The Shanghai Taxation Bureau has just notified that starting from August 1,2021, the income tax collection method for individual/partnership enterprises in Shanghai for general taxpayers will be changed from all approved levy to audit levy!

1. What is an approved levy?

Approved levy or approved collection mainly means that when taxpayers’ accounting books are imperfect, information is incomplete, it is difficult to check the accounts, or the basis for tax calculation is obviously low, etc., it is difficult to for tax bureau to determine the taxpayer’s tax payable, it is a easy method of tax collection.

Approved levy is widely used in personal income tax. There are three ways for the verification and collection of individual taxes, namely, regular fixed-amount collection, collection of verified taxable income rates, and other reasonable methods.

2. Why does the tax bureau gradually cancel the approved levy?

- The risk of approved levy management is huge

- Cause direct loss of tax

- Reduce the tax base of downstream companies

- Cause tax losses from upstream companies

3. The 8 cases of cancellation of approved levy enterprises will be strictly investigated

- Is it implemented for the company who is general taxpayers?

- Is it implemented for financial enterprises, economic assurance intermediary institutions?

- Is it implemented for a branch company?

- Check the use of the taxable income rate, and whether there is any over-rate levy.

- For companies whose annual income and profits change significantly more than 20%, whether the tax authorities perform their duty to adjust the taxable income rate

- Correction of companies with inconsistencies between the income in the declaration form and the number in financial reports

- Invoice control and cancellation management of the company who has approved levy method

- Other which needs to take care issues