On August 17, 2026, the Withholding Tax Module of the Electronic Tax Bureau for Individuals quietly rolled out a major update—implementing a permanent pop-up alert and blocking mechanism for income information related to ”three consecutive months of zero reporting” for wages and salaries. This means that the practice of ”routine zero reporting” for former employees or during periods of inactivity—which companies had previously relied on—is now strictly blocked by the system. This is not just an ordinary feature upgrade, but the first substantive implementation of the ”data integration and preemptive risk control” principles of the Golden Tax Phase IV initiative in the individual income tax sector. As soon as the news broke, finance groups across the country were abuzz with questions: How should companies handle consecutive zero-declarations? Will there be issues if zero-declarations aren’t filed for former employees? Do legal representatives of companies with no actual business operations still need to continue filing returns?

More notably, this update also explicitly states that three categories of individuals are prohibited from reporting wages and salaries through their own business entities: owners of individually operated businesses, investors in sole proprietorships, and individual partners in partnerships. Instances where these three categories of individuals have previously incorrectly reported wages and salaries will now be directly blocked by the system. Combined with the pop-up alerts triggered by consecutive zero-declaration submissions, individual income tax compliance requirements for the second half of 2026 have shifted from ”post-facto audits” to ”real-time interception during the filing process.” If businesses fail to adjust their filing logic in a timely manner, not only will their filings be blocked, but they may also be designated as priority targets for tax audits, which could affect their tax credit rating, invoice issuance limits, and even result in their classification as non-compliant taxpayers.

While individual income tax compliance may seem like a routine financial task, it actually has far-reaching implications. Qicaiying Group specializes in providing domestic and international company registration services in Shenzhen, Guangzhou, Shanghai, Beijing, Hangzhou, Hong Kong, the United States, Japan, South Korea, Southeast Asia, Singapore, the British Virgin Islands (BVI), the Cayman Islands, and other locations, as well as corporate annual reviews and audits, bookkeeping and tax filing, tax compliance, information updates, bank account opening, ODI and FDI filings, and other corporate services; Hong Kong residency applications, renewals, and permanent residency services; Singapore EP application services; and cross-border e-commerce support and managed operations—all as part of our one-stop service. If you have any needs or are interested, please feel free to contact me at any time (Consultation Hotline: 18676749275, add WeChat: Qicaiyingjituan).

I. The Core of the New Regulations: A Qualitative Shift from ”Warnings and Reminders” to ”Mandatory Blocking”

To understand the impact of this update, we must first clarify the specific operating logic of the pop-up blocking mechanism.

Trigger condition: Zero reporting for three consecutive months. The system automatically triggers a pop-up window when an employee’s reported salary and wages are zero for three consecutive months. This pop-up is not a ”friendly reminder”—it will appear mandatorily during the submission process, requiring the company to confirm the action or navigate to resolve the issue. If the company chooses to ignore it, the system will mark that filing record as ”Pending Verification,” and repeated triggers may directly block the company’s individual income tax filing process.

Three possible actions after the pop-up appears. According to the State Taxation Administration’s operational guidelines, upon receiving a pop-up notification, enterprises must select one of the following three courses of action based on their actual circumstances:

Scenario 1: The employee has left the company. Click ”Redirect Now” in the pop-up window and follow the system’s instructions to change the employee’s status from ”Normal” to ”Abnormal” (i.e., resigned). Subsequently, do not file any salary and wage declarations for this employee. This is the most common and standard procedure—after an employee resigns, the company should not continue to file zero declarations for them but should instead directly change their status.

Option 2: The company has no actual business operations. If the company is indeed not conducting any actual business operations, but the legal representative or certain retained staff members still need to file a zero-report, you can select ”Do Not Proceed for Now,” then enter the salary and wages reporting module to manually generate a zero-salary record. After confirming that the information is correct, submit the report as usual. However, please note: This procedure should not be used repeatedly; frequent selection of ”Do Not Proceed” will be flagged as an anomaly by the system.

Option 3: A zero declaration reflects the actual situation. If verification confirms that the employee is still on the payroll and the zero-reporting status is accurate (e.g., leave of absence with pay suspended, unpaid leave, etc.), you may disregard the prompt and proceed with the filing as usual according to the standard process. However, the company must retain the relevant supporting documentation for future reference.

The following three categories of individuals are not permitted to report wages and salaries. This update also clarifies that owners of individually operated businesses, investors in sole proprietorships, and individual partners in partnerships may not report comprehensive income items—such as wages and salaries or annual lump-sum bonuses—within the business entities they operate. These three categories of individuals should file their individual income tax returns based on business income rather than wages and salaries. Instances of mixed reporting that occurred in the past will be automatically blocked by the system.

II. Five Associated Risks of Filing a Zero-Income Tax Return

Being blocked from submitting consecutive zero-reporting filings is only a surface-level issue; what truly gives companies a headache is the chain of associated risks triggered by the pop-up window.

Risk 1: Being designated as a priority target for tax audits. Consecutive zero tax returns are one of the most typical signs of tax irregularities. The Golden Tax Phase IV system automatically places companies with consecutive zero tax returns on the ”high-risk watch list,” significantly increasing the likelihood of an audit for suspected concealment of income or evasion of individual income tax. Once audited, the company must pay back taxes and late payment penalties; in serious cases, it may also face administrative penalties.

Risk 2: A lower corporate tax credit rating. A tax credit rating is a company’s ”tax ID.” Consecutive zero tax filings will directly lower a company’s credit score, dropping it from Grade A to Grade B or even Grade C or D. Once a company’s credit rating is lowered, it will face restrictions in areas such as export tax rebates, invoice issuance, bank loans, and participation in bidding processes.

Risk 3: Impact on the invoice issuance limit. In the era of digital invoices, the invoice issuance limit is tied to tax credit ratings. For companies filing zero-reporting returns, the system may automatically reduce their invoice issuance limit, affecting their normal business operations. For companies that need to issue invoices frequently, this is virtually a ”bottleneck” restriction.

Risk 4: You may be classified as a non-compliant account holder. Companies that consistently file zero tax returns without providing a reasonable explanation may be classified as ”non-compliant taxpayers” by the tax authorities. Once designated as non-compliant, the company’s tax registration will be frozen, preventing it from handling any tax-related matters; the process to lift this restriction is cumbersome and time-consuming.

Risk 5: In serious cases, administrative penalties may be imposed. If a zero tax return is determined to constitute concealment of income or tax evasion, the company and the relevant responsible parties will face three penalties: back taxes, late payment penalties, and fines. If the amount involved reaches a certain threshold, criminal liability may also be imposed.

Compliance risks associated with individual income tax filing are not merely isolated financial issues, but rather a critical factor that affects a company’s overall creditworthiness, business qualifications, and legal liability. Qicaiying Group specializes in providing domestic and international company registration services in Shenzhen, Guangzhou, Shanghai, Beijing, Hangzhou, Hong Kong, the United States, Japan, South Korea, Southeast Asia, Singapore, the British Virgin Islands (BVI), the Cayman Islands, and other locations, as well as annual review and audit, bookkeeping and tax filing, tax compliance, information updates, bank account opening, ODI filing, FDI filing, and other corporate services; Hong Kong residency application, renewal, and permanent residency services; Singapore EP application services; and cross-border e-commerce support and agency services. If you have any needs or are interested, please feel free to contact me at any time (Consultation Hotline: 18676749275, add WeChat: Qicaiyingjituan).

III. Corporate Response Plan: Simultaneous Rectification Across Four Dimensions

In light of the new regulations regarding individual income tax withholding, companies should simultaneously implement corrective measures in the following four areas.

First, conduct a comprehensive review of employee statuses. Companies should immediately verify the status of all employees one by one in the Withholding Tax section of the Natural Person Electronic Tax Bureau. For employees who have left the company, change their status from ”Normal” to ”Abnormal” and enter the date of separation; For employees who are still on the payroll but receiving zero wages, confirm the reason for the zero tax return and retain supporting documentation (e.g., agreements for leave without pay, applications for unpaid leave, etc.); for legal representatives and retained personnel, if the company has no actual business operations, select the ”Do Not Proceed for Now” option, but take steps to resume actual operations as soon as possible or consider deregistration.

Second, standardize the reporting criteria for these three categories of personnel. Owners of individually operated businesses, investors in sole proprietorships, and individual partners in partnerships must file their individual income tax returns based on business income and may not report wages or salaries through their business entities. If there have been instances of mixed reporting in the past, adjustments must be made before the next filing, and amended returns must be filed if necessary.

Third, establish an internal control system for individual income tax filing. Companies should establish a three-step internal control process consisting of ”monthly reconciliation—status verification—submission of reports.” Prior to each monthly filing, the HR department provides a list of current employees and payroll details, and the finance department verifies employee statuses and filing criteria; after confirming accuracy, the filing is submitted. A dedicated ledger should be maintained to record exceptional circumstances such as resignations, job transfers, and unpaid leave.

Fourth, conduct regular tax health checks. It is recommended that companies conduct a quarterly tax compliance self-assessment, focusing on the following: whether the number of employees filing individual income tax returns matches the number of employees covered by social insurance; whether reported wages and salaries align with the social insurance contribution base; whether there is a valid basis for employees filing zero returns; and whether the reporting criteria for the three categories of employees are correct. Any anomalies identified should be corrected promptly to prevent the accumulation of risks.

IV. A Shift in Mindset: From ”Routine Operations” to ”Precise Reporting”

The new regulation blocking pop-up notifications for consecutive zero-reporting in the individual income tax withholding system may appear to be a mere system update on the surface, but in essence, it represents a fundamental shift in tax administration from ”lenient entry and oversight” to ”strict entry and oversight.”

In the past, filing a zero tax return was considered a ”harmless practice”—if a company had no revenue or employees had no wages, simply reporting a zero was sufficient. However, under the data monitoring system of the Golden Tax Phase IV initiative, a zero tax return is no longer considered ”no information,” but rather an ”anomaly.” The system automatically cross-checks zero tax returns against social insurance enrollment figures, bank transaction records, issued invoices, and corporate income tax revenue. If a company is making social insurance payments, issuing invoices, and has bank transactions, yet consistently files zero individual income tax returns—this ”data discrepancy” will instantly trigger a risk alert.

A more profound change lies in the full implementation of the ”individual verification” logic. By 2026, Phase IV of the Golden Tax Project will have incorporated six categories of key personnel—including corporate legal representatives, financial officers, tax filers, actual controllers, shareholders, and core business operators—into a system of in-depth, linked monitoring. Anomalies in zero individual income tax filings will flag not only the enterprise but also the relevant individuals. This means that individual income tax compliance is no longer solely an issue for the enterprise; rather, it has become a complex matter involving personal credit records and career risks.

For small and medium-sized enterprises, the most pragmatic approach is not to try to use ”zero reporting” to offset business fluctuations, but rather to establish standardized systems for payroll disbursement and individual income tax filing. Even if a company is temporarily operating at a loss or is not profitable, as long as it has employees on the payroll, it should file individual income tax returns normally based on actual salary levels. Truthful, accurate, and complete—these six words represent the baseline for individual income tax compliance in the era of the Golden Tax Phase IV initiative.

Qicaiying Group has a professional team of financial and tax service experts that provides enterprises with end-to-end services, including bookkeeping, tax filing, tax compliance, and tax health checks. Whether it involves clarifying employee status, adjusting reporting criteria, or conducting tax risk assessments, Qicaiying can provide professional, efficient, and compliant solutions. Individual income tax compliance is not a cost—it is a protective barrier for the stable operation of a business. Consultation Hotline: 18676749275. Add us on WeChat: Qicaiyingjituan.