I have a very deep understanding of the CRS process. I can't go into too much detail, but the general idea is that CRS is not as scary as it seems. Brokers will only upload data to the Chinese National Taxation Administration once a year (at the end of the year) or twice a year (mid-year and end of the year). Each upload consists of just one piece of data: the "balance." All CRS systems only upload this one data point.

Moreover, the so-called situation where "if your principal is 1 million, you lost 500,000 last year, and this year you just recovered 100,000, sorry, you might still have to pay tax on that 100,000 profit, hand over 20,000!" does not exist. This is because CRS is merely an information exchange mechanism, not a tax system. CRS only transmits the balance, so it does not reflect your profit and loss situation.

If the National Taxation Administration needs to check you (believe me, this is almost non-existent; general checks are usually bottom-up rather than top-down), they can access your historical records through the CRS system. For example, if your annual balance was 1 million last year and is 500,000 this year, does that mean you incurred a loss?

It means nothing at all because they can only see the "balance." Please remember this repeatedly: they can only see the balance. For instance, if you had 1 million dollars in your account last year, made 1 million dollars, and withdrew 1.5 million dollars, your account balance would be 500,000 dollars. CRS will not provide any party with detailed transaction or withdrawal data, so the only possible scenario for requiring additional tax based on the balance (which is almost non-existent) would be if your account was 1 million dollars last year and 2 million dollars this year.

Additionally, "the account trigger threshold for financial institutions in CRS member countries like Hong Kong: if your single financial account (including brokers and banks) exceeds 1 million dollars at any point during the year, it will be flagged, and the information will automatically enter the exchange process." This does not exist; there is no mention of 1 million dollars, at least not in the CRS system. Moreover, brokers in Hong Kong, whether overseas or domestic, do not have this requirement.

There is enhanced due diligence of 1 million dollars in Hong Kong, where if your account exceeds 7.8 million HKD at the end of the year, the bank will conduct a simple inquiry. However, this is just an ideal scenario. In reality, if your account consistently exceeds 7.8 million HKD, almost no one will bother you except for your account manager.

I won't go into the details of CRS; for the vast majority of us, it's not something to worry about. The only thing needed is what I mentioned earlier: when they need to check you from the bottom up, so paying additional taxes is always something you fill out yourself.

This article is sponsored by #Bitget ｜ @Bitget_zh

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