In the past, many wealthy people parked their assets abroad through offshore accounts, overseas trusts, etc. to evade taxes or hide assets. According to statistics from the British research organization TJN, the total assets transferred to tax havens by major countries around the

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In the past, many wealthy people put their assets abroad through offshore accounts , overseas trusts and other methods to evade taxes or hide assets. This has created world-renowned tax havens-Bermuda, Cayman Islands, Netherlands, Switzerland and so on. According to statistics from the British research organization TJN, the total assets transferred to tax havens by major countries around the world for tax avoidance are approximately US$21 trillion. The Virgin Islands, which covers an area of ​​only 153 square kilometers, actually has about 400,000 companies registered. ——On average, each resident owns nearly 20 companies, and there is one company in the area of ​​a basketball court.

The rich have relied on tax havens and enjoyed themselves comfortably for many years, but what is coming will still come.

Inspired by the U.S. government's Fat Cat Act (FATCA), in 2014 the OECD released the "Common Reporting Standards" (CRS), aiming to combat cross-border tax evasion and maintain an honest taxation system.

According to the timetable, starting from January 1, 2017, dozens of countries and regions including China and Hong Kong will begin to implement CRS simultaneously. By then, those assets hidden overseas will be nowhere to be found.

CRS will involve all aspects, including taxation, law, corruption, asset allocation, overseas insurance, family trusts , private equity funds , P2P, wealth management practitioners, immigration, etc.

Once some bosses are found to have huge income overseas, they will not only have to pay a large amount of personal income tax, but companies established overseas will also face a 25% corporate income tax. Of course, there are still people who will face scrutiny for huge amounts of money from unknown sources.

What is CRS?

The full name of CRS (Common Reporting Standard) is translated into Chinese as “Common Reporting Standards”. In 2014, the OECD (OECD) released the Standard for the Automatic Exchange of Financial Account Information, which aims to combat cross-border tax evasion. The standard includes CRS.

　CRS is a new set of standards for the automatic exchange of international tax information. Require signatory countries to conduct systematic and regular automatic exchange of information, so that the taxpayer's country of residence and the country where the taxpayer's account is located can automatically share various financial information of taxpayers in overseas financial institutions such as banks and securities accounts, such as dividends, dividends, etc. .

| CRS flow chart

In addition, CRS has a "voluntary matching" principle, that is, among CRS participating countries (or regions), each subject can freely choose to "match" with other subjects before exchanging information.

China joins CRS

China joined the CRS Agreement on December 17, 2015, committing to become the second batch of countries (regions) to implement CRS. The State Administration of Taxation issued the "Draft for Solicitation of Opinions on the Management Measures for Due Diligence of Tax-Related Information on Non-resident Financial Accounts", which caused a stir.

As of July 2016, 101 countries and regions have committed to actively implement and implement CRS.

For existing personal accounts, there is no threshold; that is, no matter the amount, it is within the scope of information exchange. For existing corporate clients, those with an amount below US$250,000 are not included in the scope of information exchange. For newly opened personal or company accounts, information exchange is required regardless of the amount.

In addition, when financial institutions identify account holders, if they find that the account holder is not an individual, but a company, then the "financial institution" usually needs to determine whether the company is negative or positive. If it is negative (investment income accounts for more than 50%), you need to penetrate the company to find out who the actual controller is and determine whether it is a situation that requires declaration; if it is positive, no action is required. .At the same time, if the account holder itself is a "financial institution", it can usually be ignored, because since the account holder itself is a "financial institution", it also needs to identify whether its account holder needs to declare, so there is no need to This may lead to the eventual omission of the actual controller.

Which assets are not included in CRS?

Non-debt direct rights and interests in real estate and specific physical commodities do not belong to the category of financial assets, so they do not need to be reported. For example, real estate, yachts, sports cars , antique calligraphy and paintings, jewelry and other non-financial assets

Who will be affected?

　① Where financial assets are allocated overseas

　These assets will be disclosed to the tax bureau of the home country in accordance with the CRS agreement. For example, in recent years, many people have purchased large-amount insurance policies (with cash value) in Hong Kong in response to the depreciation of the RMB. Now that Hong Kong has also signed the CRS agreement, Hong Kong insurance companies must provide information on large-amount policy assets in the country to the mainland China tax bureau.

　② People who hold shell companies investment and financial management overseas

The most typical so-called shell company is to open an offshore holding company in the Virgin Islands or the Cayman Islands, and then use the company to open accounts in various financial institutions, holding There are overseas funds, stocks, etc. Such enterprises may be designated as "passive non-financial institutions". As mentioned earlier, CRS is implemented in a penetrating manner, and the financial assets owned by the actual controller of the company and the company must be disclosed. In the past, it was very difficult to use the name of a shell company to avoid taxes.

　③ Bosses who set up companies abroad to engage in international trade

CRS is a big crisis for bosses engaged in international trade in Fujian, Guangdong, Shandong, Shanghai, Shenzhen and other countries.

In the past, the operating mode of many bosses was to set up physical companies in the country to engage in production, operation and export. At the same time, most of them would set up another company in an offshore tax preferential area to complete the overseas collection function of overseas trade, so that a large amount of foreign exchange income would directly enter the business. into an overseas company account and enjoy tax-free benefits.

However, CRS will cause the assets of their personal financial accounts opened abroad to be disclosed. Once their huge income abroad is inquired, they will not only face the problem of back payment of personal income tax, but more importantly, they will have 25 years to set up companies abroad. % corporate income tax issue. In the past, I may not have paid mainland corporate income tax for as long as ten years, and the total tax cost may be as high as 40%.

　④Those who set up overseas family trusts

　The Virgin Islands, Cook Islands, Guernsey, Singapore, Hong Kong, New Zealand, Cayman Islands, etc. are the favorite places for China’s first batch of wealthy people to set up family trusts. This time the CRS signatory countries.

CRS will affect a trust in two situations: when the trust is a reporting financial institution; and when the trust is a passive non-financial institution and holds financial accounts at a reporting financial institution.

At that time, information will be reported separately based on the tax residence of the company within the trust structure and the tax residence of , the beneficiary of the trust, and finally reported to the tax authorities in mainland China.

In addition, not all assets will be affected by CRS. If the assets under the trust are all real assets such as real estate or yachts, then the trust may not be affected by CRS at all, because it is difficult to classify it as financial institution and is not related to other financial institutions.

Of course, the essential function of a family trust is not a tax avoidance tool, but wealth inheritance and debt risk isolation.

　⑤ Domestic civil servants hiding money overseas

　If a national civil servant is found to own a large amount of property overseas, he is likely to face an investigation into the unknown source of the huge amount of property.

　⑥Chinese who have immigrated

　Hidden financial assets in China are likely to be disclosed to the country of immigration! At the same time, you are very likely to face tax backpayment, various fines, and even criminal liability.

　⑦Wealth management practitioners

　Including bank account managers, insurance company agents, financial consultants, overseas investment and financial management personnel, family office staff, domestic and foreign tax accountants, etc.

On the one hand, the implementation of CRS will obviously bring about changes in the region and type of customer asset allocation, which will have an impact on some industries. Customers must consider whether to change the property type of their original financial assets, and it will also have an impact on future overseas assets. There are concerns about allocation. At the very least, customers need to be prepared for the legalization of capital income, legalization of foreign currency exchange, and legalization of the completion of tax obligations before they dare to make overseas asset allocations.

On the other hand, according to the implementation details of CRS, employees of financial institutions may face being questioned by the institution about how they serve customers, and there are also certain occupational risks (because CRS standards stipulate that if financial employees induce customers to make false statements or deceive If the financial institution you work for fails to make truthful statements, you will not only face fines, but may also be criminally prosecuted and jailed). Since then, the relationship between account managers or insurance agents and customers has become sensitive and delicate, and their own occupational risk prevention has also become an important issue.