As part of its enforcement mission, the State Taxation Administration(STA) audits a select portion of income tax returns every year. Reasons for an STA audit vary, but some factors may increase the odds of an examination.www.tannet-group.com
1. Random selection. Every year, tax authorities will randomly check the accounts of some enterprises according to the proportion. Random selection are generally based on specific conditions such as operation scale, income scale, tax payment amount, cost profit rate, tax burden rate, tax risk level, tax credit level, etc. Specific conditions are not set for random selection, and the list of objects for investigation is determined by lottery.
2. According to the risk management workflow, the risk information analysis of high-risk taxpayers was selected for random inspection, as well as the random inspection plan arranged by the superior tax bureau, the inspection tasks such as cracking down on tax evasion, evading tax recovery, tax fraud, tax resistance and false invoice.
3. Reporting the tax cheat. If your enterprise tax evasion is reported with creditable evidences, enterprise will face tax inspection. If business exits irregular, accounting fraud, or suspected tax evasion, STA will launch an investigation.
4. Most of inspected enterprises audits because of false invoices. STA uses big data, even one false invoice will cause serious consequences . If your cooperation partners are checked, so are you. If the enterprise invoices and sales are not consistent, there is a tax evasion suspicion.
5. Some enterprises intentionally increase costs, especially small enterprises, entering relatives and friends ID into their enterprises wage list. After the new individual income tax declaration system going online, STA will be warned by the irregulate wage lists.
6. Uninvoiced income is not declared. Enterprise should use the time recognition of the VAT tax and confirm the actual income tax return. If the taxpayer fails to pay tax within the prescribed period, the tax authorities, besides collecting the amount owed, by day receive the fine for delaying payment of delinquent tax on five over ten thousand.
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