China’s new Common Reporting Standard to deter overseas tax evasion
Sep 04, 2018 (China Knowledge) - From Sept 1, the new anti-tax evasion regulations of China will officially come into force. The information related to tax on financial accounts will be exchanged with Australia, New Zealand, inside mainland China, Hong Kong and Macau.
It is the first time that China is exchanging information based on Common Reporting Standard (CRS) with other countries. Chinese tax authorities will seek its residents' overseas income record including all sources of wealth. Once classified as high-risk taxpayers, they will have to pay large amounts of income tax, some may face investigations over suspicious source of money.
To put it simply, CRS is the tax information exchange between countries and regions, mainly to check whether an individual has fulfilled a tax liability under the law.
In the past, due to the lack of supervision and legal loopholes, Chinese citizens may not even realize that they have to pay taxes, but it never meant that one should not pay. With the new system in place personal assets and tax records will be transparent, source of wealth should be neat and legal.
The implementation of the CRS and the imposition of anti-tax evasion provisions in the new individual income tax law will deter the concealment of wealth, money laundering, tax evasion, and related illegal acts. Non-compliance will result in legal action against the individuals.
As for 2017, 55 countries joined the CRS system, including countries notorious for being tax evader’s heaven such as Bermuda, the British Virgin Islands, the Cayman Islands, and Jersey.
According to foreign media reports, in July major commercial banks in New Zealand and Australia froze thousands of accounts, a large number of accounts belonged to Chinese residents, on the suspicion of tax evasion.
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