On May 19th, 2017, Regulation of Due Diligence in Tax Information of Non-resident Financial Account (hereinafter referred as the Regulation) was announced. Since then, Chinese government actively follows the established timetable to promote exchange of financial account information. In accordance with the promise, the first exchange of financial account’s tax information shall take place in September, 2018.
According to the timetable, the following Three matters shall be accomplished in 2018:
1.Before May 31st, 2018, financial institutions shall report the relevant financial account’s information
According to Rules for Due Diligence in Tax Information of Non-resident Financial Account in the Financial Institutions of the Banking Sector (released by the people’s Bank of China, the State Administration of Taxation and the State Administration of Foreign Exchange), banks shall report the non-resident financial account information to the People’s Bank of China according to Article 35 of the Regulation before May 31st every year. And banks shall report in written form of the enforcement of the Regulation in the past calendar year to the People’s Bank of China, the State Administration of Taxation and the State Administration of Foreign Exchange before June 30th every year. The report shall include situation of system construction, process, information report, problem suggestions etc.
- The State Administration of Taxation shall exchange the information with other country or territory’s tax authorities for the first time in September 2018
According to the promise, in September 2018, China shall exchange the information with other country or territory for the first time. Relative Chinese resident’s or institute’s foreign financial account information (including the owner’s name, tax identification number, address, account number, account balance or value, interest, dividend, income from sale of financial assets, etc.) shall be report to Chinese tax authorities.
- Before December 31, 2018, financial institutions shall finish due diligence investigation of low net worth individuals’ accounts and all institutions’ accounts.
Financial institutions shall choose the following methods to do the due diligence investigation before December 31, 2018.
If the customers’ information including address and there are materials which can prove the address is the bank account’s owner’s present address or the address is in the account owner’s resident country or territory, where the account owner is resident or non-resident can be judged by the address. However, if the address can not be delivered, it can not be judged as present address.
Using the existing information system to carry out electronic record retrieval to identify any non-resident identity in the account.
Since 2018, tax payers using foreign financial account to escape tax liabilities shall face huge risk. Tax payers shall treat tax related matters prudently, pay higher attention to the regulations and be professional in tax planning.