The disappearing shell company: live broadcast tax avoidance is hard to find "Khorgos"
Internet celebrity anchors looking for tax depressions and registering sole proprietorships for tax evasion have been investigated and dealt with by relevant departments; experts say tax incentives are not tax havens
Behind Wei Ya was fined more than 1.3 billion yuan, tax evasion methods and other issues have attracted the attention of the industry.
On December 20, the person in charge of the Inspection Bureau of Hangzhou Taxation Bureau responded to reporters’ questions about Huang Wei’s tax evasion case and stated that Huang Wei (Weiya)’s fictitious business changed the nature of the income to falsely declare the tax evasion part, which is more illegal than the non-declaration of hidden income. The circumstances and the degree of harm are relatively minor, and a fine of 1 time shall be imposed.
Among them, what is "fictional business conversion of income nature false declaration of tax evasion"?
According to industry insiders, this involves a word often seen in the Internet celebrity anchor circle: tax planning.
An unnamed senior tax planning expert told Shell Finance reporter that before July 2021, many live broadcast Internet celebrities opened their companies to Shanghai Chongming Island, because Chongming Island had the best (tax incentives) policy at the time.
Previously, the Sydney tax evasion incident shifted the discussion of tax evasion from celebrities to Internet celebrities. Among them, new tax depressions such as Hainan, Tianjin, and Chongming have attracted attention. There has been speculation that these places will become "Khorgos" for Internet celebrity anchors to avoid tax. .
What is the actual situation?
The Beijing News Shell Finance reporter's investigation found that with Horgos's lessons learned, the policy has become stricter. When setting preferential conditions, local governments will require enterprises to substantively operate, thereby cracking down on shell companies that have exploited loopholes.
Shi Wenwen, director of the Finance and Taxation Law Research Center of China University of Political Science and Law, said that the emergence of new business formats has brought certain challenges to tax system collection and management.
In his view, some tax depressions have come to the point where they need to be cleaned up. "The advantages of a free trade port are given by the state. The creation of a free trade port with a competitive tax system does not mean that it is a tax haven, and this loophole cannot be used to evade tax. "
Weiya 7 companies in Chongming, anchor "tax avoidance" attracts attention
On September 28, 2021, the State Administration of Taxation announced that in the recent "double random, one open" spot check, the taxation department found through taxation big data analysis that two network anchors mainly engaged in e-commerce and live broadcast delivery were suspected of passing concealment. Tax evasion by means of personal income, changing the nature of income, etc.
In September 2021, the Special Commissioner Office of the State Administration of Taxation in Shanghai coordinated the taxation departments of Zhejiang, Guangxi and other places to conduct investigations on these two anchors and related companies in accordance with the law.
The inspection found that the two anchors were suspected of illegally turning their personal income into business income, making false declarations and underpaid personal income tax, and the amount of tax involved was relatively large.
What is the purpose of "turning personal income into business income"?
Shi Wenwen stated that one of the current methods of tax evasion with cargo anchors is to convert labor remuneration into operating income by setting up studios, and to enjoy local fiscal and tax preferential land policies in some tax depressions, and to reduce tax rates through approved collection methods.
According to the text of the implementation, if the tax rate for labor remuneration is up to 45%, the maximum tax rate for operating income is 35%.
At the same time, the income from business operations can be levied by means of approved levy, which is to levy taxes in accordance with the prescribed taxable income rate, which can usually reduce the actual tax burden to less than 10%.
So what kind of preferential policies exist in some "tax swales"?
On December 20, the Shell Finance reporter of the Beijing News inquired on the Chongming Development Zone website and found that under the “Approved Levy” column of the website, it was marked in boldface: “Tax Avoidance Artifact-Shanghai Taxation Optimization Plan for Sole Proprietorship (Chongming Island Tax Depression) +A sole proprietorship enterprise will levy individual tax) double concessions, which can save tax by more than 60%."
Regarding the “individual proprietorship levying individual taxes”, the Chongming Development Zone website shows that “individual proprietorship enterprises do not pay corporate income tax, but only need to pay individual income tax; they can also apply for an approved collection (that is, with taxation), and the comprehensive tax rate is extremely low. The policy complies with national laws and regulations, belongs to the scope of reasonable tax avoidance, and saves tax by more than 70%. It is very suitable for high-income and high-profit companies, companies with high executive salaries, shareholder dividends, and companies that lack invoices."
According to the website, since July 2016, the personal income tax of sole proprietorship partnerships has been levied according to the five-level excess progressive tax rate table, with tax rates ranging from 0.5% to 3.5% in the service industry, 0.25% to 2.4% in the construction industry, and trade 0.25%-1.75%.
According to an enterprise search, the seven sole proprietorships under Wei Ya's name are all located in Chongming, Shanghai.
However, the aforementioned unnamed senior tax planning expert told the Shell Finance reporter that basically (the anchor) is no longer registered on Chongming Island. The places where there are more registrations are Anhui, Jiangxi, Hainan and other places.
However, this way of using "tax swales" to register sole proprietorships for tax evasion has been investigated and dealt with by relevant departments.
On November 22, the Hangzhou Taxation Bureau stated that Zhu Chenhui (Sydney) will establish Beihai Chenxi Marketing Planning Center, Beihai Ruichen Marketing Planning Center, Shanghai Douzi Ma Marketing Planning Center, and Shanghai from 2019 to 2020. Huangsang Marketing Planning Center, Yiyang New District Douzima Marketing Service Center in Yichun City, Yiyang New District Huangsang Marketing Service Center in Yichun City, and other sole proprietorship enterprises, fictitious business to obtain 84,456,100 personal wages and salaries and labor compensation from related companies Yuan, converted into the operating income of a sole proprietorship enterprise, and evaded personal income tax of 30,369,500 yuan.
Lessons learned by Horgos, "Hainan is not a tax haven"
On June 1, 2020, the "Overall Plan for the Construction of Hainan Free Trade Port" proposed a tax system with zero tariffs, low tax rates, and simplified taxation.
Competitive taxation policies have attracted a large number of companies to register. According to data from companies, since May 2020, Hainan has added 3,289 entertainment and media companies, but Hainan has not limited the scope to the film and television industry.
With the development of the Internet celebrity economy, the live streaming industry with billions of GMV at every turn has become a "hot commodity" among the emerging formats.
In order to seize this part of the economy, various localities have issued a series of preferential policies for live delivery of goods. Hainan issued a notice on "Several Measures to Support the Development of the Live Broadcast E-commerce Industry in Haikou (Interim)" in December 2020. The notice mentioned It is necessary to vigorously develop the e-commerce industry, introduce and cultivate a number of top anchors and MCN agencies, and provide tax reductions and subsidies for them.
In terms of talent cultivation, a one-time house purchase award of up to 500,000 yuan will be given, a bonus award of up to 5 million live broadcasts will be given, and there are also talent policies for settlement and children.
In terms of operational support, a 1.5% discount interest subsidy, rent reduction and exemption, and supplier support are given to live broadcast enterprise loans.
In addition, there will be rewards and listing rewards for platforms that bring goods to Hainan.
These tax incentives inevitably remind people of Khorgos, who was once crowded with "shell companies."
A few years ago, Khorgos, a small town on the western border of Xinjiang, was well-known for celebrity tax evasion incidents.
In 2010, Khorgos became a special economic development zone specially approved by the state for exemption of corporate income tax, stipulating that enterprises in the park can enjoy the "five exemption and five halving" policy, which means that corporate income tax will be exempted within five years and halved after five years. Offers.
The local government expects to be able to attract companies to activate the local economy through tax incentives, but the final activation is the registered economy, and a large number of "shell companies" have emerged.
The preferential tax policy of "five exemptions and five halves" has allowed this small city with a permanent population of less than 100,000 to add 6,967 registered companies in the first eight months of 2017, which is 9 times that of 2016.
At the same time, with the rapid increase of registered companies, there is a shortage of registered places, and there have been phenomena such as one site with multiple photos and information fraud. This has spawned a large number of service providers for agent registration and tax processing.
After the siege of the shell company, the preferential policies became stricter. The government put forward requirements such as one site, one license, and substantive operation. As a result, the supply of registered places exceeded demand, and the agency fees also rose. Leave.
Since then, Khorgos’ tax incentives have been tightened until they are cancelled. Eventually, film and television cultural companies have also dispersed, leaving behind a pile of "empty shells."
With the continuous introduction of various preferential policies for the Hainan Free Trade Port, can Hainan avoid becoming the second "Khorgos"?
Feng Fei, the governor of Hainan, once publicly stated at a press conference on the Hainan Free Trade Port Law, “Don’t want any shell companies that take advantage of the loopholes, and resolutely not let Hainan Free Trade Port become a tax haven.” At the same time, he introduced some control measures. One is Strengthen source control, properly manage registration, establish and improve risk identification and discovery mechanisms.
The second is to ensure that policies are formulated, and no supporting policies directly linked to the tax payment of enterprises shall be signed or issued.
The third is to strengthen daily supervision.
"Various discounts have thresholds, and you can't enjoy them when you come."
A reporter from the Beijing News Shell Finance and Economics found that at the beginning of the establishment of the policy, Hainan proposed that the registered company must be substantively operated, that is, the actual management organization of the company is located in the Hainan Free Trade Port, and the implementation of the company’s production and operation, personnel, finance, and property is implemented. Substantial overall management and control are indispensable for the four.
Tian Ruirui, a lawyer from Hainan Huihai Law Firm, told the Shell Finance reporter of the Beijing News that various local preferential policies in Hainan also have thresholds. Industry and income generation, "If the headquarters of some groups are settled, they may start to enjoy the policies when they are established, but for ordinary enterprises, they need to wait for it to develop to a certain scale, and its income and tax revenue can reach a certain range before they can enjoy a certain level. Policy benefits. For individuals, qualifications of talents are also required."
From the live broadcast e-commerce "Several Measures to Support the Development of the Live Broadcast E-commerce Industry in Haikou (Interim)" issued by Hainan, the personal contribution reward requires an individual's pre-tax annual income of 300,000, and the purchase subsidy requires an annual sales of more than 50 million, and the live broadcast will bring the goods. The reward requires 500,000 fans, annual sales of more than 10 million, and talent certification requires annual sales of more than 100 million.
The threshold for enterprise support and operating subsidies is also relatively high, which are 5 million financial contributions and 100 million live broadcast sales.
A staff member of a company specializing in fiscal and taxation business said frankly, “In fact, many policies in Hainan have not yet been implemented, and there are not as many concessions as outsiders imagine.” She said that in the field of live broadcast, Hainan’s preferential policies are actually not as good as Hangzhou, and in the past two years The influx of many companies is mainly "going towards the future of Hainan", that is, "closing customs."
Huang Yunlin is the person in charge of Hainan Dingyi Culture Media Co., Ltd. He believes that Hainan’s creation of an Internet celebrity economy is mainly to attract more people to travel. He hopes that more people will pay attention to Hainan with the help of platform traffic. Therefore, the local government is very supportive Internet celebrity economy.
For many companies flocking to Hainan to register, an MCN company official also said, “For many mainland companies, Hainan may only be part of their strategic layout, and it will be nothing to lose money for two years.”
Linde, who is doing live streaming of fruits and seafood in Hainan, said that many of the MCN agencies that have poured into Hainan are actually not very large-scale companies, but mainly dispatch agencies that some mainland enterprises go to the local area to deploy first. In terms of business, they are generally large-scale. Relatively small attempts, and in terms of anchor types, mainly anchors below the waist or non-institutional individuals.
Huang Yunlin believes that Hainan’s Internet celebrity economy does not have corresponding supporting measures, and there is a shortage of talents. “To open an MCN organization here, you need to prepare your own supply chain, Internet celebrity, traffic, customer service, etc., like Hangzhou has very professional people. To do these things, but you can’t find professionals here. If you go to find them in other places, the cost of employment and communication will increase."
Although Hainan’s Internet celebrity economy is still in its infancy, many MCN institutions still have confidence in its prospects.
Zhang Lei, who started his business in Hainan New Media after graduation, said that some friends who help brands do live broadcast operations have achieved sales of hundreds of thousands or millions, and the MCN agencies around them are still operating.
"Since last year, everyone started to do it slowly, with high enthusiasm, and explored slowly. Through summing up experience, we will definitely do better and better."
Huang Yunlin is planning a live broadcast base. He hopes to replicate his accumulated experience, incubate a group of internet celebrities himself, and at the same time build the supply chain most needed for live broadcasts. “Currently, the live broadcast of Hainan is still in its early stages, but it has to go through. In such a process, with the support of the government and the improvement of the industrial chain, this industry still has prospects."
"Live broadcast will not fall into tax depressions and need to be rectified"
Regarding the tax reimbursement crisis for Internet celebrity anchors, Shi Wenwen stated that the live broadcast industry will not fall due to this. "The regulatory authorities will strictly deduct taxes based on actual profits when enforcing the law, and deductions will be deducted for the situation such as swiping orders. For Internet celebrities, Paying taxes is a manifestation of social responsibility. As the income and reputation of Internet celebrities increase, they should assume more social responsibilities."
He believes that the local government has certain responsibilities for the emergence of shell companies. Only the central government has the authority for tax incentives and the local government has no authority. However, many governments use financial subsidies and other forms to rebate in order to attract investment, which is strictly speaking not standard.
Shi Zhengwen stated that the current platform economy has tax sources and tax deviations, and taxation adopts the principle of registration place.
In other words, where the company is registered, the tax is paid wherever it is, and then the income belongs to the local area, regardless of whether the business activities are in the local area. Therefore, many local governments will reduce taxation for political achievements.
In many tax depressions, the subsidy provided by the government is almost equal to tax exemption, but even so, shell companies can still bring certain taxes, registration fees, and annual inspection fees. "This part is not considered for places with large economies. What, but it can be considered a considerable income for places with small economies." Shi Zhengwen said.
"This kind of behavior has brought some benefits to the local government, but it has greatly harmed the fairness of the national market and caused a negative impact. This is also the reason for the rectification."
In his view, some tax depressions have come to the point where they need to be cleaned up. "The advantages of a free trade port are given by the state. The creation of a free trade port with a competitive tax system does not mean that it is a tax haven, and this loophole cannot be used to evade tax. "
For local governments, the entry of shell companies does not bring huge economic benefits, but it will bring great damage to the fairness of the national tax system. "The advantages of the free trade port are given by the state, and the tax system is created to be competitive. The free trade port does not mean that it is a tax haven. Local governments need to use their advantages correctly and cannot disrupt the tax payment order." Shi Zhengwen said.
Regarding tax reforms, the regulatory level should also keep up in time. First of all, through strict law enforcement, it serves as a warning and education function, and provides tax guidance to tell the anchor that this operation is illegal.
Secondly, third-party platforms must take the initiative to assume obligations and responsibilities, withholding and payment obligations, and the obligation to provide income information to tax authorities, including some registration services, requiring anchors to go through relevant tax registrations to prevent fluke.
Finally, there is the division of tax jurisdiction. In the future, tax collection and management can change the principle of levying at the place of registration, and levy according to the actual place of business or consumption.
Beijing News Shell Finance reporter Song Meilu Bai Jinlei Sun Wenxuan