With the in-depth promotion of Golden Tax Phase IV, the means of tax supervision is becoming more and more intelligent, and the requirements of enterprise financial compliance have also increased. As an important concept in tax audit, "four streams of consistency" is related to enterprise tax security, but many enterprise leaders and financial personnel still have a vague understanding of it. In this article, we have compiled 4 core issues to help you fully understand the four streams of consistency and avoid tax risks.

I. What exactly is "four streams of consistency"?

The "four streams of consistency" is a key criterion for tax authorities to determine the authenticity of transactions and avoid the risk of fraudulent invoicing, and refers toFlow of funds, flow of invoices, flow of contracts, flow of goodsof the information matches exactly;

In a nutshell.Harmonization of "who signs the contract, who delivers the goods, who invoices and who collects the money"The

II. When are the four streams inconsistent?

Common scenarios of inconsistency in the four streams:

1. Differences in subject matter: The contract, invoice, payee, and shipper are not the same;

2. Varying content: Invoiced goods/quantities/amounts do not match contractual or actual;

3. Misplaced time: Invoicing is earlier than contracting or shipping;

4. Funding anomalies: The payer does not match the contracting party or the payment is received on a personal account.

Core: business is the most important, the four streams of unity is the basis; special circumstances to leave evidence, as far as possible, the funds paid to the public.

Does inconsistency between the third and fourth streams necessarily violate the law?

Not necessarily! The tax authorities are clear: the flow of funds and the flow of invoices may not coincide, and the core meets two conditions to be compliant:

1. The business is real, and the invoice is issued by the actual recipient of the service/sale of goods (in line with the requirements of the State Administration of Taxation for "invoicing according to the actual business");

2, due to industry regulations or funds regulation leads to "payer and payee are not the same", retain the entrusted advance agreement, authorization letter and other proof, in principle, can be normal deduction.

IV. How can enterprises avoid inconsistencies in the four streams?

The core principle is "business reality as the basis, process trace as a supplement", focus on these five points:

1. Contracts first:Clarify the subject and content of the transaction, etc., to avoid unauthorized substitution of signatures;

2. Truthful invoicing:Issued on the basis of actual transactions, the list is printed from the invoicing system;

3. Public account settlement:Avoid cash transactions, third-party payment/collection requires a three-party agreement;

4. Logistics to leave evidence:Retain shipping documents, receiving and inspection documents, etc., to ensure consistency with the contract;

5. Periodic reconciliation:Reconcile the four streams of documents on a monthly basis and rectify deviations in a timely manner.  

Consistency of the four streams is a basic requirement for tax compliance and an important safeguard for enterprises to prevent tax risks. Although the inconsistency of the four streams does not necessarily lead to violations, but in the actual operation, enterprises should still try to keep the four streams consistent, so as not to bring unnecessary tax trouble. We hope that this article can help business leaders and financial personnel to better understand the four streams of consistency, and do a good job of tax risk prevention!