Checking bank accounts is a must for the Inland Revenue Department. When they have the target they want to check, they will open a file and ask the most popular banks such as HSBC, Hang Seng, or Bank of China for relevant information, followed by the taxpayer’s residence, work, and The bank with the best chance of opening an account near the location of operation. If taxpayers have mentioned other bank accounts during their meeting with IRD officers, they will also make comprehensive inquiries on those bank accounts.
Inland Revenue Department staff will analyze the background information of the following taxpayers in various aspects to understand their account status:
1. Multi-category income and benefits for work
2. The nature of income and the mode of collection of payments for all operations
3. The nature of expenses for all operations
4. Property rental income and transaction amount
5. What stocks and dividends do you hold?
6. Overseas business information
7. Its living expenditure pattern (rich or ordinary)
8. Do you have any contact with overseas people?
In the process of reviewing/investigating the files, checking the bank account is an important task for the tax bureau personnel to use the asset increase analysis method. The asset increase analysis method is an indirect tax assessment method adopted by the taxpayer due to the lack of account books and records. Calculated by the following formula:
Growth in Net Assets [Beginning NAV (minus) Ending NAV]
Plus: No expenses allowed
Less: Taxable Income
If taxpayers want to reduce their taxes, they should try to estimate each of the following items according to the above formula:
1. Increase the assets at the beginning of the period, that is, the taxpayer actually had a lot of cash, stocks, bank deposits, and a high business net asset value at the beginning
2. Increase ending liabilities, i.e. taxpayers have large private debts to pay off
3. Explain to the examiner that the assets are not owned by the taxpayer, and the taxpayer is actually the custodian of the assets
4. The assets are not actually related to the taxpayer’s income, but are obtained from gambling, inheritance, gifts, gifts from others, overseas income, or remittances
5. Have more than one tax-free income
6. Taxpayers’ living expenses are not high
7. Explain and provide evidence as far as possible that the unknown withdrawal amount is a tax-deductible expense, and the unknown income is not taxable
The above information is for reference only. If in doubt, we welcome your tax inquiries.