Tips on Proctecting Your Offshore Account!
Since January 1st this year, every offshore account is supposed to be checked. Both individuals and enterprises need to write a Statement as a Certificate of Fiscal Resident when they open a new account in a financial institution.
In October last year, China SAT had passed Management Measure on Tax-related Information Due Diligence of Non-Resident Financial Accounts.
The measure aims to prevent overseas accounts from tax evasion via strengthening international tax co-operation with greater transparency. China, together with other 101 countries decided to implement CRS in the near future.
CRS is Common Reporting Standard in full name. Countries involved in “CRS”implementing plan share information each other of enterprises' and individuals' offshore financial accounts with separated places between businesses and accounts. CRS helps to stop tax evasion and maintain integrity of the tax system.
So, as for a foreigner doing business here in China, what will CRS actually bring to you?
Mr.B, a Turkish (Turkey is involved in CRS policy), had registered a company and opened accounts both personally and for his company in a Chinese mainland bank.
Under CRS policy, if he is confirmed as a Turkish fiscal resident by the Chinese bank, all of his account information will be informed to Turkish Tax Authorities, and he has to pay all the tax to the Turkish Tax Authorities at the first time. Then after having lived for a year in China, he should pay tax to China SAT.
However, how can those offshore financial accounts in use avoid being written off, frozen or demoted right?
Don't Be Engaged in Illegal Transactions.
Once your account is suspected to be in money laundering or used to foreign exchange transfer, it will be frozen immediately.
What's more, your account will also be implicated if something goes wrong when you help others (individuals or enterprises) transfer money by using your account without knowing the source or purpose of the money.
Less Transaction With Countries (or Regions) At High Risk.
Countries at high risk refers those countries under sanction or with extremely unstable policy or economy.
These countries usually transfer money via the third countries or offshore accounts because they cannot transfer money directly on their own when doing business. Thus, it is hard to explain the source and purpose of the cash flow.
Less Transaction With Individuals.
Doing business with individuals by using offshore account may result in account's instability, or the possibility of stricter inspection, such as your income and employment statement.
This rule directly results from the newly foreign exchange policy PBC had announced that smaller amount of cash and transfer transaction also needs to be reported to the bank this year.
Truthful Transaction Background and Regular Transaction
If there is often a large amount of foreign exchange on your bank account but just with single company and account overseas and no actually related company or transaction domestically, you need to explain the situation to the bank in case of high possibility of account’s freeze or cancellation.
Do Not Keep Your Account Long-term Idle
Your account will be more likely to be written off if it has been in a long-term idle. That is, if there are very little transaction in your company's account, it will be also written off by the bank.
So you'd better cancel the account when your company is not in operation even if it has been registered already.
Indeed, under “CRS” policy, financial information becomes more transparent, meanwhile, the management and control for offshore accounts becomes stricter internationally.
If you own an offshore account, HACOS hopes that the tips will be helpful to you!
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