Well-known actor fined 106 million yuan! What is tax evasion? Will you go to jail?

Experts in this article:

Mao Junying, tax lawyer

Song Shengyun, Lawyer

I believe everyone has seen the frequent news reports of entertainment stars being fined huge amounts of money for tax evasion.

Weibo screenshot

Recently, based on clues from tax supervision, the Fourth Inspection Bureau of the Shanghai Municipal Taxation Bureau conducted further analysis of tax big data and found that Deng Lun was suspected of tax evasion. A comprehensive and in-depth tax inspection was conducted on him in accordance with the law.

After investigation, it was found that Deng Lun evaded personal income tax of 47.6582 million yuan by converting the nature of income by fictitious business and making false declarations from 2019 to 2020, and underpaid personal income tax of 13.9932 million yuan in other amounts.

In the end, Deng Lun was pursued and fined 106 million yuan for tax evasion.

Let's not just watch the fun, take this opportunity to learn some tax law knowledge, why do we have to pay taxes? What are the behaviors of tax evasion?

Why do our citizens pay taxes?

As long as Chinese citizens have income, they must pay taxes, but the tax items involved are different and the tax calculation methods are also different, unless there is a clear tax exemption.

Paying taxes to the state is for secondary distribution to be used for national security, public construction and other expenditures in order to achieve relative fairness.

A person's income is personal earnings. Salaries, bonuses, year-end pay raises, labor dividends, allowances, subsidies, service fees or royalties, money earned from business and other paid services, income from property transfers, and occasional money received from personal awards, prizes, and lotteries are all subject to personal income tax.

As long as your income is determined to be related to your position or employment, no matter what it is called, it is wages and salaries. For example, some companies stipulate that as long as employees are on business trips, they will be given a travel allowance at a fixed rate every day, and there are similar transportation subsidies. These incomes need to be included in wages and salaries to pay personal income tax.

The manuscript fee has nothing to do with whether the article is published or not, and has nothing to do with newspapers, periodicals, various self-media, etc.

According to Article 6, Paragraph (2) of the Regulations for the Implementation of the Individual Income Tax Law of the People's Republic of China, the income from performances and performances by entertainers is considered labor fees and individual income tax is paid accordingly.

Royalties refer to the income obtained by an individual from providing the right to use patents, trademarks, copyrights, non-patented technologies and other franchises; the income obtained from providing the right to use copyrights does not include royalties. We may not come into contact with this tax item very often, and it is easy to confuse it with income from property transfer. One of the characteristics of royalties is that it is the transfer of the right to use, while property transfer is the transfer of ownership, which is the biggest difference between them.

The income obtained by an individual from running schools, providing medical treatment, consulting and other paid service activities in accordance with the law is considered business income.

You will find that medical treatment, consulting, and lecturing are listed among the income from labor remuneration.

So many people are wondering, for the same medical treatment and consulting services, why are some income calculated as labor remuneration while others are calculated as business income?

First, determine whether the main business purpose is "running schools, providing medical treatment, or consulting";

Secondly, check whether it is a continuous operation;

If it continues to be the main means of survival, then according to the "Tax Registration Management Measures", tax registration should be carried out.

Therefore, in practice, the tax authorities judge whether an individual is engaged in running schools and medical consulting in accordance with the law. If it is business income, then they must apply for a license. They can set up an individual business, a sole proprietorship, or a partnership.

What behaviors constitute tax evasion?

Taxes must be paid. Paying less or not paying at all depends on different circumstances and the nature of the matter.

Different practices should be tolerated, but no red line of law should be crossed. In some cases, it is against the law if a taxpayer forges, alters, conceals, or destroys account books or vouchers without authorization, or over-lists expenses or fails to list or under-lists income in the account books, or refuses to file a tax return after being notified by the tax authorities, or files a false tax return, or fails to pay or under-pays the tax due.

Fraud is a form of tax evasion. There are many types of fraud, such as converting film remuneration or labor remuneration into corporate income for the purpose of paying less tax, avoiding tax, or evading tax, which is a form of false declaration of income conversion by fictitious business, or a form of concealing illegal purposes in a legal form.

Will you go to jail for tax evasion?

First of all, tax evasion is illegal and should be punished by law. Those who violate the law seriously should go to jail.

The consequences of tax evasion include paying back taxes within a specified period of time, a late payment penalty of 0.05% per day, a fine of 0.5-5 times the tax amount, and criminal liability of up to three to seven years in prison.

If the amount of tax evasion is huge and accounts for more than 30% of the tax payable, the most severe punishment shall be imposed according to Article 201 of the Criminal Law of the People's Republic of China, with a sentence of fixed-term imprisonment of not less than three years but not more than seven years and a fine.

What should I pay attention to when paying taxes?

Many people may say, I am not a star and I don’t have that much income to pay taxes.

You should know that tax declaration is a prerequisite for paying taxes according to the law.

According to Article 11 of the Individual Income Tax Law of the People's Republic of China, resident individuals who obtain comprehensive income shall calculate their individual income tax on an annual basis; if there is a withholding agent, the withholding agent shall withhold and prepay the tax on a monthly or per-time basis; if a final tax settlement is required, it shall be made between March 1 and June 30 of the year following the year in which the income is obtained.

Article 13 stipulates that if a taxpayer obtains taxable income and there is no withholding agent, he shall submit a tax return to the tax authority and pay the tax within the 15th day of the month following the month in which the income is obtained. If a taxpayer obtains taxable income and the withholding agent fails to withhold the tax, the taxpayer shall pay the tax before June 30th of the year following the year in which the income is obtained; if the tax authority notifies the taxpayer to pay the tax within a time limit, the taxpayer shall pay the tax within the time limit.

The so-called comprehensive income refers to income from wages, salaries, remuneration for services, royalties, and franchise fees.

Since the amendment of the Personal Income Tax Law in 2018, we residents need to file a reconciliation and settlement for the year in which the comprehensive income was obtained before June 30 of the year following the year in which the comprehensive income was obtained. We can download the Personal Income Tax APP on our mobile phones and declare the reconciliation directly in the APP.

Therefore, no matter how big or small the amount is, everyone must pay taxes in a timely manner in accordance with tax laws.

The 2021 individual tax reconciliation has started on March 1

How much did you withdraw?

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