Businesses and individuals with unpaid tax in China could face million-pound-plus bills

Winnie Cao, Head of the Blick Rothenberg China desk, said:

In China there has been an increase in cases where the authorities look into the past for tax irregularities. The implementation of the Phase IV Golden Tax System allows the Chinese authorities to capture lots of data from businesses and individuals in China.

There has recently been a famous case where one enterprise, VV Food & Beverage, had to repay their missing tax payment from the last three decades. The total bill was for 85 million yuan, or around nine million British pounds.

The Chinese tax system can also reach beyond China due to the Common Reporting Standards (CRS.) CRS is the result of the G20 nations developing a global standard for the automatic exchange of financial account information. The impact of CRS is the next trend to watch in China, as many high-net-worth individuals now have income and assets dotted around several jurisdictions.

Between the Phase IV Golden Tax System and CRS, it will be far easier for the Chinese authorities to catch up with Chinese companies and domiciled individuals that owe tax in China regardless of where their assets are based in the world.

China’s equivalent of self-assessment system was implemented from January 2019, and the first reporting was done by June 2020. With more extensive self-return data to work with and increasing maturity I expect the Chinese tax system will soon catch up with the likes of the IRS and HMRC given that it operates a worldwide tax system for Chinese domiciled individuals.

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If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Winnie Cao using the form below.