Issued by the Wuhan Municipal Taxation Bureau in January 2024).
Law firms are the bridge between the judicial system and society, and play an important role in promoting the process of comprehensive law-based governance, such as maintaining the authority of the law, promoting social fairness and justice, and protecting citizens' rights. However, from the perspective of individual income tax collection and management, the financial management of some law firms is not standardizedThe phenomenon of under-reporting income and failing to standardize the expenditure of costs and expenses, the industry tax risk is greater.
In order to further serve law firms in handling the 2023 annual business income tax reconciliation declaration in accordance with laws and regulations, promote the high-quality development of the law firm industry, and better play the role of the rule of law in consolidating the foundation, stabilizing expectations, and benefiting the long-term, the Wuhan Municipal Taxation Bureau of the State Administration of Taxation has sorted out the "Risk Prevention Matters for Individual Income Tax Declaration in the Law Firm Industry" in accordance with the current laws, regulations and relevant policies. For some key risk prevention matters, the following reminders are given:
1.Standardize the establishment of accounts and account according to law. The individual income tax on the business income of lawyers funded by law firms must not be verified and collected, and account books shall be set up in accordance with the provisions of laws and administrative regulations, and accounts shall be kept on the basis of lawful and valid vouchers, accounting shall be conducted, and tax declarations shall be handled truthfully.
2.The income from the operation shall not be underreported. Law firms should report their income in a comprehensive and timely manner on the accrual basis of accounting, and the income that belongs to the current period should be regarded as the income of the current period, regardless of whether the money is received or paid, and whether the income is in monetary or non-monetary form. The commission income and salary income of the lawyer shall be incorporated into the business income and declared individual income tax; Uninvoiced income shall be declared in accordance with the regulations.
3.The case-handling commissions and wages and salaries of the funded lawyers shall not be deducted before tax when declaring business income.
4.The provision that the case-handling expenses shall be deducted by a fixed amount of 25% of the income shall not be applied to the funding lawyers, and the case-handling expenses of the participating lawyers shall be deducted before tax on the basis of legal and valid vouchers.
5.Employee lawyers must not deduct case-handling fees in excess or repeatedly when they receive commission income. Employee lawyers' case handling costs, such as transportation expenses, information fees, communication expenses, and salaries of employeesThere is an option to make a fixed deduction of 25% of the share income, according to the "wages and salaries income" item to declare individual income tax, you can also choose to be reimbursed at the law firm according to the facts, but no double deduction is allowed.
6.The expenses for employee training borne by law firms may be included in the law firm's employee education expenses; Except for the professional training expenses that lawyers personally bear, except for the professional training expenses they participate in in accordance with the provisions of the lawyers association, which can be deducted before tax, other training expenses must not be deducted before tax.
7.Expenses that are not genuinely incurred and unrelated to business activities shall not be deducted before tax, expenses that cannot provide legal and valid certificates shall not be deducted before tax, and expenses that are obviously unreasonable shall not be deducted before tax.
8.All kinds of reserves accrued by law firms shall not be deducted before tax.
9.The living expenses incurred by the contributing lawyer and his or her family shall not be deducted before tax, and if the living expenses incurred by the contributing lawyer and his or her family are mixed with the production and operation expenses of the law firm, and it is difficult to divide them, all of them shall be regarded as the living expenses incurred by the contributing lawyer and his family, and shall not be deducted before tax.
10.Where it is difficult to divide the fixed assets shared by law firms' production and operation and the investment lawyers and their families, the in-charge taxation authorities shall verify the amount or proportion of depreciation expenses that are allowed to be deducted before tax on the basis of the specific circumstances such as the type and scale of the law firm's production and operation. If it has not been verified by the tax authorities, it shall not be deducted.
11.Employee welfare expenses, advertising expenses, business publicity expenses and other expenses shall not be deducted beyond the standard. The trade union funds, employee welfare expenses, and employee education expenses allocated by the law firm are respectively included in the total wages and salaries5% of the standard deduction according to the facts; The advertising expenses and business promotion expenses incurred in each tax year shall be deducted according to the facts, and shall not exceed 15% of the operating income of the current year; The relevant business entertainment expenses incurred in each tax year shall be deducted according to 60% of the amount incurred, but the maximum shall not exceed 5% of the operating income of the current year.
12.It is not allowed to understate or conceal the remuneration of employees or to decompose remuneration by inflating the number of employees. It is necessary to strictly implement the full declaration of wages and salaries in accordance with the regulations, strictly fulfill the obligation of withholding and paying individual income tax, and the commission income of the employee lawyer shall be incorporated into the wage and salary withholding declaration in accordance with the regulations.
13.Where a contributing lawyer obtains both comprehensive income and business income, he or she may declare a deduction of 60,000 yuan in expenses, special deductions, special additional deductions, and other deductions determined in accordance with law from the comprehensive income or business income, but must not be deducted repeatedly.
14.A partnership law firm shall take the full amount of annual operating income as the base, and "divide first and then tax" in accordance with the prescribed proportion, and the total distribution ratio shall be equal to 1.
15. Legal aid subsidies that are not directly paid by legal aid institutions to legal aid personnel must not be exempt from individual income tax.
16.The investment lawyer should handle the annual reconciliation of business income before March 31 and submit the "Individual Income Tax Return for Business Income (Form B)"; If the business income is obtained from more than two places, the annual summary declaration shall also be made and the "Individual Income Tax Return for Business Income (Form C)" shall be submitted. The contributing lawyer of the law firm's branch shall handle the declaration of business income in accordance with the law with the competent tax authority where the branch is located.
Lawyer Huang Juntao, graduated from Zhongnan University of Economics and Law, with a double bachelor's degree in accounting + law and a master's degree in economic law (finance and taxation).
Researcher of the Research Center of the Criminal Committee of the Wuhan Lawyers Association, Deputy Director of the Jingshi (National) Tax Law Committee, Deputy Director of the Jingshi (Wuhan) Criminal Compliance Center, Director of the Finance and Taxation Legal Affairs Department of the Jingshi (Wuhan), and Researcher of the Donghu Administrative Law Research Institute.
Since his practice, he has insisted on deepening tax-related legal services, participated in handling more than 100 major, difficult and complex tax-related cases, published more than 300 tax-related articles, and won the Provincial Economic Law Society, the Finance and Taxation Law Society, and the Bankruptcy Law Society for many times. He has participated in the drafting of the Operational Guidelines for Lawyers Handling Tax Law Services of the All-China Lawyers Association and the Guidelines for the Defense of Financial Crime Cases by Lawyers of the Wuhan Lawyers Association, and participated in the compilation of the compilation of the Practices of Difficult Cases in China's Tax Law and the Practice of Tax Lawyers in China, and is the author of Analysis and Compliance Management of Export Tax Rebate Practice (Law Press).
Address: 40th Floor, Shanhe Building, Yuejiazui, Wuhan City, Beijing Jingshi (Wuhan) Law Firm.