In the context of CRS, whether it is identifying non-resident accounts or reporting overseas assets, it means that high net worth learns to declare property, which is the first step in wealth management. Because according to the provisions of the "Multiple-Governmental Agreement on the Exchange of Tax-related Information in Financial Accounts", if the income of Chinese tax residents abroad is not declared to the Chinese tax authorities and therefore does not pay taxes in China, according to the current tax collection and management laws, this is called "tax evasion". They must pay a fine of more than 50% and less than five times the undeclared amount, and must pay an annual late payment fee of about 18% for the undeclared amount. Moreover, these responsibilities are not restricted by retrospective period, that is, the tax authorities can recover them at any time.
This shows that in the future, entrepreneurs will be passive when they need to declare. Therefore, it is particularly important to inventory assets in advance and confirm rights. The existing types of personal assets of high net worth individuals in China, especially entrepreneurs, are mainly reflected in cash, real estate, equity and assets entrusted to others to hold on their behalf. Why does life insurance have more advantages when filing compared to other assets?
First of all, life insurance, as a relatively solid financial asset, is simpler and clearer than when declaring cash deposits.
Secondly, life insurance, real estate, and equity have the advantages that are easier to explain than cash deposits, but life insurance is relatively private compared to comprehensive real estate registration and corporate equity registration, and is an invisible asset. Moreover, compared with the property tax that is about to be released by real estate, equity exchange income tax, and even the inheritance tax that may be levied in the future, life insurance is also more advantageous and is often defined as a tax-free asset. Since it is a tax-free asset, why not be afraid of reporting?
Finally, many high-net-worth individuals are afraid of reporting because they have too many explicit assets in their names, and often hand over the assets under their names to their trusted relatives and friends to hold on their behalf. However, they do not know that as long as there is a problem with the asset holder, their assets will lose control. Life insurance can achieve the best of both worlds. One is that life insurance is relatively hidden asset as mentioned earlier, and the other is that life insurance has very good control. Therefore, life insurance takes into account relatively easy declaration and active control of assets.
To sum up, when reporting personal assets becomes the irreversible mainstream, how to declare relatively certain assets and how to declare relatively tax-free assets is worthy of deep consideration for high-net-worth individuals.
