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September 17, 2021, at a video conference Businesses operating in Mainland China are
of the heads of tax authorities of the BRICS required to use the software of the Golden Tax
group (Brazil, Russia, India, China, South Africa), System for the issuance of VAT special fapiao.
the commissioner of China’s State Taxation The GTS system also enables VAT calculation,
Administration (STA) announced the country had input VAT recognition, and the preparation and
officially launched the construction of the Phase submission of tax returns.
IV of the Golden Tax System (GTS). What is the difference between China’s
China’s Golden Tax System, a nationwide value- Golden Tax Phase III and IV?
added tax (VAT) administration and monitoring China’s GTS Phase III is still running at present.
system, was originally developed in 1994 and is The main breakthrough of this system is it
now operating in its third phase. The GTS Phase successfully unifies and integrates the national
IV is the upgraded version of GTS Phase III and is and local taxation data – tax information of
expected to be online in 2022. market entities can be swiftly exchanged between
By upgrading how the Golden Tax System respective state and local tax authorities.
works, China intends to transit from “managing The upgraded GTS Phase IV will be based on
tax through invoice” to “managing tax through GTS Phase III infrastructure but will have the
big data”. Chinese tax authorities hope to following new features:
collect, integrate, and analyze tax-related data • More comprehensive monitoring of businesses
from more fields – through the GTS Phase IV – it will not only monitor tax matters, but
mechanism. This will enable them to carry out also manage “non-tax” matters (including the
targeted statistical analysis of data to improve tax collection of social insurance premiums).
supervision and use big data and cloud technology • Cross-sectoral information sharing – it will
to better understand business activities and build channels for information sharing and
economic environment. verification between ministries, commissions,
The new tax monitoring system may increase the banks, and other participating institutions.
transparency of businesses operating in China. • Information verification – it will be able to
Thus, it is vital for enterprises to understand the verify the mobile phone numbers of related
upcoming GTS Phase IV and brace themselves personnel (such as the legal person, financial
for a new era of tightening tax regulation. In this staff, and tax agents) of the enterprise,
article, we explain the key new features of the GTS corporate tax numbers, and corporate
Phase IV and the impact on enterprises. registration information.
What is China’s Golden Tax System? A closer reading of the upcoming changes
China’s Golden Tax System or GTS is a system The Golden Tax System Phase IV will manage
that uses the online network of tax authorities not only tax matters but also non-tax matters,
to closely control VAT special invoices (also especially the collection of social insurance.
known as VAT special fapiao in Chinese), This is because since November 2020, China’s
monitor the corporate VAT tax status, and tax bureau has replaced the HR bureau to be
ensure taxpayers’ compliance. solely responsible for collecting social insurance
The upgradation of GTS is one of China’s premiums from enterprise. As a result, the
national e-government projects and consists users of the GTS Phase IV will include not only
of “one network” and “four subsystems”. The taxpayers but also insurance contributors. Also,
“one network” is a four-level computerized the GTS Phase IV will establish information
taxation network of tax authorities at the sharing channels between Tax bureau, HR
national, provincial, local, and county level. bureau, market regulators, banks, and other
The four subsystems refer to the VAT anti- institutions. In fact, the Chinese government has
counterfeiting tax control invoicing subsystem, long been working on increasing cross-sectoral
anti-counterfeiting tax control certification information sharing.
subsystem, VAT auditing subsystem, and
invoice co-checking subsystem.

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