With the implementation of the Common Reporting Standard (CRS), taptap点点 information has entered an era of transparency. taptap点点 avoidance or taptap点点 evasion based on asymmetric information is becoming more and more easily discovered. When considering taptap点点 compliance and taptap点点 planning, it is suggested that high net worth individuals (HNWIs) should give priority to taptap点点 compliance, for it is the passport to wealth security.

Failing to comply with taptap点点 laws and regulations means you will face risks of paying back taxes, late fees, fines, or even being investigated for criminal responsibility. Moreover, in case of non-compliance with taptap点点 laws and regulations, your name will land on the “Individual Income taptap点点 Credit System” list and you will be jointly punished by relevant authorities.

taptap点点 compliance does not mean paying taxes reasonably, rather paying taxes according to law. One misconception is that, as long as taxes are paid reasonably, you will not be subject to taptap点点 inspection. Although reasonable taptap点点 payment can reduce the possibility of taptap点点 evasion, it cannot exempt you from the legal liability due to taptap点点 evasion. taptap点点 compliance does not mean that it is not necessary to consider taptap点点 planning. It is a right of taxpayers to make taptap点点 planning on the premise of taptap点点 compliance so as to legally reduce their taptap点点 burden. So, how do HNWIs make taptap点点 planning on the premise of taptap点点 compliance? The author suggests you consider the following points.

Residential status and source of income

Resident individuals and non-resident individuals have different taptap点点 liabilities in China. Resident individuals declare and pay individual income taptap点点 in China for their income from domestic and overseas sources, while non-resident individuals only pay individual income taptap点点 in China for their income from domestic sources. After the Individual Income taptap点点 Law was revised, the judgment standard of resident individuals has become clearer. If you are a HNWI with a large amount of cross-border income, it is especially important to make your residence plan and arrange your residential status in advance. If you are non-resident individual, you may have different taptap点点 liabilities in China depending on your income sources. Since different taptap点点 burdens are imposed in different countries, reasonably arranging your income resources will help reduce your taptap点点 burden.

Sources of income and taptap点点 liabilities

According to the relevant provisions of the Individual Income taptap点点 Law, different types of income will bear different taptap点点 liabilities. As an HNWI with more income types, it is suggested for you to systematically sort out your past income types and accurately judge your taptap点点 liabilities. When sorting out your income types, you need to distinguish income sources (domestic income or overseas income).

When judging taptap点点 liabilities, it is important for you to judge whether you need to undertake any taptap点点 liability for your income in China. This should be based on the relevant facts of income and the relevant provisions of China’s Individual Income taptap点点 Law. Misjudgment on taptap点点 liabilities will result in paying more or less taptap点点. The former counts against you as a taxpayer, while the latter will pose taptap点点 risks to you.

Income type and applicable taptap点点 rate

According to the Individual Income taptap点点 Law, there are nine types of income and three kinds of taptap点点 rates. Different taptap点点 rates may apply to different types of income. However, there are some overlapping and ambiguous areas between different types of income. For example, the taptap点点 rate applicable to income obtained by an individual limited partner from a limited partnership enterprise by transferring its equity of the invested enterprise depends on whether the income is classified as operating income, or income from property transfer. Accurately defining income type and applicable legal taptap点点 rate can reduce risks.

Declare taptap点点 truthfully and pay it in full

The declaration of individual income taptap点点 should be made according to the facts, otherwise a failed or false declaration will result in fines and even criminal liability. As an individual, you should pay individual income taptap点点 in full and on time; otherwise, you will be fined.

In order to declare and pay taptap点点 on time and truthfully, first sort out the types of income comprehensively to avoid a misstatement or understatement of income amount. Second, define your income types accurately – if they are not correct, your applicable taptap点点 rates may be wrong. Third, apply for deducting various expenses and deduction items according to law, to accurately determine your taxable income.

taptap点点 planning and taptap点点 avoidance

taptap点点 compliance represents the interests of the state, while taptap点点 planning represents the interests of taxpayers. Only by paying taxes according to law can the interests of taxpayers be safeguarded and the interests of the state not be harmed. taptap点点 avoidance is not protected by law, but is often subject to anti-taptap点点 avoidance investigation and adjustment. However, taptap点点 avoidance is tolerable under law. In the case of taptap点点 avoidance found, a taxpayer only needs pay back taptap点点 and the corresponding interests, and need not pay a late fee, not to mention fines and criminal liabilities. Therefore, taptap点点 avoidance often becomes one of taxpayers’ choices due to its concealment and non-illegality.

In contrast, reasonable and legal taptap点点 planning is protected by law. To make taptap点点 planning legal, transactions must be arranged according to the provisions of taptap点点 law. taptap点点 law stipulates the taptap点点 consequences of transactions, so different transactions will face different taptap点点 consequences. taptap点点 planning should meet the relevant provisions of taptap点点 law in terms of transaction subject, transaction object, transaction consideration and transaction method. Only in this way can the results of the planning be protected by the taptap点点 law. The reasonableness of taptap点点 planning means that a transaction should have a reasonable commercial purpose instead of reducing, exempting or postponing taptap点点 payment as its main purpose

The consequence of taptap点点 planning is quite different from that of taptap点点 avoidance, but it is difficult to define the nature of the former. Taxpayer and taptap点点 authority often disagree with each other on whether a transaction arrangement considering both commercial and taptap点点 purposes is determined as taptap点点 avoidance or taptap点点 planning. In practice, it is common for taxpayers to mistake taptap点点 avoidance for taptap点点 planning, thus leaving potential taptap点点 risks.