{"id":3319,"date":"2019-05-18T09:49:30","date_gmt":"2019-05-18T09:49:30","guid":{"rendered":"https:\/\/cbbcfocus.com\/?p=3319"},"modified":"2025-04-23T10:16:09","modified_gmt":"2025-04-23T10:16:09","slug":"tax-reform-can-cause-confusion","status":"publish","type":"post","link":"https:\/\/focus.cbbc.org\/tax-reform-can-cause-confusion\/","title":{"rendered":"Businesses need to pay attention to the tax reforms of the last few months if they are to avoid falling foul of legislation"},"content":{"rendered":"

In recent years, China has been implementing significant nationwide tax reform, making changes that even the most responsible businesses may struggle to keep up with. As reported recently,<\/a> stronger enforcement of existing compliance requirements and restructuring government bodies the government aims to reduce fraud and improve statutory oversight.<\/h2>\n

It seems to be working. Already the Chinese government has reduced value-added tax across a range of industries thanks to the additional tax revenue coming in, and stronger enforcement is also seen as a key factor in plans to further reduce corporate income taxes and various social security rates.<\/p>\n

A brief history of Chinese tax reform<\/strong><\/h2>\n

Beginning with the \u201cGolden Tax 3\u201d plan in 2016, which officially transitioned China from being a \u201cfapiao<\/em> driven tax system\u201d to an \u201cinformation-driven tax system\u201d, the new tax policies signal a new era for taxation in China. Chiefly characterized by increased financial oversight and greater efficiency when identifying tax evasion and resolving tax disputes, the \u201cGolden Tax 3\u201d reforms also allow tax authorities to include the personal bank account of a business\u2019s legal representative within the scope of a company audit.<\/p>\n

Since July 2018, China\u2019s state and local tax bureaus have been integrated, allowing them to consolidate the sets of data from different financial reports filed by a business. This restructuring has significantly improved the efficiency of tax administration, enabling speedy identification of inaccurate reporting and the quick resolution of tax disputes.<\/p>\n

It is this kind of administrative restructuring and data sharing across different government bodies that is going to make taxable income more difficult to manipulate and revenue harder to conceal. For many businesses, this will mean paying more taxes. However, as a direct result of the additional tax revenue collected, the tax authorities have announced they will be further reducing corporate tax rates later in 2019, so the tax burden will be reduced for those who are already accurately declaring their tax.<\/p>\n

Reform will bring benefits to foreign companies in China who currently adhere to the regulations and pay their taxes<\/p><\/blockquote>\n

From February 2019, the Peoples Bank of China (PBC) began abolishing the \u201cCorporate Bank Account Opening License\u201d in Jiangsu Province and Zhejiang Province, and will have abolished it nationwide by the end of the year. Originally intended for the central bank to exercise control of all new accounts created in China, with the cancellation of the license, the Chinese central bank will instead exercise control through increased monitoring of both company and personal transactions on a day to day basis. Transactions that exceed predetermined amounts and frequency will be flagged and reported to the PBC for investigation. The predetermined limits are as follows:<\/p>\n