Phase IV of the Golden Tax System is no longer simply a matter of ”system launch”; at its core, it is about ”data-driven tax administration”—integrating data from tax authorities, banks, industrial and commercial registries, social security agencies, and customs, and using more than 400 risk warning models to keep a close eye on you.

Many business owners are still stuck in the outdated mindset that ”if the amount isn’t large, they won’t be investigated.” Here are five actions that are most likely to trigger the system’s attention—if you do even one of them, you could end up on the risk list.

01

Public Funds Deposited in Private Accounts—It Can’t Be Hidden Any Longer

Receiving payments via the personal bank cards, WeChat, or Alipay accounts of business owners, shareholders, finance staff, or even relatives—especially when the amounts are large or the frequency is high—is the first thing the system flags. Even if you split the payments into multiple small, scattered transactions, big data will still aggregate and track the annual transaction history across all accounts under the same controlling party.

Data from tax authorities, banks, and payment platforms is now interconnected. The system automatically flags and reports transactions such as single-day cash deposits or withdrawals of 50,000, cumulative domestic transfers to personal accounts totaling 500,000, and single-day transfers from corporate to personal accounts exceeding 200,000. Under the "Golden Tax Phase IV" initiative, the avenue for concealing income has been virtually closed off.

02

There is no basis for the shift from public to private ownership; this is a direct warning.

Frequent transfers from corporate accounts to the personal accounts of shareholders or legal representatives under the guise of ”intercompany payments” or ”contingency funds”—without supporting contracts, invoices, or approval documents—or large outstanding balances at year-end that remain unpaid for extended periods, are typical warning signs.

Be aware of a common pitfall: If a shareholder borrows money from the company and has not repaid it by December 31—nor used it for business operations—the tax authorities will treat it as a ”dividend” and require the payment of 20% personal income tax. Many business owners don’t realize this until the end of the year, by which time it’s already too late.

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03

If the four data streams do not match, trigger an audit immediately.

The system automatically cross-checks contract flows, invoice flows, cash flows, and logistics (service flows). While reported revenue is on the low side, warehouse shipments, utility and consumable usage, and upstream and downstream order volumes continue to rise; these data discrepancies trigger an audit work order.

Significant discrepancies between input and output invoices are also dangerous: a company selling electronics lists ”office supplies” as its input, while a machinery factory purchases large quantities of steel but reports ”technical services” as its output. Additionally, frequent voiding and red-line adjustments (with a voiding rate ranging from 10% to 15%) and issuing invoices at the maximum limit (nearing or exceeding 90%) are all indicators of suspected fraudulent invoicing.

04

Closed-Loop Capital Flow: Irrefutable Evidence of Fraudulent Invoicing

Payments made by a company to suppliers that flow back through a third-party account to the accounts of the actual controller or related parties—this is a classic sign of fraudulent invoicing. Once this occurs, the company faces criminal liability, which cannot be resolved simply by paying back taxes and fines.

Phase IV of the Golden Tax System features powerful relationship-mapping capabilities that can map out a network of all account relationships involving legal representatives, shareholders, supervisors, financial officers, their immediate family members, and upstream and downstream entities. If multiple personal accounts with no business dealings consistently receive payments from the same group of customers over a long period, the system automatically flags this as ”splitting accounts to conceal income.”

05

Tax Avoidance Through Corporate Splits Leads to an Even Bigger Deficit

Registering multiple shell sole proprietorships and small-scale companies, splitting up the same business into separate entities, and artificially lowering each entity’s sales to take advantage of the tax exemption for small-scale businesses and the 50 percent reduction in individual income tax—with the funds ultimately funneled into the actual controller’s personal accounts—is a clear case of tax evasion and creates a longer chain of risk.

“Three-No Enterprises” (no staff, no premises, no logistics) are the primary targets for crackdowns. Practices such as using purchased invoices to offset tax liabilities and issuing reciprocal or circular invoices are clearly exposed through the ”four-flow” verification process, and tax evasion and fraud can result in indefinite back taxes. The old notion that “if you can just hold out for three years, you’re safe” no longer holds true.

Under the Golden Tax Phase IV initiative, business authenticity is the only reliable safeguard. All tax-saving arrangements must be based on genuine transactions and designed in advance, rather than as a retroactive remedy. Scan the QR code to contact Qicaiying’s online customer service (WeChat/Phone: 13312938845). We’ll help you establish a data self-inspection and compliance system so your business can rest easy.

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