The fourth phase of the Golden Tax is approaching, and bank accounts will be included in the enterprise information online verification system to share large and suspicious transfer data from the People's Bank of China's Anti Money Laundering Center. Emphasis will be placed on large and suspicious transfers between individual and enterprise bank accounts.

Recently, there was a case where Mr. Wang used his 50 million yuan cash assets in Bank A for financial management. After the financial product expired, he transferred a portion of the financial management funds to his daughter's account, and then managed the financial management in his daughter's name. The transfer amount is generally more than 2 million yuan, and it is generally converted once every month. Later, it attracted the attention of the tax bureau and made an appointment with Mr. Wang. So, under what circumstances will individual bank accounts attract the attention of tax authorities? Below, please self diagnose whether your personal bank account is at risk.

Self diagnosis point 1: Is your transfer amount a large amount transfer?

According to relevant regulations, information related to transfers between enterprises of more than 2 million yuan, between individuals of more than 500000 yuan, and between individuals of more than 200000 yuan across borders, as well as cash deposit and withdrawal information of more than 50000 yuan, will be automatically reported by commercial banks to the People's Bank of China's Anti Money Laundering Center through the system, and these information will be shared by the Golden Tax Phase IV system. Therefore, if the transfer between accounts reaches the above amount, it may attract the attention of the tax authorities.

Self diagnosis point 2: Is your account transferred in and out frequently?

If high net worth individuals have large deposits in banks but do not transfer funds frequently, they will generally not receive tax attention. Why is tax paying special attention to "transfer"? "Because transfers can be considered by the tax authorities to have transactions, and transactions may create tax liabilities.". A high net worth person in a bank uses his/her personal account to collect business funds, with a personal account flow of over 90 million yuan and frequent fund transfers in and out. The tax inspection authority has verified the account.

Self diagnosis point 3: Is there any situation where your account is transferred in and out in a decentralized and centralized manner?

If the accounts of high-net-worth individuals are transferred in or out in a decentralized manner in a short period of time, or if they are transferred in or out in a centralized manner, they meet a suspicious transaction characteristic in the bank's anti-money laundering monitoring system. If the account opening bank determines that there are legitimate reasons for fund income and expenditure, it can manually eliminate suspicious transaction records. If the account opening bank believes that the transaction is suspicious, it will report it to the People's Bank of China. Accounts with such transaction characteristics will also receive the attention of the tax authorities.

Self diagnosis key point 4: Is your account holder also a shareholder, legal representative, or executive?

The personal accounts of registered shareholders, legal representatives, and senior management personnel are also key monitoring accounts for tax authorities. In the case of tax evasion by an information consulting company, the tax inspection authority determined that the company had hidden income of 2.81 million yuan by checking the WeChat and private account monitoring of relevant personnel of the company. Finally, it inspected and paid 850000 yuan in taxes and fined 420000 yuan. Due to the fact that the fourth phase of Golden Tax will share information with banks and the National Market Supervision and Administration, the system can achieve associated monitoring of enterprise related personnel's mobile phone numbers, enterprise tax status, enterprise registration information, and corresponding bank accounts. The tax authorities will be able to accurately grasp the private accounts of enterprise related personnel.

Self diagnosis point 5: Does your account frequently spend money and have a record of large transfers before closing the account?

Some high net worth individuals believe that there is no risk of timely account cancellation, and in fact, frequent spending accounts will also be subject to key monitoring. Ms. Zhang (pseudonym)'s multiple sleep savings cards under her personal name were suddenly activated, followed by tens of millions of funds entering and exiting. After the completion of the large amount of funds transaction, the card was cancelled and the account was cancelled. Cancelling an account cannot evade the monitoring of the tax authorities. On the contrary, abnormal transactions and account cancellation can attract the attention of the tax authorities.

Self diagnosis point 6: Is the business scope associated with your account unrelated to the flow of funds?

Some high-net-worth individuals operate in the catering industry, but bank account transfer records show that they often receive large transfers from automotive trading or mining companies. Although there are no problems with the accounts and tax returns, as these transactions are not consistent with engaging in the catering industry, the bank has reason to suspect that the hotel is engaged in money laundering and carries out investigation and supervision. After the tax authorities share data, they may suspect whether there are illegal activities such as falsifying invoices.

epilogue

With the arrival of the fourth phase of the Golden Tax, the relevant information of bank accounts will be included in the monitoring of the tax authorities in the future. After certain law enforcement procedures, the tax authorities can promptly retrieve relevant information. At the same time, a certain data model will also be designed, which will also cause system warnings and risk alerts when bank account transactions are abnormal. Therefore, high net worth individuals need to conduct timely tax risk self diagnosis. After self diagnosis, if you have any of the above situations, please consult Gaopeng Law Firm in a timely manner to sort out the risks and solve the problems for you.

In the future, we will continue to provide you with explanations on the risks of business to individual transfer, personal to business transfer, and financial management risks of opening a bank account in the name of your child. Please look forward to this!
Attachment: Background and relevant legal basis of the fourth phase of the Golden Tax

Background and relevant legal basis of the fourth phase of the Golden Tax (slide down to view)

1、 Background of Golden Tax Phase IV

According to the "Opinions on Further Deepening the Reform of Tax Collection and Management" issued by the General Office of the State Council and the General Office of the Central Committee of the Communist Party of China on March 24, 2021 is the first year to implement the "Opinions" and also the opening year of the construction of the Golden Tax Phase IV project.

Electronic invoice, as a major content of the fourth phase of the Golden Tax, will be available in most provinces and cities across the country by the end of 2022. For example, starting from December 1, 2021, the pilot project of Golden Tax Phase IV full electronic invoice will be carried out among some taxpayers in the pilot areas of Guangdong (excluding Shenzhen, the same below), Inner Mongolia, and Shanghai. Please refer to Announcement No. 3 of 2021 of the Shanghai Municipal Taxation Bureau of the State Administration of Taxation on the Pilot Work of Fully Digitized Electronic Invoice; Announcement No. 3 of the Guangdong Provincial Taxation Bureau of the State Administration of Taxation in 2021 on the Pilot Work of Fully Digitized Electronic Invoices by the Guangdong Provincial Taxation Bureau; The State Administration of Taxation, Inner Mongolia Autonomous Region Taxation Bureau Announcement No. 10 of 2021, "Inner Mongolia Autonomous Region Taxation Bureau Announcement on Carrying out the Pilot Work of Fully Digitized Electronic Invoices".

On September 22, 2022, Director Wang Jun of the State Administration of Taxation made a speech at the third "the Belt and Road" Tax Collection and Management Cooperation Forum "Promoting the Silk Road Spirit and Promoting Capacity Building", mentioning that "the Chinese tax authorities are developing 'Golden Tax Phase IV' (Smart Tax), which will be basically completed by the end of this year." Therefore, Golden Tax Phase IV is just around the corner.

2、 Administrative Measures for the Reporting of Large Value Transactions and Suspicious Transactions by Financial Institutions (2016 Revision)
Article 5 Financial institutions shall report the following large-value transactions:

（1） Cash deposit, cash withdrawal, cash settlement and sales of foreign exchange, cash exchange, cash remittance, cash bill payment, and other forms of cash receipts and expenditures for a single or cumulative transaction of more than 50000 yuan (including 50000 yuan) and foreign currency equivalent of more than 10000 dollars (including 10000 dollars) on the same day.

（2） Transfer of funds with a single or cumulative transaction of more than 2 million yuan (including 2 million yuan) or a foreign currency equivalent of more than 200000 dollars (including 200000 dollars) between the bank account of a non natural person customer and other bank accounts on the same day.

（3） Transfer of domestic funds with a single or cumulative transaction of more than 500000 yuan (including 500000 yuan) or a foreign currency equivalent of more than 100000 dollars (including 100000 dollars) between the bank account of a natural person customer and other bank accounts on the same day.

（4） Cross-border transfer of funds with a single or cumulative transaction of more than 200000 yuan (including 200000 yuan) and a foreign currency equivalent of more than 10000 dollars (including 10000 dollars) between the bank account of a natural person customer and other bank accounts on the same day.

The cumulative transaction amount is calculated and reported on a customer basis, based on the unilateral accumulation of capital income or expenditure. Unless otherwise stipulated by the People's Bank of China.
The People's Bank of China may adjust the reporting standards for large-value transactions stipulated in the first paragraph of this article as needed.

Article 11 If a financial institution discovers or has reasonable reasons to suspect that a customer, their funds or other assets, or their transactions or attempted transactions are related to criminal activities such as money laundering or terrorist financing, it shall submit a suspicious transaction report regardless of the amount of funds or asset value involved.