By Alexander Chipman Koty and Zhou Qian
Shenzhen has implemented a new rule requiring all businesses in the city to register key tax personnel with the local tax bureau. The move aims to enhance businesses’ commitment to comply with tax-related laws by registering and verifying the individual personnel responsible for such issues.
Tax authorities in Shenzhen implemented the rule for newly set up companies as of July 1, 2017, and then expanded them in November to include all taxpayers. Guangdong province, as well as many other regions in China, began implementing this rule in 2016, but Shenzhen was excluded from the initial rollout.
The originally determined deadline for businesses in Shenzhen to register their real name authentication has been postponed from December 31, 2017 to February 28, 2018. Despite the change in deadline, businesses that have not yet done so are advised to register as soon as possible to avoid disruption of tax-related business activities. Businesses located elsewhere in China should ensure that they are up to date with the implementation of the rule at the local level.
Real name authentication registration process
According to the real name authentication rules, key tax-related personnel in every company have to register with the local tax bureau.
Personnel in the following tax-related positions are required to conduct real name authentication:
- Legal representative (法定代表人/负责人/业主);
- CFO (财务负责人);
- Tax operator/handler (办税人员/购票员);
- Other tax personnel authorized by the legal representative (其他相关办税人员).
Based on a new document released by the Shenzhen tax bureau on December 28, 2017, legal representatives satisfying one of the following conditions can be exempted from the real name authentication requirement:
- The legal representative is from an enterprise categorized as a Class A taxpayer in credit evaluation; or
- The legal representative is from an enterprise recognized by the tax bureau in charge.
To register, the relevant personnel must provide the tax bureau with the following documents:
- ID certificate (such as a valid ID card, temporary ID card, “Mainland Travel Permit for Hong Kong and Macau Residents”, “Mainland Travel Permit for Taiwan Residents”, passports for foreign nationals, and/or Permanent Residence Certificate for foreign nationals);
- Certificates with a unified social credit number (if the company has not obtained a certificate with a unified social credit number, then the tax certificate should be provided instead);
- Real name authentication information collection form; and
- Tax agent agreement.
Local personnel can register online or in-person; however, foreign personnel have to apply in-person as a Chinese ID card number is required for the online registration.
In-person applicants can apply at either a national tax office or a local one. If the real name authentication is conducted with a local tax bureau, applicants that manage issues related to the national tax office need to also register their photo and facial information with the national tax office.
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Amber Liu, Senior Accounting and Tax Manager at Dezan Shira & Associates’ Shenzhen office, said, “Unfortunately, there is no online channel for foreigners to complete this authentication process, which means that foreigners have to go to the tax bureau counter in-person to register. As most foreign businesses have a foreigner appointed as a Legal Representative or Finance Manager/CFO, they need to physically go to China to visit the tax bureau.”
Liu continues, “Alternatively, foreign businesses can change their CFO to a local staff member who can visit the tax bureau in-person, or enlist a third party firm to handle their tax and accounting matters.”
If the registration is successful, the tax bureau will record the following information of the personnel:
- ID number;
- Photo and facial information; as well as
- Mobile phone number.
Notably, the exact positions requiring registration and the documents needed for registration vary depending on the region.
Moreover, if a business’ key tax personnel changes or the personnel’s information changes (such as their phone number), the real name authentication information should be changed with the bureau accordingly.
With the rules, only personnel registered with the tax bureau are able to carry out various day-to-day tax activities in-person, such as purchasing special VAT fapiao. Those who have not registered are unable to carry out these activities. However, those with an active online account with the local tax authorities will still be able to carry out activities online.
Liu warned, “Failure to register real name authentication will cause great inconvenience on a company’s normal tax-related operations. If one fails to register, their ability to conduct regular tax activities will be impeded, including being unable to purchase VAT fapiao, correct electronic tax returns, reset the online tax bureau login password, and increase monthly VAT fapiao quota, depending on their location.”
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Real name authentication implementation timeline
The real name authentication requirements were first announced in 2016, and have been rolled out across the country at various stages.
The rollout has proceeded as follows:
- SAT announcement in 2016 introduces real name authentication;
- All provinces and regions (excluding Hong Kong, Macau, and Taiwan) fully or partially rolled out the new rule in 2016 (though regions each had different timelines for full implementation);
- Guangdong province launched pilot programs for implementation in 2016 (which excluded Shenzhen);
- Shenzhen started to implement the rule for newly set up companies as of July 1, 2017 and expanded implementation to essentially all companies in November.
The stipulated transition period was originally set to end on December 31, 2017, but has been extended to February 28, 2018. After that, tax personnel without registering their real name authentication will not be able deal with tax matters at the tax office.
The main purpose of real name authentication is to verify the key personnel in charge of tax matters to enhance their commitment to comply with tax laws. However, according to Liu, it is also designed to improve the quality of government tax services, as a tax certificate copy or ID certificate copy will no longer be required every time one deals with tax issues at the bureau.
Businesses in Shenzhen that have not yet registered should do so before the February 28 deadline. Investors located elsewhere in China that have not yet registered are advised to liaise with the local tax bureau to inquire whether it is required to do so in that region.
If you and your business require further advice regarding this compliance requirement, please contact our office in Shenzhen or any of our other offices in China.
This article was originally published on December 18, 2017 and has been updated with the latest regulatory changes.
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