Law of the People's Republic of China Concerning Tax Collection and Tax Administration: Passed at the 27th Session of the Standing Committee of the Seventh National People's Congress (NPC) on September 4, 1992; amended at the 12th Session of the Standing Committee of the Eighth NPC on February 28, 1995; revised at the 21st Session of the Standing Committee of the Ninth NPC on April 28, 2001; and came into effect as of May 1, 2001.
Detailed Rules for the Implementation of the Law of the People's Republic of China Concerning Tax Collection and Tax Administration: Promulgated by the State Council on September 7, 2002; came into effect as of October 15, 2002.
Criminal Law of the People's Republic of China: Passed at the 2nd Session of the Fifth NPC on July 1, 1979; amended at the 5th Session of the Eighth NPC on March 14, 1997; came into effect as of October 1, 1997; revised at the Standing Committee of the NPC later. These rules and laws were formulated for the following purposes:
To strengthen tax administration.
To standardize tax collection and payment behavior.
To ensure State tax revenue.
To safeguard the legal rights and interests of taxpayers.
To promote social and economic development.

EXECUTION OF TAX LEGISLATION

Observing Legalities

Prevailing laws have to be observed with respect to the following matters:

The adoption of new taxes.
The termination of taxes.
Tax reductions.
Tax exemptions.
Tax refunds.
Tax repayments.

As authorized by prevailing laws, the State Council shall formulate administrative rules and regulations that have to be observed with relation to the matters discussed above.

The tax department has the right to refuse any decision that contravenes tax laws or administrative rules or regulations:

Contravention

No department, unit, or individual shall be allowed to take any of the following actions in violation of prevailing laws or administrative rules or regulations:

Collect new taxes.
Terminate taxes.
Grant tax reductions, exemptions, refunds, or repayments.

Where decisions made by any department, unit, or individual contravene tax laws or administrative regulations or rules, the decisions shall be deemed invalid.

The tax department shall disregard these decisions, and report to the tax department at a higher level.

Division of Responsibilities

The relevant department of the State Council is in charge of tax collection and administration work in China.

The tax offices of the State Administration of Taxation (SAT) and the local tax bureaus in different regions will carry out tax administration and collection work within the scope prescribed by the State Council.

Role of Local People's Government

The local People's Government at various levels should strengthen the leadership over or coordination of tax collection and administration work within their own administrative jurisdictions.

They will support the tax department in the following areas:

The execution of its duties.
The execution of its tax collection and administration tasks in accordance with prevailing laws.
The computation of tax due in accordance with statutory tax rates.
The collection of tax in accordance with prevailing laws.

Role of Other Organs

All departments and units will support and assist the tax department and the Customs department in carrying out their duties.

No unit or individual will obstruct their work.

Dissemination, Consultation

The tax department undertakes the following duties:

Disseminate information on tax laws and administrative regulations.
Disseminate tax knowledge to all members of the populace.
Provide tax consultation services to taxpayers free of charge.

Standards of Conduct

The tax department will strengthen team construction to improve the political and professional quality of tax staff.

Tax departments and tax officials shall observe the following standards:

They should implement laws impartially.
They should be dedicated to their work.
They should be honest in their administration.
They should be polite to their customers.
They should provide reliable services.
They should respect and protect the rights of taxpayers and withholding agents.
They should accept monitoring as stipulated by prevailing laws.

Tax staff should not take bribes, bend the law for their own benefit, or neglect their duties by failing to collect or under-collecting taxes due.

They should not abuse their power by over-collecting taxes due, or create difficulties for taxpayers or withholding agents.

Internal Controls

Tax departments at all levels should set up internal control and monitoring systems, or improve existing ones.

Tax departments at all levels should monitor the behavior of their staff in implementing laws and administrative regulations, and in observing the self-disciplined rules.

Tax departments at higher levels shall, by law, monitor the administrative behavior of tax departments at lower levels.

Discovery of Tax Offenses

Where a tax department discovers that a tax department at a lower level has committed a tax offense, it should remedy the situation in a timely manner.

The department under the higher department that discovers the offense should correct the offense in a timely fashion, in accordance with the ruling of the higher department that discovers the offense.

When a tax department discovers that a tax department at a higher level has committed a tax offense, it should report the case to a tax department at a higher level or to the relevant department.

Demarcation of Responsibilities

The responsibilities of tax staff in charge of collection, administration, audit, and administrative review work in the tax department should be clearly demarcated, and should be separate for cross-check.

Conflicts of Interest

Where tax staff may be subject to conflicts of interest with relation to taxpayers or withholding agents, or with relation to tax offense cases where they are in charge of collecting taxes or investigating the offenses, they should recuse themselves.

When tax staff conduct assessments of tax payable, adjustments of tax quotas or tax inspections, or where they handle tax administrative penalties or tax administrative reviews, they should recuse themselves if they have any of the following relations with the taxpayers, withholding agents, legal representatives, or direct responsible persons:

A husband and wife relationship.
A direct blood relationship.
An indirect blood relationship within three generations.
Other relationships that may compromise their impartial execution of tax laws.

Customs

Customs and Customs staff should carry out their duty collection work by the statutory power and procedures, safeguard the interests of the State, protect the legal rights and interests of the State, and accept monitoring as prescribed by prevailing laws.

TAXPAYERS AND WITHHOLDING AGENTS

Taxpayers

Where units or individuals are specified as being liable to pay tax by prevailing laws or administrative rules or regulations, they are deemed to be taxpayers.

Withholding Agents

Where units or individuals are specified as having an obligation to withhold/remit taxes by prevailing laws or administrative rules or regulations, they are deemed to be withholding agents.

Entrusted Agents

Taxpayers and withholding agents should, in accordance with prevailing laws and administrative rules and regulations, pay, withhold/remit or collect/remit taxes.

They may entrust tax agents to deal with tax matters.

Acts of Contravention

Taxpayers should fulfill their tax payment obligations in accordance with prevailing tax laws, administrative regulations and rules.

Where they sign contracts or enter into agreements that contravene tax laws, administrative regulations or rules, the contracts or agreements shall be deemed invalid.

Supporting Documentation

Taxpayers, withholding agents and other relevant units should, in accordance with relevant State rules, provide truthfully relevant information concerning tax payments and the withholding of taxes.

Instruction

Taxpayers and withholding agents have the right to learn from the tax department about tax laws, administrative regulations, and tax payment procedures.

Confidentiality

Taxpayers and withholding agents have the right to request the tax department to keep taxpayers' information (i.e., commercial secrets, private matters) confidential.

The tax department is obliged to keep confidential information about taxpayers and withholding agents.

Applications for Reductions, Exemptions, Refunds

By law, taxpayers have the right to apply for tax reductions, tax exemptions, and tax refunds.

Administrative Review

With respect to decisions made by the tax department, taxpayers and withholding agents have the following rights:

To make statements and arguments.
To apply for administrative review or appeal.
To request compensation by the State.

Offenses by Tax Department, Staff

Taxpayers and withholding agents have the right to accuse and disclose offenses committed by the tax department or tax staff.

Informants

Any unit or individual has the right to disclose any activity that violates tax laws or administrative rules or regulations.

The tax department should keep the identity of informants confidential and give proper rewards.

Customs, Confidentiality, Informants

Duty payers have the right to request Customs to keep their commercial secrets confidential, but should not refuse to provide relevant materials by means of commercial secrets. Customs should keep the relevant information confidential for duty payers.

Customs should give rewards to units or individuals that disclose or assist in the detection of violations of import/export regulations. It should be responsible for keeping the relevant information confidential.

TAX REGISTRATION

Overview

Tax registration is a statutory system under which the tax department registers the economic activities of taxpayers and conducts tax administration over taxpayers.

Entities

The following entities should, by law, file for tax registration:

Enterprises.
Branches set up by enterprises in other jurisdictions.
Household industrial/commercial enterprises engaged in production/business operations.
Institutions engaged in production business operations.

Other taxpayers should also file, except for the following entities:

Government organs.
Individuals or mobile vendors in the countryside that have no fixed production/business places.

Withholding Agents

Where withholding agents, except for government organs, are obliged to withhold taxes, they should, by law, file for tax withholding registration.

Registration Departments

Registration is handled by the offices (or branches) of the SAT, and by the local tax bureaus (or branches) at the county (or district) level or above.

The following responsibilities fall under their purview:

Registration of establishments.
Change in registration.
De-registration and checking.
Amendments to tax registration certificates.
Handling of abnormal taxpayers.
Checking registration.

The offices of the SAT and the local tax bureaus shall use unified tax registration numbers. The numbers shall be worked out jointly by the SAT offices and the local tax bureaus at the provincial level, and issued uniformly for execution.

Taxpayers have to provide tax registration certificates when opening bank accounts, purchasing invoices, or handling other tax matters.

Registration of Establishments

Filing Procedures

Submitting Registration Forms

When taxpayers submit their tax registration forms, they should provide the relevant documentation. Depending on the circumstances, the following items may be required:

Business licenses or other documents that grant approval for business.
Relevant contracts, charters, or agreements.
Organizational uniform code certificates.
The resident identification cards, passports, or other legal documents of the legal representatives, or of the key personnel or owners.

The tax departments at the provincial level shall determine what other documents or materials are necessary.

Issuing Registration Certificates

Where the registration forms filled in by the taxpayers comply with the rules, and where the documents or materials provided by the taxpayers are complete, the relevant tax department shall issue the tax registration certificates in a timely manner.

Where the registration forms fail to comply with the rules, or where the documents/materials provided are incomplete, the relevant tax department shall ask the taxpayers to fill in the forms again, on the spot, or to provide the missing documents/materials.

Where there is any issue with the documents/materials provided, the tax department should investigate on the spot, and issue the registration certificates after verification.

Deadlines

The following entities (hereafter referred to as taxpayers engaged in production/business operations) should file for tax registration with the tax offices that serve the locales in which their production/business operations are located.

Enterprises.
Branches or places set up by enterprises engaged in production/business operations in other jurisdictions.
Individual industrial/commercial households engaged in production/business operation.
Institutions engaged in production/business operation.

Taxpayers with Business Licenses

Where taxpayers engaged in production/business operations have received their industrial/commercial business licenses (or temporary business licenses), they should, within 30 days of receipt, file for tax registration with the relevant local tax offices.

The tax offices shall make the necessary checks, and issue the tax registration certificates and corresponding transcripts. For temporary business licenses, they shall issue temporary tax registration certificates and corresponding transcripts.

Taxpayers without Business Licenses

Where taxpayers engaged in production/business operations have received approval from the relevant departments for establishment, but have no business licenses, they should, within 30 days of approval, file for tax registration with the relevant local tax offices.

The tax offices shall make the necessary checks, and issue the tax registration certificates and corresponding transcripts.

Temporary Registration Certificates

Where taxpayers engaged in production/business operations have not received approval from the relevant departments for establishment, and have no business licenses, they should, within 30 days of the date that their tax obligation arises, file for tax registration with the relevant local tax offices.

The tax offices shall make the necessary checks, and issue temporary tax registration certificates and corresponding transcripts.

Subcontractors or Lessees

Where subcontract takers or lessees have independent production/business operation rights, conduct independent financial accounting, and regularly pay subcontract fees or rental to the subcontract makers or lessors, they should, within 30 days of signing the subcontract or leasing contract, file for tax registration with the tax offices in the locales where the subcontracting or leasing occurs.

The tax offices shall make the necessary checks, and issue temporary tax registration certificates and corresponding transcripts.

Taxpayers in Other Jurisdictions

Where taxpayers engaged in production/business operations conduct business in other jurisdictions, they need to file for tax registration only after they have provided services or conducted business in the same county/city for a full 180 days in a consecutive 12-month period.

After they have accumulated the full 180 days, they should, within 30 days of final accumulation, file for tax registration with the relevant tax offices in the locales where the production/business operations are situated.

The tax offices shall make the necessary checks, and issue temporary tax registration certificates and corresponding transcripts.

Overseas Enterprises

Where overseas enterprises subcontract the following projects, they should, within 30 days of signing the relevant contract/agreement, file for tax registration with the tax offices in the locales where the projects are situated.

Construction.
Installation.
Assembly.
Surveying.
Provision of labor services.

The tax offices shall make the necessary checks, and issue temporary tax registration certificates and corresponding transcripts.

Other Taxpayers

All other taxpayers should, within 30 days of the date that their tax obligations arise, file for tax registration with the tax offices in the locales where the obligations arise.

The tax offices shall make the necessary checks, and issue the tax registration certificates and corresponding transcripts.

The following entities shall be excluded:

Government organs.
Individuals or mobile vendors in the countryside that have no fixed production/business places.

Tax Withholding Agents

Where tax withholding agents have already completed their tax registration, they should, within 30 days of the date that the withholding obligations arise, file for withholding registration with the tax office where they completed their tax registration.

Where the tax offices have already registered the withholding items in their tax registration certificates, the tax offices shall not issue the tax withholding certificates anymore.

Where tax withholding agents are allowed by law to skip tax registration, they should, within 30 days of the date that the withholding obligations arise, file for withholding registration with the tax department in the locale where the institutions are situated.

The tax offices shall promptly issue the tax withholding registration certificates.

Amending Registration Details

Filing Changes

Changes Filed with the Industrial/Commercial Administration

If registration details need to be amended, the taxpayers should file the amendments with the tax offices where the original registration was filed.

If the taxpayers have already registered the amendments with the industrial and commercial administration, they should, within 30 days of the date that the amendments are registered, file for tax registration amendments at the tax offices where the original tax registration.

They need to supply the following documents/materials:

The industrial and commercial registration form of change.
The industrial and commercial business license.
Relevant supporting documents for the amendments.
The original tax registration certificate.
Other relevant materials.

Other Changes

If the taxpayers do not need to register the amendments with the industrial and commercial administration, or if the amendments are unrelated to industrial and commercial registration, they should, file for tax registration amendments at the tax offices where they filed their original tax registration.

They must file within 30 days of the date that the nature of the registration changes, or of the date that the relevant department approves or announces the changes.

They need to supply the following documents/materials.

Relevant supporting documents for the amendments.
The original tax registration certificate.
Other relevant materials.

Processing Changes

Where the taxpayers provide full documentation and complete the application forms in accordance with the rules, the changes shall be accepted after the relevant tax department has examined them. Where they contravene the rules, they shall be notified by the tax department to rectify the situation.

The tax department should examine and process the changes within 30 days of accepting the application.

Re-Issuing Certificates

Where the details provided in the tax registration form and the tax registration certificate have changed, the tax department shall re-issue the certificate, with the changes reflected.

Where the details provided in the tax registration form have changed, but the details provided in the tax registration certificate have not, the tax department shall not re-issue the registration certificate.

Registration of Business Suspensions/Restorations

Suspensions

Where industrial and commercial household taxpayers make periodic tax payments, in fixed amounts, and where they need to suspend their businesses, they should register the suspension with the relevant tax department. The suspension should not exceed 1 year in duration.

Filing Applications

When filing their applications, the taxpayers should provide the following materials/information:

The reasons for the suspension.
The suspension period.
Their tax payment history before the suspension.
How invoices are received, used, and stored.

They should also settle any tax payable, interest due on late payments, and fines.

Processing Applications

The tax department should retain and store their tax registration certificates and corresponding transcripts.

It should also retain the following materials:

Invoice purchase record books.
Blank invoices.
Other tax documents.

Tax Liabilities Incurred During Suspensions

Where taxpayers incur tax liabilities during the suspension period, they should report to the relevant tax department in a timely manner, and pay the tax due in accordance with prevailing laws.

Restorations

Before taxpayers can restore production/business operations, they must register the restoration with the relevant tax department, by filling in the Report of Business Suspension and Restoration.

They also need to retrieve or start to use the following documents/materials:

The tax registration certificate.
Invoice record books.
Invoices purchased before the suspension.

Extensions

Where taxpayers are unable to restore production/business operations before the suspension period expires, they should apply to the relevant tax department for an extension, before the suspension period expires, and fill in the Report of Business Suspension and Restoration.

De-Registration

Where entities are disbanded, enter bankruptcy, or enter other states that result in the termination of tax payment obligations, the taxpayers must first bring the relevant documents/materials and de-register with the tax department where they filed their original registration, before they de-register with the industrial and commercial administration department.

Filing Applications

No Other Forms of De-Registration Required

Where taxpayers need not de-register with the industrial and commercial administration department or other departments in accordance with prevailing rules, they should de-register with the tax department where they filed their original registration, within 15 days of the date that the relevant department approves or announces the termination.

Revocation of Licenses

Where taxpayers have had their business licenses revoked by the industrial and commercial administration department, or where their registration has been cancelled by other departments, they should de-register with the tax department where they filed their original registration, within 15 days of the date of revocation or cancellation.

Change in Registration Department

Where taxpayers need to change tax registration departments because they have changed their place of residence/business, they should bring the relevant documents/materials and de-register with the tax department where they filed their original registration.

After that, they may register the change in place of residence/business or de-register with the industrial and commercial administration department or other departments, and register the change in location.

They must register with the tax department in the new location within 30 days of the date of de-registration.

Overseas Enterprises

Where overseas enterprises subcontract the following projects within China, they should bring the relevant documents/materials and de-register with the tax department where they filed their original registration:

Construction.
Installation.
Assembly.
Surveying.
Provision of labor services.

After completion of the projects, they should de-register at least 15 days before departing from China.

Processing Applications

The relevant tax department shall examine the application after the taxpayers have met the following requirements:

They have provided all relevant documents/materials.
They have settled their tax payments, reimbursed rebates or exemptions where necessary, paid interest due on late payments, and settled fines.
They have handed in their invoices, tax registration certificates, and other tax documents.

Registration to Conduct Businesses in Other Jurisdictions

Where taxpayers engage in temporary production/business activities in other counties/cities, they should bring their tax registration certificates to the tax department to apply for the issuance of the Tax Administration Certificate for Doing Business in Other Jurisdictions (hereafter referred to as the Certificate), before commencing production/business operations.

The tax department shall issue the Certificate in line with the principle of one certificate per jurisdiction. The Certificate is usually valid for 30 days (maximum: 180 days).

Registering in Other Jurisdictions

Before commencing production/business operations in other jurisdictions as indicated in the Certificate, the taxpayers should register with the local tax department, and provide the following documents/materials:

The Certificate.
The tax registration certificate and corresponding transcripts.

Where the taxpayers sell goods in the jurisdiction indicated in the Certificate, they should also fill in the Declaration Form for Goods Sales in Other Jurisdictions for the checking of goods.

Termination of Activities

Upon termination of their business activities in other jurisdictions, the taxpayers should fill in the Form of Business Activities in Other Jurisdictions, and file the form with the local tax department where the activities take place.

They should also settle tax payments, and hand in and write off invoices not used yet.

To complete the formalities involved in canceling the Certificate, they should bring the Certificate to the relevant tax department in the locale where they reside, within 10 days of the date that the Certificate ceases to be valid.

Treatment of Delinquent Taxpayers

Where registered taxpayers fail to report and pay tax on time in accordance with prevailing rules, and where they disregard the tax department's orders to rectify the situation, the tax department shall send staff to make on-the-spot inspections.

Where the tax inspectors are unable to find the taxpayers or enforce the performance of their tax payment obligations, the inspectors should prepare identification reports on the abnormal taxpayers. These reports shall be stored in the taxpayers' files, and the tax department shall suspend the use of their tax registration certificates, invoice purchase books, and invoices.

Three months after the taxpayers are identified as abnormal taxpayers, the tax department shall pronounce their tax registration certificates to be invalid, but their tax payable shall be pursued in accordance with tax administration law.

Administration of Certificates

Checks and Verifications

To strengthen its administration of tax registration certificates, the tax department shall conduct on-the-spot investigations, door-to-door verifications, and/or cross-check information exchanged between the tax department and the industrial and commercial administration department, the offices/branches of the SAT, and the local tax bureaus/branches.

Change in Registration Patterns

Where tax registration patterns change, the SAT shall decide whether to re-issue new certificates.

Lost Certificates

Taxpayers and withholding agents should keep their tax registration certificates properly, and use them in accordance with prevailing rules.

If they lose the certificate, they should, within 15 days of the loss, report in writing to the tax department, and fill in the Form of Loss of Tax Registration Certificate. They should also make the following declarations in the newspapers/magazines specified by the tax department:

The invalidity of the taxpayer's name.
The name of the certificate.
The certificate number.
The validity period of the certificate.
The name of the issuing department.

Joint Handling of Tax Registration

Under the joint handling system, taxpayers shall apply to only one tax department for tax registration. The tax department that accepts the application shall issue one tax registration certificate, on behalf of both the SAT offices and the local tax bureaus.

Scope

The following tasks are covered under the joint-handling system:

New registrations.
Changes in registration.
De-registration.
Handling of registration offenses.
Other registration work that comes under the common administration of the SAT offices and the local tax bureaus.

Procedures

Establishment Registration

Where taxpayers fill in the registration forms correctly, and hand in all the relevant documents/materials, the accepting tax department should, after examination, grant identification numbers to the qualified taxpayers, and print and issue their certificates, properly stamped by the relevant SAT office and local tax bureau.

The accepting tax department should send the registration forms and the attached documents/materials to the other tax departments on the same day where possible, and not later than the second day.

Change in Registration

Where taxpayers make changes in registration, they should register with the tax department issuing the certificate.

The issuing tax department shall, after examination, handle the changes, and pass the relevant details to the other tax departments.

De-Registration

Where taxpayers request de-registration, they should report to the tax department that issued the original certificate.

The issuing department shall pass the details to the other tax departments for joint handling.

Handling of Offenses

Where taxpayers contravene relevant rules related to the administration of tax registration, the case should be handled by the tax department that discovers the offense.

The department that handles the case should notify the other tax departments so that the other department shall not handle that again.

MANAGEMENT OF ACCOUNTING RECORDS, VOUCHERS

Taxpayers and withholding agents should set up their accounting records in accordance with prevailing laws and administrative regulations, and the rules laid down by the Ministry of Finance and the SAT. Their records and accounting should be based on valid vouchers.

Setting Up Accounting Systems

Taxpayers engaged in production/business operations should, in accordance with the relevant State rules, set up their accounting records within 15 days of the date that they receive their business license, or of the date that their tax payment obligation arises.

Examples of such records are listed below:

General ledgers.
Subsidiary ledgers.
Journals.
Other supporting records.

Small-Scale Taxpayers

Where small-scale taxpayers are unable to set up accounting records on their own, they may, upon verification by the tax department, hire the following entities to set up the records and handle financial accounting matters for them:

Professional institutions engaged in accounting services that have been approved by the tax department.
Financial accountants that have been certified by the tax department.

Where they have difficulty in hiring such institutions or accountants, the taxpayers may, upon approval by the tax department at or above the county level, set up voucher books for revenue and expenses, and recording books for the purchase/sale of goods, or use tax control equipment, in accordance with the rules laid down by the tax department.

Submitting Accounting Systems

Taxpayers engaged in production/business operations should, within 15 days of receiving their tax registration certificates, submit their financial and accounting systems, or financial and accounting methods to the tax offices for record-keeping.

Where the taxpayers use computers for recording, they should submit the following information/materials to the tax department for record-keeping, before they commence using computers for their accounting records:

The accounting software.
The instructions.
Relevant details about the accounting computerization system.

The accounting computerization system should be set up in such a way that it conforms with relevant State rules, and it can correctly and completely account for revenue and income.

Withholding Agents

Withholding agents should, within 10 days of the accrual of withholding liability under prevailing laws, administrative rules and regulations, set up separate accounting records for the taxes withheld and remitted, as well as for the taxes collected and remitted, with separate categories for different types of taxes.

What Constitutes Accounting Records

Where taxpayers or withholding agents have sound accounting systems, and where they are able to correctly and completely account for their revenue and income, or for the withholding of taxes using computers, their computer printouts may be regarded as their accounting records.

Where taxpayers or withholding agents have no sound accounting system, or where they are unable to correctly or completely account for their revenue or income, or for the withholding of taxes using computers, they should set up the general ledger and other accounting books relevant to tax payment or withholding.

Systems in Contravention

Where the financial/accounting systems or financial/accounting methods employed by taxpayers or withholding agents contravene the relevant tax rules laid down by the State Council, the Ministry of Finance or the SAT, they should comply with these rules when computing their tax payable, or the tax to be withheld/collected.

Language Used

Chinese should be used for accounting records, vouchers, and statements.

Where taxpayers are established in national autonomous regions, they may concurrently use one nationality language.

Enterprises with foreign investment or foreign enterprises may use one foreign language.

Tax Control Facilities

Taxpayers should install and use tax control facilities in accordance with the rules laid down by the tax department, and report the relevant materials.

The most widely encouraged facilities are listed below.

Tax control cash machines.
Tax control gasoline-filling machines.
Tax control charge meters for taxis.

They should not damage or modify the facilities.

Maintenance Period

Taxpayers and withholding agents need to maintain their accounting records, accounting vouchers, tax payment leaf, and other relevant documents for the period specified by the Ministry of Finance and the SAT.

The accounting records, accounting vouchers, accounting statements, tax payment leaf, export documents, and other tax relevant documents should be legal, real, and complete, and should normally be kept for 10 years.

Tampering with Records

Accounting records, accounting vouchers, tax payment leaf, and other relevant documents should not be falsified, altered, or damaged at discretion.

Depository Accounts

Taxpayers engaged in production/business operations should, in accordance with the relevant State rules, open a basic depository account and other depository accounts with a bank or other financial institutions using their tax registration certificates.

They should report, in writing, all their account numbers to the tax department within 15 days of opening the accounts.

Where there is any change in the accounts, the taxpayers should report the change, in writing, to the tax department within 15 days of the date that the change occurs.

Obligations of Financial Institutions

Banks and other financial institutions should record the tax registration certificate numbers as part of the taxpayers' account details, and record the account numbers in the tax registration certificates.

When the tax authorities inquire by law about such accounts, the banks and other financial institutions should provide all necessary assistance and cooperation.

ADMINISTRATION OF INVOICES

Invoices play an important role in economic activities as they pertain to payments issued/obtained and receipts of payments issued/obtained in the sale/purchase of goods, the provision/receipt of labor services and other business activities.

Units and individuals should issue/use/receive invoices when they buy/sell goods, they provide/receive business services, or they are engaged in other business activities.

In China, the tax department is the relevant administrative organ responsible for the management and monitoring of invoices in the following areas:

Printing.
Purchasing.
Issuance.
Receipt.
Storage.
Cancellation.

Invoice administration in the following areas is under the purview of the SAT:

Types of invoices.
Number of copies.
Content.
Scope of utilization.

Statutory Basis

China's tax administration attaches great importance to the administration of invoices.

The current Methods of the People's Republic of China on Administration of Invoices were approved by the State Council on December 12, 1993, and promulgated for implementation by the Ministry of Finance on December 23, 1993. The above Methods have to be followed by all units and individuals when printing, purchasing, issuing, obtaining, and/or storing invoices.

In addition, there are special rules governing the administration of special VAT invoices.

Copies of Invoices

In general, there are three copies of each invoice.

First copy: The counterfoil is kept by the issuing party for future checks.
Second copy: The invoice copy represents the original document for payment or receipt of payment for the holder of the copy.
Third copy: The recording copy represents the original document retained for the accounting records of the issuing party.

Except for special VAT invoices, the number of copies may be appropriately increased or decreased, where necessary, for purposes specified by the tax department at or above the county level.

Special VAT Invoices

These invoices should include the credit copy (i.e., the document for crediting tax by the holder of the copy).

Basic Content

In general, invoices should contain the following details:

The invoice type.
The size of character.
The number of leaves and purpose of use of each leaf in one invoice.
The customer's name.
The opening bank and the account number.
The name of the goods or business item.
The unit of measure.
The quantity.
The price.
The payment.
The writer of the invoice.
The date of issuance.
The name of the issuing unit.

Special Instances

For those withholding tax: The details should include the withholding tax rate, and the amount of tax withheld.
For those collecting tax on behalf of others: The details should include the collection tax rate, and the amount of tax collected.
For those collecting tax on trust: The details should include the collection tax rate, and the amount of tax collected.
Special VAT invoices: The following details should also be included:
- The address and tax registration number of the purchaser.
- The VAT rate.
- The VAT amount.
- The name, address and tax registration number of the supplier.

Unified Models

Nationwide, the unified model for invoices shall be determined by the SAT. The model shall cover the following points:

Invoice type.
Utilization of copies.
Concrete contents.
Pattern of layout.
Size.
Scope of use.

The unified model within a province/autonomous region/municipality directly under the State Council shall be determined by the relevant tax department (the office of the SAT or the local tax bureau) at the provincial level.

Printing of Invoices

The tax department has sole control over the administration of invoice printing. It shall issue invoice printing permits to qualified enterprises only, after strict examination of their printing qualifications.

The tax department shall conduct regular inspections of both the enterprises printing invoices and the enterprises manufacturing anti-forgery products. If any enterprises are discovered deviating from the specified terms, they shall be stripped of their qualifications.

Designated Printing Enterprises

It is an offense to privately print, falsely print, or forge invoices.

Designating Bodies

Special VAT invoices: They shall be printed by enterprises designated by the SAT.
Other invoices: They shall be printed by enterprises designated by the relevant tax department at the provincial level.

It is an offense to privately print, falsely print, or forge invoices.

Obligations

Invoice printing enterprises must meet the following obligations:

They should set up invoice printing management systems and invoice storage measures that comply with the uniform rules of the tax department.
They should, in particular, assign special persons to handle and manage the invoice monitoring stamp and the anti-forgery products.
They should print the invoices in accordance with the patterns and quantities approved by the relevant tax department.

Designated Anti-Forgery Product Enterprises

It is an offense under the law to produce anti-forgery products for invoices without proper permission.

Only enterprises designated by the SAT may manufacture these products.

Control Measures

Invoice Monitor Stamps

All invoices should be printed with the nationwide unified invoice monitor stamp (i.e., the statutory symbol of the tax department's administrative purview).

The design of the stamp and the invoice layout shall be determined by the SAT. The stamp shall be prepared by the tax department at the provincial level.

It is an offense to forge invoice monitor stamps.

Invoice Design

The design may be amended on an ad hoc basis.

The specific time, the specific design amendments, and other requirements shall be decided by the SAT.

Printing Locations

Except for special VAT invoices, invoices used by various units or individuals within one administrative jurisdiction at the provincial level should be printed within their own province/autonomous region/municipality directly under the State Council.

Where it is necessary to print invoices in other provinces/autonomous regions/municipalities directly under the State Council, the relevant tax department at the provincial level in charge of the locale where the units or individuals are based, must first consult the relevant tax departments in other jurisdictions.

After the other tax departments have agreed, the invoices shall be printed by enterprises designated by the relevant tax departments at the provincial level in the other jurisdictions.

The printing of invoices outside China is prohibited.

Self-Printing, Self-Design

Where units meet the following criteria, they may apply for the right to print their own invoices, with their names included on the invoices:

They have fixed places of production/business operations.
They have perfect accounting and invoice management systems.
They use large quantities of invoices.

Where the unified pattern of invoices fails to meet their business needs, the units may also use their own designs.

Self-printing or self-design has to be pre-approved by the relevant tax department at or above the county level.

Purchase of Invoices

General Procedure

Units or individuals that have received tax registration certificates after registering in accordance with prevailing laws, may apply to the relevant tax department to purchase invoices.

Submitting Applications

When they submit their applications, purchasing units or individuals should provide the following documents:

The identification papers (e.g., resident identification card, passport, work identification card) of the sole person handling the invoices.
The tax registration certificate or other relevant documents.
The financial stamp.
The imprint of the invoice monitor stamp.

Purchasing Formalities

After the documents have been checked by the relevant tax department, the units or individuals will receive their purchasing record books.

The units or individuals may purchase invoices from the relevant tax department according to the type of invoices, quantity, and approaches as verified in the invoice purchasing recording books.

Special VAT Invoices

Where units or individuals purchase special VAT invoices, they should also provide tax registration certificates and the corresponding transcripts bearing the special stamp for identifying normal VAT taxpayers.

Small-scale VAT payers and non-VAT payers cannot purchase special VAT invoices.

Other Purchasers

Where units or individuals do not need to file for tax registration by law, they may apply to the relevant tax department to purchase invoices in accordance with prevailing rules if they need to purchase invoices.

Temporary Business Activities

Where units or individuals need to use invoices temporarily, they may apply directly to the relevant tax department. When they submit their applications, they should provide written proof of the following items or activities:

Purchases/sales.
The provision/receipt of services.
The provision/receipt of other business activities.
Where the units or individuals need to pay taxes by law, the relevant tax department should, at the time of issuing the invoices, collect the tax due.

Cross-Locale Purchases

Where units or individuals need to purchase invoices for temporary business activities in other provinces/autonomous regions/municipalities directly under the State Council, they must first submit their documents to the relevant tax department in charge of the locale where they are based.

They may then apply to the relevant tax department in charge of the locale where the business activities take place, to purchase invoices for the jurisdiction where the activities take place.

Where units or individuals need to purchase invoices for cross-city or cross-county business activities within the same province/autonomous region/municipality directly under the State Council, rulings shall be made by the relevant tax department in that province/autonomous region/municipality directly under the State Council.

Guarantors

Where units or individuals from a province/autonomous region/municipality directly under the State Council conduct temporary business activities in another province, the tax department may impose the following requirements on them:

They must provide a guarantor, or a guaranty payment not exceeding 10,000 yuan in relation to the face value limit of the invoices and the quantity of invoices purchased.
They must return or write off invoices within a specified period.

Where the invoices are returned and written off within the specified period, the guarantor's obligations shall be rescinded, or the guaranty payment shall be returned.

Otherwise, the guarantor shall bear full legal responsibility, or the guaranty payment shall be used to satisfy the legal responsibility.

When receiving guaranty payments, the tax department should issue receipts.

Abrogation of Purchasing Rights

Where taxpayers or withholding agents engaged in production/business operations refuse to accept the treatment of the tax department for their tax violence, the tax department may take over their invoices or stop selling invoices to them.

Issuance of Invoices

Issuing Parties

Sale of Goods, Provision of Services

Where units or individuals engaged in the sale of goods, or in the provision of services or other business activities receive payment for business transacted, the party receiving the payment should issue an invoice to the party making the payment.

Under certain circumstances (e.g., when purchasing units or withholding agents make payments to individuals), it is the party making the payment that issues the invoice to the party receiving the payment.

Purchase of Goods, Receipt of Services

Where units or individuals engaged in production/business operations make payment for the purchase of goods, or for the receipt of services or other business activities, they should obtain an invoice from the recipient of the payment.

They should not request changes to the name of the goods or items, or the payment amount.

Completion of Invoices

All copies of the invoice should be filled in truthfully at one time, column by column, in the order prescribed and within the time limit prescribed. The financial stamp or special stamp used by the units for invoices should be affixed to the invoice.

The invoices should be filled in truthfully on all copies at one instance by each column according to the prescribed time order and limit, and should be put on the financial stamp or special stamp for invoice use of the units.

Issuance by Computer

Computerized issuance has to be approved by the relevant tax department.

Where it is allowed, pre-printed external invoices under monitor by the tax department must be used.

After issuance, the counterfoil copies should be bound together in volumes in numerical order.

Sales Returns, Discounts

Where goods or items sold are returned, and red-character invoices have to be issued, the original invoices have to be reclaimed and stamped “invalid.” Otherwise, valid documents have to be obtained from the purchasing party.

Where sales discounts are given, the invoices should be re-issued after the original invoices have been reclaimed and stamped “invalid.”

Rejections

Invoices that do not comply with prevailing rules should not be used as documents for financial reimbursement. Any unit or individual has the right to refuse them.

Below are listed some reasons for rejection:

The invoices were not monitored by tax department.
The invoices were not completely filled in.
The contents are false.
The handwriting is unclear.
There is no financial stamp or special stamp for invoice use.
The invoices are forged.
The invoices are invalid.

Prohibitions

No unit or individual shall be allowed to lend, transfer, or issue invoices on behalf of someone else.

Without the approval of the tax department, a book of invoices cannot be taken apart for use. Without approval, the scope of use of professional invoices cannot be expanded.

Trade in invoices, invoice monitoring stamps, or anti-forgery products for invoices is prohibited.

Cross-Locale Issuance

In general, issuance must be conducted in the same province/autonomous region/municipality directly under the State Council where the purchasing units or individuals are based.

The relevant tax department at the provincial level may formulate rules governing the issuance of invoices across cities or counties within its province/autonomous region/municipality directly under the State Council.

Without the approval of the tax department, no unit or individual is allowed to carry, mail, or transport blank invoices across the border of the area specified by law.

It is an offense to carry, mail, or transport blank invoices outside China.

Storage of Invoices

Invoice-issuing units or individuals need to abide by the following requirements:

They must establish a system to record the use of invoices.
They must set up invoice record books.
They must periodically report their invoice use to the relevant tax department.

The invoices should be stored and kept according to the rules laid out by the tax department, and should not be lost or damaged.

Where invoices are lost, the loss should be reported on the same day to the relevant tax department, and the invalidity of the invoices should be announced in newspapers, magazines, or other media.

Counterfoil copies and invoice record books should be kept for 5 years. After 5 years, they may be destroyed, after being checked by the relevant tax department.

When proceeding with the formalities involved in changing or cancelling tax registration, the parties concerned should proceed with the formalities involved in changing or cancelling invoices and invoice purchasing books at the same time.

Inspection of Invoices

Scope and Procedure

In invoice administration, the tax department may carry out various checks.

They may inspect the printing, purchasing, issuance, obtaining, and storage of invoices.
They may remove invoices for checking.
They may read and/or copy vouchers and documents related to invoices.
They may ask the parties concerned about anything concerning invoices.

In the course of their investigations, the tax department may engage in the following activities:

Taking notes.
Making tape recordings.
Making video recordings.
Taking photographs.
Duplicating materials relevant to the investigations.

Tax officers invoice inspections should present their tax inspection cards.

Conduct of Those Under Inspection

Units or individuals that print or use invoices shall, by law, accept inspections by the tax department, report the truth, and provide relevant information.

They should not refuse or hide anything relevant.

Removal of Invoices

Where the tax department needs to remove issued invoices in the course of their investigations, the tax department should issue invoice replacement vouchers to the units or individuals under investigation. The vouchers shall have the same effect as the invoices removed.

Invoice replacement vouchers should be used only within the same county/city.

Where the tax department needs to remove invoices of other counties/cities, it should contact the relevant tax departments of the other counties/cities, and issue the invoice replacement vouchers for the other counties/cities concerned.

Blank Invoices

Where the tax department needs to remove blank invoices, it should issue receipts.

If no problem is found during the investigations, the invoices should be returned immediately.

Cross-Checks of Counterfoil, Invoice Copies

Where the tax department needs to run cross-checks on counterfoil copies and invoice copies, it may send invoice cross-check cards to the unit or individual holding the counterfoil copy or the invoice copy.

The unit or individual concerned should truthfully fill in the card, and return it within 15 days of receiving it.

Overseas Investigations

Where the tax department, in the course of its investigations, has cause to doubt the veracity or validity of tax-related invoices or vouchers obtained from outside China, it may request the relevant units or individuals to provide supporting documents from overseas notary institutions or certified public accountants.

After verification of these materials by the tax department, the invoices or vouchers obtained from abroad may be used as accounting vouchers.

TAX REPORTS

General Rules

Taxpayers' Obligations

Tax reporting is a statutory system under which taxpayers and withholding agents are required by law to submit written reports related to their tax status to the tax department.

Taxpayers should truthfully report to the relevant tax department for tax payment, and submit the following documents/materials when required to do so by the tax department:

Tax returns.
Financial statements.
Other tax payment materials:
- Financial/accounting statements/commentaries.
- Tax-related contracts.
- Agreements and vouchers.
- The electronic report materials of tax control facilities.
- Tax administration certificates for conducting business in other jurisdictions.
- Supporting documents issued by notary institutions.

They should make their submissions and provide the necessary details within the time limits prescribed by prevailing laws and administrative rules and regulations, or within the time limits set by the tax department in accordance with prevailing laws and administrative rules and regulations.

Withholding Agents' Obligations

Withholding agents should truthfully submit the following documents/materials to the relevant tax department when required to do so by the department:

Tax withholding reports.
Tax collection reports.
Legal documents related to the withholding activities.
Other relevant materials (e.g., economic contracts related to the withholding activities).

Filing Methods

Taxpayers and withholding agents may lodge tax returns or withholding reports by going directly to the tax offices.

Where approval is granted by the tax department, they may make their submissions through the mail, data text (i.e., phone tones, electronic data exchange, network transmission), or other means (e.g., entrusting agents).

Electronic Submissions

Where taxpayers or withholding agents file tax returns in electronic data form, the reporting date shall be the date that the tax authorities receive the electronic data on their computer networks.

Hard-Copy Submissions

Where hard-copy returns are filed, the time limit for submission shall be determined by the tax authorities.

Submissions by Mail

When returns are filed by mail, taxpayers should use the uniform envelope for tax reporting.

The postal receipt of the post office shall be taken as the reporting document; and the date of posting, as the actual reporting date.

Simple Reporting

Where taxpayers pay tax in fixed amounts and on a periodic basis, they may adopt the simple reporting system (i.e., by integrating the tax periods).

When they adopt this system, they must pay taxes within the time limits specified by prevailing laws, administrative regulations and rules, or specified by the tax authorities in accordance with prevailing laws, administrative regulations, and rules.

Under this system, they may, upon approval by the tax department, integrate the tax periods, and pay taxes on a quarterly, half-yearly, or yearly basis. The specific time period shall be determined by the tax department at the provincial level after considering local conditions.

Obligatory Submission

Taxpayers should submit their tax reports in accordance with prevailing rules even during tax periods when they need not pay tax.

Likewise, taxpayers enjoying tax reductions or exemptions should submit their tax reports in accordance with prevailing rules during the tax holidays.

Report Content

Below are listed the main details that need to be incorporated into tax or withholding reports:

The type of tax payable.
The taxable item or withholding item.
The tax base.
Deductible items and standards.
The applicable tax rate or tax per unit.
The tax rebatable and the amount.
Tax reductions and exemptions.
The tax payable or tax to be withheld.
The tax year.
Tax arrears.
Tax deferrals.
Interest due on late payments.

Deadline Extensions

Where taxpayers or withholding agents encounter difficulties (e.g., force majeure, special circumstances related to financial accounting treatments) in submitting their tax reports or withholding reports within the specified time limits, they may apply to have the deadline extended. Applications should be made in writing to the relevant tax department.

After verification by the relevant tax department, they may be granted an extension (normally for 3 months).

Where extensions are granted, they should, within the tax payment period, prepay their taxes. The amount actually paid in the previous period or the amount assessed by the tax department shall be taken as the amount payable. They should also complete their tax settlement formalities within the extended period.

Force Majeure

Where force majeure prevents taxpayers or withholding agents from submitting within the specified time limits, the deadline may be extended.

However, they should report to the relevant tax department immediately after the event ends. The relevant tax department should investigate the case and approve.

Rules Governing Customs Duties

Declaration

Imported Goods

Duty payers of imported goods should declare the entry of the goods to Customs within 14 days of the date that the entry of the transporting tools is declared.

Imported Goods

The duty payers of exported goods should declare the exit of the goods to Customs after the goods are delivered to the Customs control zones and at least 24 hours before the goods are loaded, except specially exempted by Customs.

Pre-Verification

Before the actual entry or exit of the goods, the duty payers may apply to Customs in accordance with prevailing rules for pre-verification of the following details:

Classification.
Price.
Origin.

After verification, Customs should notify the duty payers in writing, and accept that when the goods actually enter or exit.

Supporting Documents

Duty payers should make truthful declarations to Customs, and provide documents/materials for the following purposes:

Determination of the dutiable price of the goods, their classification, and their origin.
The execution of anti-dumping, anti-subsidy, or guaranty measures.

When necessary, Customs may request the duty payers to make supplementary reports. Alternatively, the duty payers may take the initiative by volunteering to provide more materials.

Commodity Classifications

The duty payers should categorize the goods, and sort them into matching classification numbers in line with the stipulations laid out in the following documents:

The catalog rules and the general rules of classification.
The type notes, chapter notes, subsection notes, and other commentaries contained in the import and export classification rules.

Customs should, by law, examine the commodity classification of the goods, and may request that the duty payers provide relevant materials.

Checks and Determinations

Customs should, in conformity with prevailing rules, laws, and administrative regulations, and with Customs rules, examine the following details of the goods declared by duty payers:

Name.
Specification.
Classification number.
Origin.
Price.
Transactional terms.
Quantity.

Classification, Dutiable Price, Origin

To determine the classification, dutiable price, and origin of goods declared by the duty payers, Customs may check, test, or inspect the goods, or investigate the relevant enterprises.

Its findings/conclusions shall be taken as the basis for classification.

Classification Numbers

Where Customs finds, after examination, that the duty payers have erroneously declared the classification number, Customs should independently determine the number in accordance with the relevant rules of classification.

Price, Transactional Terms

Where Customs finds, after examination, that either of the following circumstances applies, Customs should separately assess that in accordance with the rules for determining the dutiable price of goods:

The price declared by the duty payers is inconsistent with the transactional terms.
It is difficult to determine the transactional price.

Origin

Where Customs finds, after examination, that the duty payers have erroneously declared the origin of the goods, Customs should independently determine that in accordance with the rules of origin, by the following means:

Checking the document of origin provided by the duty payers.
Checking the actual goods.
Examining other relevant documents.

Reductions, Exemptions

Where Customs finds, after examining applications submitted by duty payers for reductions/exemptions, that the applications or the details provided in the applications do not conform with the relevant rules, Customs should compute and collect the duty payable in accordance with the rules.

False Declarations

Where Customs discovers that a duty payer has made a false or untruthful declaration, in violation of Customs rules, the case should be handed over to the investigation division or the anti-contraband division of Customs.

Checking Declared Prices

To examine the truthfulness or accuracy of the declared price, Customs may check or make copies of the following documents/materials:

The import/export contract.
Invoices.
Records.
Exchange settle documents.
Vouchers.
Business correspondence.
Audio or video recordings.
Other materials that reflect the relationship between the buyers and sellers, and their trade activities.

Where a Customs office has doubts about the declared price, and where large amounts of duty are involved, it may inquire into the fund flows of the duty payers at banks or other financial institutions where the duty payers open accounts, by the following means:

The Customs uniform notice for assistant account checks.
The ID of the relevant staff.

Approval must first be granted by the director of that Customs office or by the director of the authorized branch Customs office.

Customs should inform the banking monitor institutions of the results.

Seeking Supporting Documents from Duty Payers

Where Customs has doubts about the declared price, it should issue a written notification to the duty payers, stating its reasons, and request that the duty payers submit an explanation and the relevant materials.

Where the duty payers fail to provide an explanation or the relevant materials, or where Customs still has reason to doubt the truthfulness or accuracy of the declared price, it may refuse to accept the declared price, and proceed to independently assess the dutiable price in accordance with prevailing rules.

Duty Payers' Rights

After Customs has determined the dutiable price of the goods, the duty payers may request in writing that it provide a written explanation detailing how it made its determination. Customs should provide the explanation in writing.

TAX COLLECTION

Obligations of Tax Collection Organs

Best Practices

The tax department should collect taxes in accordance with prevailing tax laws and administrative rules and regulations.

It should not violate laws or administrative rules or regulations in any of the following ways:

By collecting new taxes.
By terminating a tax.
By over-collecting taxes.
By under-collecting taxes.
By collecting taxes before the stipulated time.
By collecting taxes late.
By apportioning taxes.

Collection Methods

The tax department may adopt various tax collection methods.

Taxpayers assess their own taxes.
The department assesses the tax payable.
Collection by verification.
The department collects fixed sums on a periodic basis.

To enhance administrative control and provide greater convenience to taxpayers, the tax department may entrust relevant units or individuals to collect the following taxes on its behalf:

Minor, scattered taxes.
Taxes paid in other jurisdiction.

The entrusted units or individuals shall be issued entrusted certificates in accordance with prevailing rules.

Where taxpayers refuse to comply, the entrusted units or individuals should promptly report the situation to the tax authorities.

Tax Remittance

The offices of the SAT and the local tax bureaus should remit taxes, interest on late payments, and fines that they have collected to the State treasury based on the administrative scope, the budgetary items, and the budgetary levels of the revenue, based on the prevailing rules.

They should not occupy, appropriate for their own use, or retain what they have collected. They should not remit what they have collected to any recipient other than the State treasury, or to accounts other than those designated by the State.

Tax Offenses

Where the audit department or the financial discovers tax offenses, the tax department should deposit the taxes and interest on late payments in treasury accounts at the budgetary levels stipulated in the rulings or memoranda provided by the relevant departments.

The relevant departments should not undertake the following actions:

Self-remit the taxes or interest on late payment found during duty performance to the treasury.
Self-treat these sums.
Use these sums in other names.

Withholding Agents

Withholding agents should fulfill their withholding or collection obligations in accordance with prevailing laws and administrative rules and regulations.

The tax department should not ask any unit or individual that has no legal obligation to withhold or collect taxes to withhold, or collect taxes on its behalf.

Only the tax department, tax staff, and units/individuals authorized by the tax department in accordance with prevailing laws and administrative regulations, are allowed to collect taxes. All other units/individual are prohibited from collecting taxes.

Withholding

Where payments to taxpayers are subject to tax withholding, the withholding units or individuals should withhold the taxes at the point when the payment is made to the taxpayers.

Where the taxpayers refuse to submit to the withholding, the withholding agents should suspend payment, retaining monies equivalent to the tax payable. They should report the situation to the tax department within one day.

Collection

Where units or individuals are charged with collecting taxes payable by taxpayers, they should collect the taxes at the point when they receive the payment from the taxpayers.

Where the taxpayers refuse to submit to the collection, the collecting agents should report the situation to the tax department within one day.

Time Limits

Taxpayers and withholding agents should pay or remit taxes to the State within the time limits prescribed by prevailing laws and administrative rules and regulations, or within the time limits set by the relevant tax departments in accordance with prevailing laws and administrative rules and regulations.

Extensions

Filing Applications

Where taxpayers face actual difficulties in paying taxes on time, they should apply, in writing, to the relevant tax department for an extension.

They should submit their applications within the time limits specified for tax payment, and provide all relevant information and documents.

Some situations where taxpayers may apply for an extension are listed below.

They incur large losses because their normal production/business operations have been significantly affected by force majeure.
They have insufficient funds to pay taxes after deductions of employee wages and social insurance premiums.

Upon approval by the offices of the SAT or the local tax bureaus at the provincial level, extensions (maximum: 3 months) may be granted, during which no interest will be charged on late payments.

Supporting Documents

Where taxpayers need to extend the payment period, they should submit their applications to the tax department before they have exceeded the original time limit specified for payment.

When submitting their applications, they need to provide the following documents/materials/items:

The application report.
The balance of the monetary funds for the current period.
All the bank reconciliation statements, balance sheets, wages payable, and social insurance premiums as required by the tax department with reference to the spending budget.

Processing Applications

The tax department should make its ruling within 20 days of receiving the application for extension.

Where it rejects the application, interest on late payments should be charged starting from the day following the expiry of the payment deadline.

Extensions for Customs Duties

Filing Applications

Where duty payers are unable to pay duty on time because of the following reasons, they should apply, in writing, for an extension to the Customs office in charge of the locale where they declared the import/export of the goods, and they should attach all relevant materials and propose a duty payment plan:

Force majeure.
State policy changes.

Processing Applications

The direct Customs should verify that within 10 days of receiving the application. Where the applications are genuine, the direct Customs should immediately forward the application materials to the General Administration of Customs (GAC).

The GAC should make its ruling within 20 days of receiving the materials and directly inform Customs. Where special circumstances prevent the GAC from rendering a decision within the stipulated 20 days, the period may be prolonged by 10 days.

Where extensions are granted, they should not exceed 6 months, starting from the date that the goods are released.

Where applications are rejected by the GAC, Customs should inform the duty payers within 3 working days of receiving the ruling. It should then issue the duty payment memorandum.

Where the goods are actually imported/exported, and where the duty payers request that the goods be released first, they should lodge duty guaranties with Customs.

Tax in Arrears

Where taxpayers fail to pay taxes within the stipulated time limit, or where withholding agents fail to remit taxes within the stipulated time limit, the tax department shall take the following actions:

Send a tax payment notice ordering tax payment or tax remittance within a specified time limit (maximum: 5 days).
Charge interest on late payments at a rate of 0.05% a day, starting from the expiry of the tax payment deadline till the date that the taxpayers or withholding agents finally pay or remit the taxes.

Where taxpayers are overdue on payments of VAT or Consumption Tax incurred at the importation stage, interest shall be charged on the late payments, starting from the expiry of the tax payment deadline till the date that the taxpayers finally pay the taxes. Interest charged cannot exceed 50 yuan.

Tax Payment Certificates

After collecting tax payments from taxpayers, the tax department should issue to the taxpayers the relevant tax payment certificates. Some examples are listed below:

Tax payment receipts.
Tax payment memoranda.
Tax stamps.
Withholding documents.
Collection documents.

Where the taxpayers pay taxes through banks, the tax department may entrust the banks to issue the receipts.

No unit or individual may print tax payment receipts unless so authorized by the tax department.

Tax payment receipts should not be lent, traded, forged, or altered.

Withholding Agents

Where withholding agents withhold taxes, they should issue tax withholding certificates when so requested by the taxpayers.

Loss of Receipts

Where taxpayers lose their tax payment receipts, the tax department may take either of the following actions, after ensuring that the taxpayers have indeed paid taxes:

Provide a copy of the original tax payment receipt.
Issue a new receipt, on which the invalidity of the previous receipt shall be indicated.

Loss of Memoranda

Where duty payers lose their tax payment memoranda after paying duty, they may apply, in writing, to the Customs office that issued the memorandum for a confirmation of payment.

They must submit their applications within 1 year of the date that they lose the memoranda. After verification, Customs shall provide confirmation, but shall not reissue the memorandum.

Tax Disputes

When taxpayers, withholding agents, or tax payment guarantors have differences of opinion or disputes with the relevant tax department over the following matters, they should first pay or remit the taxes and interest on late payments, or provide the guaranty, based on assessments by the relevant tax department:

The taxpaying body.
The taxable item.
The tax scope.
Tax reductions.
Tax exemptions.
Tax refunds.
The applicable tax rate.
The tax base.
The taxable stage.
The tax payment deadline.
The tax payment place.
The tax collection method.

They may then, by law, apply for review.

Where they dispute the rulings of the administrative review, they may, by law, appeal to the People's Court.

Assessment of Tax Payable

Where any of the following circumstances applies, the relevant tax department shall have the right to assess the tax payable:

The taxpayers are prohibited from keeping accounting books, in accordance with the relevant provisions of prevailing laws and administrative regulations.
Accounting books that should be kept, as stipulated by prevailing laws and administrative regulations, have not been kept.
The taxpayers arbitrarily destroy accounting books, or refuse to provide tax information.
The taxpayers have kept accounting books, but audits are difficult to conduct for the following reasons:
- The accounting entries have not been entered in an appropriate manner.
- Details on costs are incomplete.
- Receipt vouchers or expense vouchers are incomplete.
The taxpayers fail to complete tax filing procedures within a prescribed time limit, and fail to file tax returns within the prescribed time limit even after having been ordered to do so by the relevant tax department.
The tax base computed by the taxpayers is inordinately low, and the taxpayers cannot offer an acceptable reason.
Taxpayers engaged in production/business operations or taxpayers temporarily engaged in business operations fail to file for tax registration.

Assessment Criteria

When assessing tax payable by taxpayers, the tax department may adopt various approaches.

Assessment with reference to the tax burden level of taxpayers that operate businesses of a similar size with similar income levels in the same trade or a similar trade.
Assessment based on business revenue or cost plus reasonable expenses and profit.
Assessment based on estimates of raw material, fuels, or power consumed.
Other reasonable approaches.

Where the tax department is unable to accurately assess the tax payable using one approach, two or more approaches may be applied at the same time.

Disputes

Where the taxpayers dispute the method of assessment chosen by the tax department, they should provide the relevant evidence.

The tax department shall adjust the tax payable after verification of the evidence.

Pricing Principles for Associates

Where charges or fees are received or paid in business transactions between establishments/places engaged in production/business operations that have been established in China by an enterprise or a foreign enterprise, and their associated enterprises (i.e., enterprises that they directly or indirectly own, or whose funds, operations, purchases or sales they control), the receipts or payments should be made in line with those for transactions between independent enterprises (i.e., transactions that comply with the arm's length principle in terms of pricing, and with normal business practices between non-associated enterprises).

Where the arm's length principle is not followed, and taxable revenue or income is reduced as a result, the relevant tax department may make reasonable adjustments to the assessable revenue or income.

Taxpayers may propose to the tax department the pricing principle and the calculation method they wish to apply in transactions with their associated enterprises. After verification and approval, the tax department shall make advance pricing agreements with the taxpayers and monitor their execution by the taxpayers.

Adjustments of Tax Payable

Where any of the following circumstances applies to transactions between taxpayers and their associated enterprises, the tax department may adjust their tax payable:

Purchases or sales are not priced in line with the arm's length principle.
The interest paid or received on intra-enterprise financing is above or below the value normally agreed on between independent enterprises, or the interest rate charged is above or below the normal rates charged for similar businesses.
Intra-enterprise remunerations received or paid are not in line with those made between independent enterprises.
Intra-enterprise transfers of property or provision of property use rights are not valued, received, or paid for in the same manner as those made by independent enterprises.
Other circumstances that result in non-compliance with the arm's length principle.

Adjustment Methods

In any of the cases described above, the tax department may adjust taxable revenue or income using the following methods:

Based on prices used by independent enterprises for the same or similar business activities.
Based on revenue and profit levels that would be achieved from resales to non-associated third parties.
Based on cost plus reasonable expenses and profit.
Other reasonable methods.

Time Limits

Where taxpayers fail to follow the arm's length principle in making payments to their associated enterprises, the tax department may make adjustments within 3 years of the date that the business activities occur.

The period may be extended to 10 years where any of the following circumstances applies:

The accumulated business of the taxpayers with their associated enterprises amounts to 100,000 yuan in preceding years.
The department finds, after a desk audit, that the business of the taxpayers with their associated enterprises in preceding years is expected to reach 500,000 yuan.
The taxpayers had business exchanges with their associated enterprises in the tax haven in preceding years.
The taxpayers fail to report business exchanges with their associated enterprises in preceding years in accordance with prevailing rules.
The taxpayers do report their business exchanges, but the tax department finds, after examination, that their reporting is not truthful.
The taxpayers do report their business exchanges, but they fail to fulfill their obligations in terms of providing materials relating to relevant prices or expense standards.

Taxpayers are obliged to provide the relevant local tax department with relevant information relating to prices and expenses charged in intra-enterprise transactions.

Failure to Register, Impounding

Where taxpayers engage in business operations or temporary business operations without filing for tax registration in accordance with prevailing rules, the relevant tax department shall assess the tax payable, and order the taxpayers to make payment. This procedure also applies to taxpayers that fail to report to the local tax department when doing business in other jurisdictions.

Where the taxpayers refuse to pay the tax, the relevant tax department may impound their commodities or goods, equivalent to the tax payable.

Where the taxpayers make payment after the impounding, the relevant tax department should immediately remove the lien, and return the impounded commodities or goods.

Where the taxpayers fail to make payment after the impounding (15 days), the following actions shall be taken, upon approval by the director of the tax department at or above the county level:

The impounded commodities or goods shall be sold through auctions or sales in accordance with prevailing laws.
The proceeds from the auctions or sales shall be used to make good the tax owed.

The impounding period may be shortened for commodities or goods that are fresh, easily rotten, or losing effect.

Flight from Obligations, Tax Guaranties

Where the relevant tax department has grounds to believe that a taxpayer intends to flee his tax payment obligations, the department may, before the prescribed date of the tax payment, order the taxpayer to make payment within the prescribed time limit.

Tax Guaranty Measures

Where there is clear evidence that the taxpayer will, during the prescribed time limit, transfer or conceal his taxable commodities, goods or other property (e.g., realty, cash, marketable securities), or his taxable income, the department may order the taxpayer to provide a tax payment guaranty (e.g., guaranties provided by guarantors that are acceptable to the tax department, properties not in lien that are in the possession of the guarantor or the taxpayer).

Where the taxpayer is unable to provide a guaranty, the department may take the following steps to retain tax revenue, upon approval by the director of the tax department at or above the county level:

Notify, in writing, the banks or other financial institutions with which the taxpayer has opened accounts, and instruct them to freeze the taxpayer's deposits, equivalent to the tax payable.
Impound or seal up the taxpayer's taxable commodities, goods, or other property, equivalent to the tax payable.

Notification

During the impounding or sealing up, at least two tax officials should be present, and the tax department should notify the taxpayer beforehand.

Where the taxpayer is a citizen, either he or an adult family member should be notified to be present.

Where the taxpayer is a legal person or other type of organization, the legal representative or the chief person should be notified to be present. However, their absence shall not have any effect on the execution.

Tax Department's Obligations

Where the tax department has impounded commodities, goods, or other property, it should issue receipts for the items.

Where it has sealed up commodities, goods, or other property, it should issue a detailed list of the items.

Where the taxpayer makes payment within the prescribed time limit after the tax department has undertaken guaranty measures, the department must immediately lift the measures, within 1 day of receiving the payment, or of receiving the tax payment leaf from the banks.

Failure to Pay

Where the taxpayer fails to make payment before the payment deadline expires, the relevant tax department may take the following steps, upon approval by the director of the tax office at or above the county level:

Notify, in writing, the banks or other financial institutions with which the taxpayer has opened accounts, and instruct them to withhold and remit an amount equivalent to the tax payable, out of the taxpayer's frozen deposits.
Sell the commodities, goods, or property that have been impounded, through auctions or sales, and use the proceeds to make good the tax owed.

Items Excluded

Certain items fall outside the scope of tax guaranty measures.

Houses.
Items necessary for the individuals to make a living and for supporting family members.

The following items may be included in tax guaranty measures:

Motor vehicles.
Gold and silver ornaments.
Antiques.
Luxury houses.
Houses, where the taxpayer owns more than one house.

Time Limits

Tax guaranty measures should not extend for a period exceeding 6 months.

Where the cases are serious enough to warrant extending the period, they should be reported to the SAT for approval.

Duty Guaranty Measures

Where the payers of Customs duties on transfers of imports or transfer, hide the dutiable goods or other property during the period before the payment deadline has expired, Customs may order the duty payers to provide duty payment guaranties.

Where the duty payers are unable to provide the guaranties, Customs may take the following duty guaranty measures, upon approval by the director of Customs directly under the GAC or the director of Customs authorized by the GAC.

Notify, in writing, the banks or other financial institutions with which the duty payer has opened accounts, and instruct them to freeze the duty payer's deposits, equivalent to the duty payable.
Impound or seal up the duty payer's goods or other property, equivalent to the duty payable.

Tax Department's Obligations

Where the duty payer makes payment within the prescribed time limit, Customs must immediately lift the duty guaranty measures.

Failure to Pay

Where the duty payer fails to make payment before the payment deadline expires, Customs may take the following steps, upon approval by the director of Customs directly under the GAC or the director of Customs authorized by the GAC.

Notify, in writing, the banks or other financial institutions with which the duty payer has opened accounts, and instruct them to withhold and remit an amount equivalent to the duty payable, out of the duty payer's frozen deposits.
Sell the commodities, goods, or property that have been impounded, through auctions or sales, and use the proceeds to make good the duty owed.

Release of Goods, Duty Guaranties

Where any of the following situations applies, and where the duty payers request that Customs first release the goods, they should lodge a sufficient duty guaranty with Customs, based on the initial assessment made by Customs of the duty payable:

Customs has not yet finalized the classification, dutiable price, or origin of the commodities.
Duty reduction and exemption formalities are handled by Customs.
The duty payers have applied for deferred payment of duty.
Temporary entry or exit.
The goods are entering for repair or exiting for processing. Goods administered as bonded goods are an exception.
Duty payers declare the importation or exportation of uncharged replacement goods under the following scenarios, because the original goods were damaged, were of poor quality, or failed to meet product specifications:
- The previously imported goods have not been transported out of China, or have not been surrendered to Customs for processing.
- The previously exported goods have not yet been transported out of China.

Other Cases Requiring Guaranties

Guaranty Period

The guaranty period should not normally exceed 6 months.

It may be extended upon approval by the director of Customs, or appropriately authorized persons in special cases.

Types of Guaranties

Guaranties normally take the form of downpayments, or guaranty letters from banks or non-bank financial institutions.

For guaranty letters from banks or non-bank financial institutions, the guaranty method should be the associated responsibility guaranty.

Where the guaranty letter explicitly indicates the guaranty period, the period should not be shorter than the period stipulated by Customs.

Time Limits

Where the duty payers fulfill their duty payment obligations within the guaranty period approved by Customs, Customs should complete the formalities for lifting the guaranty measures within 5 working days of the date that they fulfill their obligations.

Where the duty payers fail to fulfill their obligations, Customs should complete the formalities of converting the guaranties into duty payments within 5 working days, starting from the date that the guaranty period expires.

Where banks or non-bank financial institutions have provided a guaranty letter, Customs should request the guarantors to perform their duty payment obligations within 6 months, or within the guaranty period indicated in the guaranty letter.

Enforcement Measures

Where taxpayers or withholding agents fail to pay or remit tax within the prescribed time limit, or tax payment guarantors fail to pay the guaranteed amount of tax within the prescribed time limit, the relevant tax department shall order them to make payment within a period of 15 days at most.

Other than the statutory tax department, no unit or individual has the authority to implement the tax guaranty and enforcement measures discussed below.

Mandatory Measures

Where they fail to make payment within the new time limit, the department may implement the mandatory enforcement measures discussed below, upon approval by the director of the tax department at or above the county level.

Freezing of accounts: The tax department shall notify, in writing, the banks or other financial institutions with which the taxpayer, withholding agent, or guarantor has opened accounts, and instruct them to withhold and remit an amount equivalent to the tax due, out of the deposits of the taxpayer, withholding agent, or guarantor.
Where the deposits of the taxpayer, the withholding agent, or the guarantor are insufficient to pay both the taxes and any loans outstanding, the deposit should first be withheld to pay the taxes; loan payments shall be made later.
Where the relevant banks or financial institutions are unable to withhold the tax within the prescribed time limit, they should notify, in writing, the relevant tax department so the department may take other enforcement measures.
Impounding or sealing up: The tax department shall, by law, impound, seal up, or sell, through auctions or sales, the commodities, goods, or other property, equivalent to the tax payable, and use the proceeds to make good the tax payable.

Once the tax department has valued, impounded, or sealed up the items for tax payment purposes, it should hand over the items to legally sanctioned auction organizations.

Where the tax department is unable to entrust the items to auction organizations for auction, they may be handed over to commercial enterprises to sell at market prices. Alternatively, the tax department may order the taxpayer to handle the sale.

Where the tax department is unable to entrust the sale to commercial enterprises or to allow the taxpayer to handle the sale, the tax department may sell the items at certain price.

Articles that are prohibited by the State from free purchase and sale should be handed over to the relevant units to purchase at prices specified by the State.

Items that Cannot Be Split Up

Where the only commodities, goods, or property available for enforcement cannot be split up, and where their value exceeds the tax payable, the tax department shall have to impound, seal up, or auction the items as a whole.

It shall then use the proceeds to cover the taxes, the interest on late payments and fines, as well as expenses incurred on the impounding, sealing up, auction, and storage.

Interest on Late Payments

While it is implementing the mandatory measures discussed above, the tax department shall simultaneously implement relevant mandatory measures to collect interest on late payments still owed by the taxpayer, withholding agent, or guarantor.

Excess Proceeds

Where the auction proceeds exceed the tax payable, interest on late payments, and fines, as well as the storage and auction charges, the remainder shall be returned to the party concerned within 3 days.

Items Excluded

Houses or articles necessary for the support of individuals or their families fall outside the scope of the enforcement measures.

Valuation

Where the tax department needs to impound or seal up commodities, goods, or other property with a value equivalent to the tax payable, it shall make its valuation with reference to market prices, factory outlet prices, or appraised prices for the same type of commodities.

The value of the items should be sufficient to also cover interest on late payments, as well as expenses incurred on the impounding, sealing up, storage, auction, and sale.

Surrendering Documents

Where the tax department, by law, impounds, or seals up movable or immovable properties, it may order the party concerned to surrender the relevant ownership documents, which shall be retained by the tax department.

At the same time, it shall notify the relevant department that it needs assistance in the execution of the enforcement measures. The relevant department shall not handle the property transfer formalities during the impounding or sealing-up period.

Impounded Items: Possession, Usage

With respect to the impounded commodities, goods, or other property, the tax department may order the executees (i.e., persons against which the measures have been executed) to retain the items in their possession, and to bear responsibility for the items while the items remain in their possession.

Where the value of the impounded properties does not decrease with continuous use, the tax department may allow the executees to continue to use the items. Any resulting loss arising from the storage or usage of the items shall be borne by the executed.

Compensation

Where the tax department abuses its powers in either of the following ways, and where this abuse leads to losses on the part of the taxpayers, withholding agents, or guarantors, in terms of their legal rights or interests, the tax department shall bear responsibility for compensation.

By violating the law while implementing tax guaranty or enforcement measures.
By implementing improper tax guaranty or enforcement measures.

Administrative Review

Where the parties concerned object to the tax guaranty or enforcement measures implemented by the tax department, they may, by law, apply for an administrative review or appeal to the People's Court.

Measures Undertaken by Customs

Where the payers or guarantors of Customs duties on imports/exports fail to pay duty within 3 months of the date that the prescribed time limit for payment expires, Customs may take the following duty enforcement measures, upon approval by the director of Customs directly under the GAC or the director of Customs authorized by the GAC.

Notify, in writing, the banks or other financial institutions with which the duty payer or guarantor has opened accounts, and instruct them to deduct the duty payable from the deposits of the duty payer or the guarantor.
Sell the dutiable goods by law, and use the proceeds to settle the duty payable.
Impound and sell the goods or other property of the duty payer or guarantor, equivalent to the duty payable, and use the proceeds to offset the duty payable.
While implementing the enforcement measures described above, Customs shall simultaneously implement measures to recover the interest on late payments still owed by the duty payers or guarantors.

Arrears, Failure to Pay

First Claim

Where taxpayers owe taxes, the tax department has priority over creditors without guaranties, unless otherwise stipulated.

Where the taxes owed were incurred before the properties of the taxpayers were mortgaged, pawned, or entered liens, the tax department shall have first claim to the properties, before the mortgage creditors, pawn creditors, or lien creditors.

Where taxpayers owe taxes, and where the administrative department has simultaneously imposed fines on the taxpayers or confiscated their illegal income, the tax department shall have priority.

Publicization

Tax departments at or above the county levels should regularly make public information concerning tax arrears in tax handling places or through the following media:

Radio.
TV.
Newspapers.
Magazines.
The Internet.

Customs may also publish information regarding duty arrears.

Disclosure Obligations

Where taxpayers owe taxes, they should disclose this fact to mortgage creditors or pawn creditors when mortgaging or pawning their property.

The mortgage creditors or pawn creditors may request the tax department for information on the tax arrears.

Mergers, Split-Ups

In the case of mergers or split-ups, the taxpayers should, by law, report to the tax department and settle their taxes.

Mergers: Where the taxpayers fail to make settlement, they should resume their obligations after the merger.
Split-ups: Where the taxpayers fail to make settlement, they should, after the split-up, bear related responsibility for obligations not fulfilled.

Arrears Exceeding 50,000 Yuan

Where taxpayers owe tax arrears in excess of 50,000 yuan, they should report to the tax department before disposing of their immovable property or assets of large value.

State Revenue Losses

Where taxpayers cause the State to suffer tax revenue losses because of their reluctance to take the following actions, the tax department may exercise its powers of subrogation or rescission:

Perform their creditor right due.
Give up the creditor right.
Transfer property free of charge.
Transfer property at a comparatively low price with the knowledge of the transferees.

When the tax department exercises its authority in these areas, the tax obligations and the legal responsibilities shall remain existing.

Customs

Mergers, Split-Ups

In the case of mergers or split-ups, duty payers should, by law, report to Customs and settle their duty payments beforehand.

Mergers: Where the duty payers fail to make settlement, they should resume their obligations after the merger.
Split-ups: Where the duty payers fail to make settlement, they should, after the split-up, bear related responsibility for obligations not fulfilled.

Mergers, Split-Ups, Asset Restructuring at Control-and-Monitor Stage

In the case of mergers, split-ups, or other asset restructuring during the control-and-monitor of duty reductions, free goods, or bonded goods, the duty payers should report to Customs. Where the duty payers need to pay duty in accordance with prevailing rules, they should settle the duty.

Where the duty payers want to continue enjoying duty reductions/exemptions, they should complete Customs formalities to register the change in duty payers.

Terminations

Where business operations are terminated (e.g., because of cancellations, dismissals, or bankruptcy) during the following periods, the duty payers should report to Customs before liquidation:

The period during which the duty payers owe duty.
The period during which duty reductions, free goods, or bonded goods, are being controlled and monitored.

Customs should, by law, collect the duty payable by the duty payers.

Taxpayers Leaving China

Where taxpayers or their representatives need to leave China but still owe taxes, they should fulfill the following obligations before leaving:

Settle the taxes owed.
Settle any interest due on late payments.
Provide a guaranty to the relevant tax department

Where duty payers or taxpayers with tax arrears have already been transferred to court for trial, they shall be treated by the court in accordance with prevailing laws.

Barring Exit

After determining that the taxpayers in tax arrears have not fulfilled the obligations described above, the relevant tax department shall, by law, notify the taxpayers that they are not allowed to leave China if they are planning to do so.

The tax department may, in accordance with prevailing rules, send a letter to the public security department, notifying it to bar those taxpayers who have already obtained exit documents from leaving China.

Where taxpayers have already fulfilled the following obligations, the relevant tax department must send a letter to the public security department, notifying it to rescind the order and allow them to exit:

Settled their taxes.
Provided guaranties equivalent to the tax owed.
Completed liquidation procedures in accordance with the Law of Bankruptcy (in the case of enterprises owing tax).

Customs

Where duty payers use properties without setting the lien as their tax guaranty, they should take the following actions:

Entrust an agent within China to handle the monitor and disposal rights of the guaranty property.
Surrender the property list and a copy of the entrusting agreement to the tax department.

Tax Refunds, Recovery

Overpayments

Where taxes are overpaid, the tax department shall refund the excess within 10 days of discovery.

The following items shall not be included in calculations of overpayment:

Final settlement rebates.
Export refunds.
Tax reductions.
Exemption refunds as a result of advance payment of taxes in accordance with prevailing laws.

Interest

Where taxpayers discover that they have overpaid taxes, they may, within 3 years of making the tax payment, apply to the relevant tax department for a refund of the excess sum, together with the bank interest during the same period.

After verification, the department should issue the refund within 30 days of receiving the application.

The interest rate used shall be the prevailing deposit interest rate quoted by the People's Bank of China on the date that the tax department handles the refund.

Offsets

Where taxpayers have both tax refundable and tax owed, the tax department may offset the tax owed against the tax and interest refundable.

It shall return the balance, if any, to the taxpayers.

Nonpayment, Underpayments

The time limit for tax repayment and tax recovery shall start from the date that the taxpayers and withholding agents fail to pay or underpay the taxes.

Fault Lies with the Tax Department

Where taxpayers or withholding agents have not paid taxes or have underpaid taxes because of the work of tax department, the taxes may be recovered from the taxpayers or the withholding agents by the relevant tax department within 3 years.

No interest will be charged on late payments.

Erroneous Calculations by Taxpayers

Where taxpayers fail to pay or underpay taxes, or withholding agents fail to withhold or under-withhold taxes because they have miscalculated their payments, the relevant tax department may recover the taxes and interest on late payments within 3 years.

The time limit may be extended to 5 years if the shortfall in taxes exceeds 100,000 yuan in accumulation.

Tax Evasions, Refusals, Cheating

Where taxpayers have committed the following acts, the relevant tax department may pursue the unpaid or underpaid taxes without time limit:

Tax evasion.
Refusal to pay taxes.
Cheating in their tax refunds.

Customs

Non-Collection, Under-Collection

When pursuing the duty owed, Customs shall issue a Customs Pursuing Duty Notice.

The duty payers should report to Customs for the duty payment formalities within 15 days of receiving the notice.

Where the duty payers fail to do so within the time limit, Customs shall fill in and issue the duty payment memorandum when the time limit expires.

Goods released, articles entering/exiting: Where Customs finds that duties have been under-collected or not collected after goods for import/export or articles entering/exiting have been released, it may make supplementary collections from the duty payers within 1 year, starting from the date that duty was paid on the goods or articles released.
Where duties are under-collected or not collected because the duty payers violated prevailing rules, Customs may pursue the collection within 3 years. It may also charge interest by the day on the duty under-collected or not collected, starting from the date that duty is paid or the goods are released, to the date that it discovers the violation.
Monitored goods: Where duties are under-collected or not collected because the duty payers violated prevailing rules, Customs may pursue the duty within 3 years, starting from the date that the duty payers should pay the duty. It may also charge interest by the day on the duty under-collected or not collected, starting from the date that duty is paid or the goods are released, to the date that it discovers the violation.

The date that duty is paid refers to the date that the duty payers violate the rules. Where Customs is unable to determine the specific date, the date when Customs discovers the act shall be taken as the date of duty payment.

Over-Collection

Discovery by Customs: Where Customs discovers that duty has been over-collected, it should immediately notify the duty payers to undergo duty rebate formalities.
The duty payers should do so within 3 months of receiving the notice.
Discovery by duty payers: Where the duty payers discover that duty has been over-collected, they may apply in writing to Customs within 1 year of the duty payment date, for rebates of the duty over-collected, together with the interest of the current deposit of the same period.
The interest rate applied shall be the rate quoted by the People's Bank of China on the date that Customs fills in the duty rebate form.
Interest shall be calculated starting from the date of duty payment to the date that Customs fills in the duty rebate form.
Customs should verify the case within 30 days of accepting the application and notify the duty payers to undergo the rebate formalities.
The duty payers should complete the formalities within 3 months of receiving the notification.

Applications for Reductions/Exemptions

Taxpayers may apply, in writing, to the relevant tax department for tax reductions or exemptions in accordance with prevailing laws and administrative rules and regulations. They should enclose all relevant documents specified by the tax department.

Verification

Applications should be examined and approved by the reduction and exemption verification organs authorized under prevailing laws and administrative rules and regulations.

Where any decisions concerning tax reductions or exemptions made by the local People's Government, the relevant departments of People's Government at various levels, units, or individuals contravene prevailing laws, administrative rules, or regulations, the decisions shall be deemed invalid.

The tax department shall disregard the decisions and report the situation to a higher tax department.

Presenting Supporting Documents

Where taxpayers are eligible for tax reductions or exemptions, as stipulated by prevailing laws or administrative regulations or rules, or as approved by the approval department following statutory procedures, they should bring the relevant documents to the tax department to undergo tax reduction or exemption formalities.

They should resume tax payment once the tax holidays expire.

Change in Circumstances

Where there is any change to the conditions for tax reductions or exemptions, the taxpayers should report to the relevant tax department within 15 days of the change.

Those who do not meet the criteria for tax reductions or exemptions shall, by law, fulfill their tax obligations.

Where they fail to do so, the tax department shall pursue the tax payable.

Customs

Where duty payers import/export goods subject to duty reductions or exemptions, they should bring the relevant documents to Customs for formal approval, unless otherwise stipulated.

After verification by Customs, they may be granted reductions or exemptions.

Monitoring

Where imported goods in use are subject to reductions/exemptions, where they are being monitored by Customs, where they are transferred or used for other purposes during the monitoring period, and where duty needs to be paid, Customs should collect the import duty based on the value of the goods after depreciation, starting from the date of importation.

The monitoring period for imported goods subject to special reductions or exemptions varies as follows, the period with starting from the date that the goods are released:

Vessels, planes: 8 years.
Motor vehicles: 6 years.
Other goods: 5 years.

During the monitoring period, the duty payers should report once a year to Customs on the condition of the goods, starting from the date that the goods are released.

Unless Customs approves the transfer of the goods to other units enjoying the same treatment, the duty payers shall not be allowed to transfer the goods or otherwise dispose of the goods before they have settled the duty payment and completed the monitor release formalities.

Once the monitoring period expires, the monitor controls are automatically removed. Where the duty payers need proof of monitor removal, they may go to Customs within 1 year of the expiration to apply for proof, by presenting the relevant documents and vouchers. Customs should verify and issue the proof within 20 days of receiving the application.

Subcontracts, Leases

Where the following criteria apply to subcontractors or lessees, they should pay taxes on their revenue and income from production/business operations, and accept tax administration, unless otherwise stipulated by prevailing laws, or administrative regulations or rules:

They possess independent production/business operation rights.
They perform independent accounting.
They regularly pay contract fees or rentals to the contract makers or lessors.

The contract makers or lessors should file reports with the tax department about the subcontractors or lessees within 30 days of the contract making or leasing.

Otherwise, they shall bear the associated responsibility with the subcontractors or the lessees.

TAX INSPECTION

Overview

The tax department has the right to conduct various tax inspections, discussed in detail below.

While conducting tax inspections, tax officials sent by the tax department should present their tax inspection cards and the tax inspection notice. Otherwise, the persons being inspected have the right to refuse the inspection. The tax officials shall observe confidentiality with respect to the taxpayers inspected.

Where the tax department inspects the tax payment materials of taxpayers engaged in production/business operations in preceding years, and where it discovers, during the inspections, the following activities by the taxpayers, it may, by law, implement tax guaranty measures or tax enforcement measures:

Payment avoidance.
Attempts to transfer or hide taxable commodities, goods, or other property, or taxable income.

Inspection Categories

Inspection of Documents

The tax department may inspect the following documents, as well as scrutinize information pertinent to the taxes payable, or the tax amounts withheld/remitted or collected/remitted:

Taxpayers: Accounting books, supporting vouchers for the accounts, statements.
Withholding agents: Accounting books, supporting vouchers for the accounts.

Onsite Inspections

Inspections may be conducted at the business premises of the taxpayers or withholding agents.

Offsite Inspections, Sequestering of Documents

Where necessary, upon approval by the tax commissioners at or above the county level, the tax department may request that taxpayers or withholding agents surrender the following materials from preceding tax years for inspection. However, the department must give the taxpayers or withholding agents a list of the materials. The materials must be returned within 3 months.

Accounting books.
Accounting vouchers.
Statements.
Other materials.
In special cases, upon approval by the tax commissioners at or above the municipal level, the tax department may request that taxpayers or withholding agents surrender the following materials for the current tax year for inspection. The materials must be returned within 30 days.
Accounting books.
Accounting vouchers.
Statements.
Other materials.
Below are some examples of such special cases.
VAT invoice inspections.
Taxpayers seriously violate tax laws.
Taxpayers or other parties concerned destroy, conceal, or transfer the accounting books.

Onsite Property Inspections, Operational Inspections

The tax department may inspect a taxpayer's taxable commodities, goods, or other property at the following locations:

The taxpayer's premises where production/business operations are conducted.
Places where goods are stored.

It may also inspect a withholding agent's operational conditions where these pertain to the withholding/remittance or collection/remittance of tax.

Requisition of Documents, Relevant Materials

The tax department may order a taxpayer or withholding agent to furnish documents, evidence, and relevant information pertaining to the payment of tax, or to the amount of tax withheld/remitted or collected/remitted.

Questioning of Concerned Parties

The tax department may make inquiries of a taxpayer or withholding agent regarding relevant issues and circumstances connected with the payment of tax, or the tax amounts withheld/remitted or collected/remitted.

Inspection of Documents for Consignment, Mailed Goods

The tax department may inspect supporting documents and vouchers, and scrutinize relevant information pertaining to taxable commodities, goods, or other property, in any of the following situations:

Where the items are transported by consignment.
Where the taxpayer sends the items by post at railway stations, docks, or airports.
Where the items are sent by enterprises engaged in postal services or their branches.

Inspection of Savings Accounts

Upon approval by the director of the tax department at or above the county level, the tax department may inspect the saving accounts that a taxpayer or a withholding agent has opened with banks or other financial institutions, by presenting a permit, of a nationally unified form, for the inspection of the accounts.

In investigating tax-related cases, the tax department may, upon approval by the tax offices at or above the municipal level, inspect and inquire into the savings deposits of concerned parties. The materials obtained in the course of such inspections and inquiries should not be used for non-tax purposes.

Inspections of Computerized Accounting Systems

Where taxpayers use computerized accounting systems, the tax department has the right to inspect the systems.

The department has the right to access the systems to inspect the following materials processed and stored in the systems, and to copy any electronic data that is relevant to tax payments as evidence:

Accounting records.
Other relevant tax materials.
In the course of the inspections, the tax department has to bear the following responsibilities:
To guarantee the security of the computerized systems.
To observe confidentiality with respect to commercial secrets.

Obligations of Taxpayers, Withholding Agents

Taxpayers and withholding agents must meet the following obligations:

Accept tax inspections by the tax department in accordance with prevailing laws.
Make true disclosures.
Provide relevant materials.

They should not refuse or conceal any facts pertinent to the inspection.

Investigations of Relevant Units, Individuals

In the course of conducting tax inspections in accordance with prevailing laws, the tax department has the right to investigate relevant units and individuals with respect to the payment of taxes or the withholding/collecting of taxes by taxpayers, withholding agents, or other concerned parties.

The units and individuals are obliged to truthfully provide relevant materials and documented evidence. Some examples are cited below:

Industrial and commercial administration department: Information about the taxpayer (i.e., business licenses, legal representatives, business places, business operations, business scope).
Banks: Information on the taxpayer's accounts or funds flow.
Transportation department: Information on the transportation of the taxpayer's goods.
Units/individuals in a purchase/sale relationship with the taxpayer: Information on the purchase/sale of goods or labor.

Customs

The Customs Department has the authority to carry out various inspections and investigations, discussed in detail below.

Inspection, Detention

Customs may undertake the following activities:

Inspect transportation tools into or out of China.
Check goods and items entering/exiting China.
Detain persons in violation of Customs laws or other relevant laws, or administrative regulations.

ID Examinations, Investigations of Suspected Offenders

Customs may undertake the following activities:

Examine the IDs of persons entering/exiting China.
Investigate persons suspected of violating the Customs laws or other relevant laws, or administrative regulations.
Investigate any behavior that may constitute an offense.

Examination of Documents

Customs may examine and copy the following materials pertaining to transportation tools, goods, or items entering/exiting China:

Contracts.
Invoices.
Accounting records.
Vouchers.
Records.
Documents.
Business correspondence.
Audio or video recordings.
Other relevant materials.

Customs may also detain the transportation tools, goods, or items, where they are involved in violation of Customs laws or other relevant laws, or administrative regulations.

Investigation of Smuggling Activities

Customs-Controlled Areas, Coastal/Border Areas Near Customs

In these areas, Customs may conduct various examinations:

Transportation tools suspected of being involved in smuggling activities.
Places suspected of being used to hide smuggled goods or items.
The bodies of suspected persons.

Customs may also detain transportation tools, goods, items, or persons suspected of being involved in smuggling activities, upon approval by the director of the Customs office directly under the GAC or the director of the Customs office authorized by the GAC.

In general, the detention of suspected persons should not exceed 24 hours, but under special circumstances, it may be extended to 48 hours.

Other Areas

When investigating smuggling cases, Customs may inspect transportation tools and places suspected of being involved in smuggling activities, upon approval by the director of the Customs office directly under the GAC or the director of the Customs office authorized by the GAC.

Customs may also inspect residential houses of citizens suspected of hiding smuggled goods or items, if the relevant persons concerned are present. Where a witness is present, inspections may be conducted even without the presence of the relevant persons concerned.

In addition, Customs may detain transportation tools, goods, or items that have been proved to be involved in smuggling activities.

Examination of Deposits, Remittances in Smuggling Cases

When investigating smuggling cases, Customs may, upon approval by the director of the Customs office directly under the GAC or the director of the Customs office authorized by the GAC, check and inquire into the following funds or funds flows of suspected units or persons:

Deposits held in financial institutions.
Money remittances processed by postal enterprises.

Other Powers, Mandates

Suspects in flight: Where transportation tools or individuals entering/exiting China flee from the control of the Customs, Customs has the authority to pursue them to areas beyond the Customs-controlled areas and to coastal/border areas near Customs, and bring them back for treatment.
Arms: Customs officers may be equipped with weapons in the course of performing their tasks.
Other powers as stipulated by prevailing laws or administrative regulations.

TAX AUDIT/INVESTIGATION

Overview

When conducting tax audits/investigations, the tax department shall, by law, inspect the conditions under which taxpayers or withholding agents fulfill their tax obligations, and assess their performance in this area and the degree to which they have met their obligations.

There are various categories.

Daily audits/investigation.
Audits/investigations of special items.
Audits/investigations of special cases.
The fundamental tasks involved are listed below:
Implementing State tax laws.
Investigating tax offenses and imposing penalties.
Ensuring State revenue.
Safeguarding tax order.
Promoting compliance.
Guaranteeing the implementation of tax laws.

Therefore, tax audits/investigations must be based on facts, and on prevailing tax laws, regulations, and rules. As there is a heavy reliance on people, it is necessary to strengthen cooperation between the tax department and the judicial department, and between the tax department and other relevant departments.

Tax audit/investigation organizations set up by tax departments at all levels should perform their duties with respect to tax audits/investigations in line with their jurisdictions.

Selection of Audit Targets

Annual Audit Plans

After weighing tax audit/investigation needs and the audit resources available, tax departments at all levels should work out tax audit/investigation plans for the following year at the end of each year, and report the plans to their chief persons for approval.

Selection Process

Targets for tax audits/investigations should be selected using the following three approaches:

Based on computer analysis of the cases.
Based on a specified percentage of the number of taxpayers, or at random, depending on the audit plans.
Based on disclosures by members of the public, cases transferred from other departments, cases assigned by the higher department, through exchange of information.

Once the audit targets are finalized, the tax department should set up tax audit master records, trace the inspection, and evaluate the implementation of the audit plans.

Tax Offense Disclosure Centers

Tax departments at all levels should set up tax offense disclosure centers within the tax audit/investigation organizations to accept and handle disclosures made by members of the public regarding tax-related offenses.

The public may disclose cases either orally or in writing. The disclosure centers accepting oral disclosures should record these disclosures on paper or using tape recorders. After the individual making the disclosure has confirmed the accuracy of the transcript, the written records may be signed or sealed by the individual, unless he is unwilling to provide his name.

If the individual is unwilling to make the records public, the disclosure centers should observe confidentiality.

If the cases disclosed do not fall within the jurisdiction of the department, the centers should advise the individuals to make their disclosures to the relevant department, or transfer the materials to the relevant department for handling.

Tax Cases Lodged for Investigation

Where a target case selected for tax audit/investigation falls primarily into one of the following categories, the case should be lodged for investigation:

The target party has committed any of the following offenses:
- Tax evasion.
- Flight from collection of tax arrears.
- Cheating in export tax refunds.
- Refusal to pay tax.
- Illegal provision to taxpayers or withholding agents of bank account details, invoices, documents, or other conveniences leading to the loss of tax revenue.
The target party has not committed the offenses listed above, but the tax amount being investigated and can be recovered ranges between 5,000 yuan and 20,000 yuan (to be specified by the tax department at the provincial level after considering local conditions).
The target party engages in any of the following activities:
- Private printing of invoices, forging of invoices for sale, or false issuance of invoices.
- Illegal filling in of invoices on behalf of other persons.
- Illegal carrying, posting, transporting, or storing of blank invoices.
- Forging or private production of invoice supervision stamps or anti-forgery products for invoices.
Other circumstances that the tax department believes warrant lodging.

Jurisdiction

Tax Audit and Investigation Department of the SAT

This department bears the following responsibilities:

Drafting of tax audit/investigation rules.
Formulation of tax audit/investigation methods.
Organizing implementation across the country.
Handling of serious tax cases with respect to registration and investigation, and proposing methods of treatment/disposal.
Instructing and coordinating tax audit/investigation work across the country.

SAT Offices, Local Tax Bureaus

Different Locations

The offices of the SAT and the local tax bureaus in different locations are responsible for the tax audit/investigation work within their own jurisdictions.

Where they encounter issues relevant to other jurisdictions, they should, in a timely manner, inform the other jurisdictions to investigate.

Where they have different opinions on the same tax issue, the opinions of the party responsible for the tax shall be observed first. Then the case shall be reported to a higher tax department, which shall make the final judgment.

Tax cases shall in principle be handled by the taxpayer department in charge of the locale where the taxpayers are situated. Invoice cases shall be handled by the tax department in charge of the locale where the case occurs.

Same Location

Where the offices of the SAT or the local tax bureaus are in the same location, any tax case involving two or more tax offices shall be handled by the tax office that first handled the investigation.

Where there is a dispute over jurisdiction, the relevant tax offices shall consult each other to determine which office has the authority to investigate, bearing in mind that their decision should be in the best interests of the investigation.

Where no resolution can be reached even after consultation, a higher tax office shall rule on the issue of jurisdiction.

Investigation by Higher Tax Offices

The following cases may be investigated by higher tax offices, or the relevant investigations may be organized by the higher office in uniform:

The case involves the following offenses:
- Serious tax evasion.
- Flight from tax collection.
- Cheating in export refunds.
- Tax avoidance.
- Refusal to pay taxes.
The case involves the following activities:
- Serious forging of invoices.
- Sale of invoices.
- Illegally issuance of invoices.
- False issuance of invoices.
- Other serious tax offenses.
The disclosure requires the higher tax office to send staff to investigate.
The case involves staff of the relevant tax offices.
The higher office believes it should investigate the case.
The lower office believes the case should be investigated by the higher office.

Execution of Audits/Investigations

Preparatory Work

Before performing the tax audit/investigation, the tax department should undertake the following tasks:

Collect overall information about the taxpayer to be audited.
Choose the audit method.
Send a written notice to the taxpayer, notifying him of the audit time and the materials to be prepared.
However, no advance notice will be issued where the following criteria apply:
Offenses have been disclosed.
The tax department has grounds to believe the taxpayer has indeed committed the offences.
The advance notice may hamper the investigation.

Conflicts of Interest

Where the tax auditor and the taxpayer being audited are related in any way that may affect the impartial execution of the law, the auditor should recuse himself.

The taxpayer has the right to request the auditor to recuse himself.

Procedures

The tax audit/investigation should be conducted by two or more persons together, after they have presented the tax inspection card.

In order to carry out the audit/investigation, depending on the needs of the audit/investigation and on which statutory procedures apply, measures such as inquiries, checks of accounting books and onsite investigations might be taken.

For cross-jurisdiction investigations, the audit/investigation may be conducted by correspondence, or an actual visit may be required.

Concluding Audits/Investigations

At the end of the audit/investigation, the auditors should inform the taxpayers of the results of the audit, and the main problems encountered for the purpose of checking and opinion.

Where cases are lodged for investigation, the auditors should, at the end of the audit/investigation, prepare the Tax Audit Report, and submit it together with the Tax Audit Work Sheet and other evidence to the trial department.

Where cases are not lodged for investigation, the auditors may, at the end of the audit/investigation, proceed directly to prepare the Tax Treatment Decision Letter, in line with simple procedures and implement it after approval by rules.

Where the audit/investigation does not reveal any problems, and the case has not been lodged for investigation, the auditors shall prepare the Tax Audit Conclusion for approval.

Where the audit/investigation does not reveal any problems, but the case has been lodged for investigation, the auditors shall prepare the Tax Audit Report, to be submitted together with other evidence to the trial department.

Audit/Investigation Trials

Trial Administration

The tax audit/investigation trial should be administered by specified tax staff, and may be conducted under joint hearing if necessary.

The trial administrators should carefully examine the Tax Audit Report and other relevant materials submitted by the auditors to confirm the following matters:

Whether the facts of the offense are clear.
Whether the evidence is true.
Whether the data is accurate.
Whether the materials are complete.
Whether the laws, regulations, or rules have been properly applied, and are in conformity with the legal procedures.
Whether the treatment suggestions are appropriate.

Where the case is major, serious, or difficult, and where the tax department finds the case hard to try, it should report the case to a higher tax department for a ruling.

Concluding the Trial

At the end of the trial, the trial persons should carry out the following tasks:

Put forward the comprehensive opinion.
Prepare the Trial Report and the Tax Treatment Decision Letter.
Hand the case over to the relevant staff for execution, upon approval.

Out of those cases where the offenses constitute crimes, the cases that should be transferred to the judicial department shall be transferred after the Tax Offence Transfer Letter has been prepared and approved by the leaders.

Out of those cases where the Tax Audit Report has been issued but where no problems were discovered during the investigation, the Tax Audit Conclusion shall be prepared for approval for those cases confirmed by the trial persons.

Doubtful cases shall be returned to the audit staff for supplementary investigations, or reported to the leaders for separate arrangements.

Time Limits

The trial persons receiving the Tax Audit Report and the relevant materials should complete the trial within 10 days of receipt.

Execution of Rulings

After receiving the Tax Treatment Decision Letter, the tax executors shall prepare the tax documents delivery sheet. They shall deliver it to the taxpayer and monitor the execution of the ruling.

Non-Compliance, Enforcement Measures

Where the taxpayer fails to abide by the rulings stated in the Tax Treatment Decision Letter, the tax executors should take the following actions, upon approval by the director of the tax office (or branch) above the county level:

Implement, by law, enforcement measures with respect to the tax and interest to be made up.
Prepare the Seal-Up (Confiscating) Certificate, the Decision Letter of Auction of Commodities, Goods, Properties or the Tax Withholding Notice.
Implement the stipulated measures.

Penalty Enforcement, People's Court

Where the following circumstances apply, the tax department above the county level shall prepare the Tax Penalty Enforcement Execution Application, and submit it together with relevant materials to the People's Court, requesting the court to assist in the execution of the enforcement measures.

The taxpayer does not abide by the penalty decision.
The taxpayer does not, within the specified time limit, comply with the enforcement measures undertaken by the tax authorities.
The taxpayer does not apply for a review.
The taxpayer does not appeal to the People's Court.

Case Administration

For cases where the administrative treatment decision has already been carried out and that have already been transferred to the judicial department, the tax department should pursue the tax, fines, and interest on late payment owed before the transfer.

For cases where the administrative treatment decision has already been carried out and that are being directly investigated by the judicial department, the tax department should make up the formalities of payment.

For cases that are cancelled free from criminal penalty, the tax department should impose administrative punishments in line with the seriousness of the offenses, and collect interest on late payments.

Customs Investigations

Customs may investigate enterprises or units directly connected with imported/exported goods and relevant imported goods, and examine the following documents/materials:

Accounting books.
Accounting vouchers.
Declaration documents.
Other relevant materials.
The investigations must be conducted within the following deadlines or during the following periods:
Exported goods: Within 3 years of their release, or during the Customs control period.
Bonded goods, imported goods subject to reductions/exemptions: Within the following 3 years.

LEGAL RESPONSIBILITIES, SANCTIONS

Non-Compliance with Basic Rules

Taxpayers

Where a taxpayer has committed any of the acts discussed below, the relevant tax department shall order him to remedy the act within a specified time limit, and shall impose a fine of less than 2,000 yuan. In serious cases, a fine of 2,000-10,000 yuan may be imposed.

The taxpayer fails to comply with rules governing registration or verification.
- Fails to apply for tax registration.
- Fails to change or cancel tax registrations within the prescribed time limit.
- Fails to undergo registration certificate checking or changing formalities in accordance with prevailing rules.
- Fails to handle verifications of export tax refunds.
- Fails to change or cancel verification formalities in accordance with prevailing rules.
The taxpayer fails to comply with business accounting requirements.
- Fails to set up or maintain accounting books.
- Fails to maintain supporting vouchers for the accounts, or relevant information, in accordance with the relevant provisions.
Where the taxpayer hides or deliberately destroys the following documents, which should be maintained in accordance with prevailing laws, the penalty imposed shall be a jail or detention term not exceeding 5 years and/or a fine of 20,000-200,000 yuan.
- Accounting vouchers.
- Accounting books.
- Financial accounting reports.
Where units commit such offenses, fines shall be imposed on the units. The staff responsible for the offenses, as well as other persons directly responsible, shall be penalized in accordance with the rules described above.
The taxpayer fails to submit to the relevant tax department his financial accounting system, financial accounting methods, and financial accounting software in accordance with prevailing rules.
The taxpayer fails to report to the tax department all his bank accounts in accordance with prevailing rules.
The taxpayer fails to install or use the tax control facilities, or engages in activities that damage or arbitrarily alter the facilities.

Non-Compliance with Registration Rules

Where taxpayers fail to register, the tax department shall order them to rectify the situation within a specified time limit. Where they fail to do so within the time limit, the tax department shall request the industrial and commercial administration department to revoke their business licenses.

Where the following circumstances apply, a fine of 2,000–10,000 yuan shall be imposed on the taxpayer. In serious cases, the fine shall be 10,000–50,000 yuan.

The taxpayer fails to use the tax registration documents as required under the relevant provisions.
The taxpayer lends, alters, damages, trades, and/or forges the tax registration certificate.

Where taxpayers commit fraud to obtain the tax registration certificate, by providing untruthful evidential materials, a fine not exceeding 2,000 yuan shall be imposed. For serious cases, the fine might be 2,000–10,000 yuan.

Withholding Agents

Where tax withholding agents fail to undergo tax withholding registration formalities in accordance with prevailing rules, the tax department shall, within 3 days of discovery, order the taxpayers to remedy the situation, and may impose a fine not exceeding 2,000 yuan.

Where a withholding agent fails to comply with business accounting requirements or withholding requirements, as described below, the relevant tax department shall order the withholding agent to remedy the situation within a specified time limit, and impose a fine not exceeding 2,000 yuan. If the case is serious, the fine may be 2,000–5,000 yuan.

Fails to set up or maintain accounting books for the tax withheld/remitted or collected/remitted.
Fails to maintain supporting vouchers for the accounts, or relevant information with respect to the tax withheld/remitted or collected/remitted, in accordance with the relevant provisions.

Cancellation of Invoice Rights

Where taxpayers or withholding agents violate rules governing tax registration administration methods, or refuse to accept the treatment of the tax department, the tax department may take over the invoices or stop selling invoices to them.

Tax Payment Documents

Where a taxpayer commits any of the following acts with respect to tax payment documents, the tax department shall order him to remedy the act, and impose a fine of 2,000–10,000 yuan.

In serious cases, the fine may be 10,000-50,000 yuan. Where the acts constitute criminal offenses, criminal responsibility shall be pursued.

Illegal printing.
Lending.
Selling.
Alteration.
Forging.

Customs

Where any of the following acts are committed with respect to Customs documents, a fine of 50,000-500,000 yuan shall be imposed, and the illegal income shall be confiscated. Where the acts constitute criminal offenses, criminal responsibility shall be pursued.

Alteration.
Forging.
Buying.
Selling.

Invoice Administration

Where taxpayers violate invoice administration rules, but their actions do not constitute a crime, they shall be penalized in the manner described below.

Where units or individuals commit any of the following acts, the tax department shall order them to rectify the situation, expropriate the illegal gains, and impose a fine of up to 10,000 yuan. Where the parties commit more than one such act, penalties may be imposed separately.
- Printing of invoices or production of anti-forgery products in violation of legal provisions.
- Purchase, issuance, obtaining, and/or keeping of invoices in violation of legal provisions.
- Refusal to accept inspections by the tax department as stipulated by prevailing rules.
Where special VAT invoices are lost because they were not stored in accordance with prevailing rules, the tax department shall impose the following penalties:
- The taxpayers shall not be allowed to use or purchase invoices of the same type for half a year.
- The remaining invoices shall be expropriated.
Where blank invoices are illegally carried, posted, transported, or stored, the tax department shall take the following measures:
- Confiscate the invoices.
- Expropriate the illegal gains.
- Impose a fine of up to 10,000 yuan.
Where invoices are illegally printed, forged, or traded, or invoice monitoring stamps or anti-forgery products are privately produced, the tax department shall take the following measures:
- Seal up, confiscate, or destroy the items.
- Confiscate the illegal gains and the tools used.
- Impose a fine of 10,000-50,000 yuan.
Where any of the following violations is committed, but is too minor to constitute an offense, the public security department shall place the parties under provisional apprehension for a period not exceeding 15 days, and impose a fine not exceeding 5,000 yuan.
- Forging and/or sale of forged special VAT invoices.
- Illegal sale and/or purchase of special VAT invoices (included in this category are purchases of forged special VAT invoices).
- Forging or unauthorized production of other invoices.
- Sale of other invoices that have been forged or produced without authorization.
- Illegal sale of other invoices.
Where any violation of invoice administration provisions leads other units or individuals to take the following actions, the tax department shall expropriate the illegal gains:
- Nonpayment of tax.
- Underpayment of tax.
- Fraudulent procurement of tax refunds.
  The department may also impose a fine equivalent to the tax unpaid, the tax underpaid, or the tax refund procured through fraud.
Where violations of invoice administration rules amount to tax evasion, they shall be treated as tax evasion offenses, and penalties shall be imposed accordingly.

Special VAT Invoices

Penalties for the offenses of falsely filling in, forging, or illegally selling special VAT invoices, and various other offenses are discussed below.

Tax Fraud Through False Overstatement

Individuals

Where individuals falsely fill in special VAT invoices or other invoices to fraudulently procure export tax refunds or tax credits, both of the following penalties shall apply:

They shall be sentenced to a term of imprisonment or provisional apprehension not exceeding 3 years.
A fine of 20,000–200,000 yuan shall be imposed.
Where the sum overstated is large or other serious offenses are involved, both of the following penalties shall apply:
A jail term of 3–10 years.
A fine of 50,000–500,000 yuan.
Where the sum overstated is huge or other particularly serious offenses are involved, both of the following penalties shall apply:
A jail term of at least 10 years. Life imprisonment may apply in certain cases.
A fine of 50,000–500,000 yuan, or confiscation of property.
Where the State is defrauded of a very huge sum, and the circumstances are so extreme that State interests suffer heavy losses, both of the following penalties shall apply:
Life imprisonment or the death penalty.
Confiscation of property.

Units

Where units commit the offenses described above, both of the following penalties shall apply:

The units shall be fined.
The direct chief and other persons responsible shall be sentenced to a term of imprisonment or provisional apprehension not exceeding 3 years.
Where the sum overstated is large or other serious offenses are involved, the following penalties shall apply:
A jail term of 3–10 years.
Where the sum overstated is huge and the situation is particularly serious, the following penalties shall apply:
A jail term of at least 10 years. Life imprisonment may be imposed in certain cases.

Forging or Sale of Forged Special VAT Invoices

Individuals

Where individuals forge or sell forged special VAT invoices, both of the following penalties shall apply:

They shall be sentenced to a term of imprisonment, provisional apprehension, or surveillance not exceeding 3 years.
A fine of 20,000–200,000 yuan shall be imposed.
Where the sum involved is large or other serious offenses are involved, both of the following penalties shall apply:
A jail term of 3–10 years.
A fine of 50,000–500,000 yuan.
Where the sum involved is huge or other particularly serious offenses are involved, both of the following penalties shall apply:
A jail term of at least 10 years. Life imprisonment may apply in certain cases.
A fine of 50,000–500,000 yuan, or confiscation of property.
Where the sum involved is very huge, and the circumstances are so extreme that the country's entire economic order may be seriously shaken, both of the following penalties shall apply:
Life imprisonment or the death penalty.
Confiscation of property.

Units

Where units commit the offenses described above, both of the following penalties shall apply:

The units shall be fined.
The direct chief and other persons responsible shall be sentenced to a term of imprisonment, provisional apprehension, or surveillance not exceeding 3 years.
Where the sum involved is large or other serious offenses are involved, the following penalties shall apply:
A jail term of 3–10 years.
Where the sum involved is huge and the situation is particularly serious, the following penalties shall apply:
A jail term of at least 10 years. Life imprisonment may be imposed in certain cases.

Illegal Sale of Special VAT Invoices

Individuals

Where individuals illegally sell special VAT invoices, the following penalties shall be imposed:

They shall be sentenced to a term of imprisonment, provisional apprehension, or surveillance not exceeding 3 years.
A fine of 20,000–200,000 yuan shall be imposed.
Where the sum involved is large, both of the following penalties shall apply:
A jail term of 3–10 years.
A fine of 50,000–500,000 yuan.
Where the sum involved is huge, both of the following penalties shall apply:
A jail term of at least 10 years. Life imprisonment may apply in certain cases.
A fine of 50,000–500,000 yuan, or confiscation of property.

Units

Where units commit the offenses described above, both of the following penalties shall apply:

The units shall be fined.
The direct chief and other persons responsible shall be punished in accordance with the provisions described above.

Illegal Purchase of Special VAT Invoices

Individuals

Where individuals illegally purchase special VAT invoices or purchase forged special VAT invoices, either or both of the following penalties shall apply:

They shall be sentenced to a term of imprisonment or provisional apprehension not exceeding 5 years.
A fine of 20,000–200,000 yuan shall be imposed.

Where individuals illegally purchase special VAT invoices or forged special VAT invoices, or where they falsely fill in or sell special VAT invoices, they shall be penalized in the same manner as those who falsely fill in special VAT invoices, sell forged special VAT invoices, or illegally sell special VAT invoices.

Units

Where units commit the offenses described above, both of the following penalties shall apply:

The units shall be fined.
The direct chief and other persons responsible shall be punished in accordance with the provisions described above.

Violations Involving Other Invoices

Individuals

Where individuals forge other invoices, produce other invoices without authorization, sell other invoices that have been forged or produced without authorization, or illegally sell other invoices, and where these other invoices can be used to fraudulently procure export tax refunds and/or tax credits, both of the following penalties shall apply:

They shall be sentenced to a term of imprisonment, provisional apprehension, or surveillance not exceeding 5 years.
A fine of 20,000–200,000 yuan shall be imposed.
Where the sum involved is huge, both of the following penalties shall apply:
A jail term of 3–7 years.
A fine of 50,000–500,000 yuan.
Where the sum involved is very huge, and the circumstances are so extreme that the country's entire economic order may be seriously shaken, both of the following penalties shall apply:
A jail term of at least 7 years.
A fine of 50,000–500,000 yuan, or confiscation of property.
Where individuals forge other invoices, produce other invoices without authorization, sell other invoices that have been forged or produced without authorization, or illegally sell other invoices, other than those stipulated above, either or both of the following penalties shall apply:
A term of imprisonment, provisional apprehension, or surveillance not exceeding 2 years.
A fine of 10,000–50,000 yuan.
Where the cases are serious, both of the following penalties shall apply:
A jail term of 2–7 years.
A fine of 50,000–500,000 yuan.

Units

Where units commit the offenses described above, both of the following penalties shall apply:

The units shall be fined.
The direct chief and other persons responsible shall be punished in accordance with the provisions described above.

Theft of Invoices

Where individuals steal special VAT invoices or other invoices that can be used to fraudulently procure export tax refunds or tax credits, and with large amount or by several times, either or both of the following penalties shall apply:

A term of imprisonment, provisional apprehension, or surveillance not exceeding 3 years.
Fines.
Where the amount involved is huge, both of the following penalties shall apply:
A jail term of 3–10 years.
Fines.
Where the amount involved is very huge, or other particularly serious offenses are involved, both of the following penalties shall apply:
A jail term of at least 10 years. Life imprisonment may apply in certain cases.
Fines or confiscation of property.

Fraudulent Procurement of Invoices

Where individuals fraudulently procure special VAT invoices or other invoices used to fraudulently procure export tax refunds or tax credits, and with large amount, either or both of the following penalties shall apply:

A term of imprisonment, provisional apprehension, or surveillance not exceeding 3 years.
Fines.
Where the amount involved is huge or other serious offenses are involved, both of the following penalties shall apply:
A jail term of 3–10 years.
Fines.
Where the amount involved is very huge, or other particularly serious offenses are involved, both of the following penalties shall apply:
A jail term of at least 10 years. Life imprisonment may apply in certain cases.
Fines or confiscation of property.

Non-Compliance with Reporting Rules

Where the following situations apply, the tax department shall order the parties concerned to provide a remedy within a specified period, and may impose a fine not exceeding 2,000 yuan. In serious cases, the fine may be 2,000–10,000 yuan.

A taxpayer fails to undergo tax reporting formalities or to submit tax materials within the prescribed time limits.
A withholding agent fails to submit tax withholding/collecting reports or relevant materials within the prescribed time limits.

Customs

Non-Declaration, False Declaration

Where any of the following details relating to imported/exported goods should have been declared to Customs, but was not or was falsely reported, penalties may be imposed:

Name of the goods.
Classification number.
Quantity.
Specifications.
Price.
Trading method.

Where the violation results in reduced tax collections, a fine of 30%–200% of the duty under-collected shall be imposed.

Where the violation affects the administration of export tax refunds, a fine of 10%–50% of the declared price of the goods shall be imposed.

Any illegal income shall be confiscated.

Declaration Under a False Identity

Where a declaration enterprise allows another entity to declare imported/exported goods under its name, the following measures may be taken:

The enterprise shall be ordered to remedy the situation.
It shall be issued a warning.
It may be banned from engaging in the declaration business for 6 months.

Items for Self-Use

Where individuals carry or mail self-use items into or out of China in quantities exceeding reasonable limits, without declaring the items to Customs as stipulated by prevailing laws, the following measures shall be taken:

They shall be ordered to make good the duty that should have been paid.
Fines may be imposed.

Failure to Pay/Withhold Taxes

Repeated Violation

Where entities repeatedly fail to meet their tax commitments under the following scenarios, the tax department may implement two-fold measures to recover the tax owed:

Taxpayers fail to pay or underpay the tax payable within the specified time limits, and even after the tax department orders them to make payment, they fail to do so within the new specified time limits.
Withholding agents fail to remit or under-remit the tax remittable within the specified time limits, and even after the tax department orders them to make payment, they fail to do so within the new specified time limits.
Two-fold measures shall be imposed:
A fine equivalent to 50%–100% of the tax owed.
Enforcement measures as prescribed under prevailing tax laws.

Refusal to Submit to Tax Withholding

Where taxpayers refuse to submit to tax withholding, the withholding agents should report the situation to the tax department.

The tax department shall then collect the tax and interest on late payments directly from the taxpayers.

If the taxpayers refuse to make payment, the tax department shall take measures to recover the tax from the taxpayers, and shall impose on the taxpayers a fine equivalent to 50%–300% of the tax owed.

Failure to Withhold/Collect Tax

Where the withholding agents fail to withhold/collect the tax that should be withheld/collected, the tax department shall pursue the tax from the taxpayers, and shall impose on the withholding agents a fine equivalent to 50%–300% of the tax owed.

Failure to Cooperate in Investigations

Where taxpayers or withholding agents commit the following violations, the tax department shall order them to rectify the situation, and shall impose a fine not exceeding 10,000 yuan. In serious cases, the fine may be 10,000–50,000 yuan.

Avoid tax inspections or refuse in other ways to submit to them.
Fail to truthfully disclose the facts.
Provide false materials.
Refuse to provide relevant materials.
Refuse to allow or otherwise obstruct the tax department's efforts to record, tape record, video record, photograph, or otherwise copy relevant materials.
Transfer, hide, or destroy relevant materials during the inspections.
Fail to accept the inspections in other ways.

Tax Evasion

General Principles

Where a taxpayer engages in any of the following activities so as to avoid paying tax or to pay less than the full tax due, he is guilty of tax evasion:

Forging, altering, concealing, or destroying without authorization accounting books or supporting vouchers for the accounts.
Overstating expenses in accounting books, or understating or failing to state income.
Failing to file returns or filing false returns after being notified by the tax department to file a report.

Where taxpayers are guilty of tax evasion, the tax department shall pursue the payment of the tax owed, and shall impose a fine not exceeding 500% of the tax owed.

Where either of the following situations applies, the tax department may sentence the taxpayers to a term of imprisonment or provisional apprehension not exceeding 3 years, and impose a fine equivalent to 100%–500% of the tax owed, in addition to collecting the tax owed:

The tax owed accounts for 10%–30% of the total tax payable, and exceeds 10,000 yuan but not 100,000 yuan.
The taxpayer has twice been subject to administrative sanctions by the tax department for tax evasion, but again repeats the offense.

Where the tax owed accounts for more than 30% of the total tax payable and exceeds 100,000 yuan, a jail term of 3–7 years and a fine equivalent to 100%–500% of the tax owed shall be imposed.

Withholding Agents

Where a withholding agent engages in the activities described above so as to avoid paying the tax withheld/collected or to pay less than the full tax due, the tax department shall pursue the payment of the tax owed, and impose a fine equivalent to 50%–500% of the tax owed.

Where the tax owed accounts for more than 10% of the total tax payable and exceeds 10,000 yuan, the tax department shall impose penalties in accordance with the provisions discussed above, in addition to recovering the tax and interest on late payments.

Repeat Offenders

Where taxpayers or withholding agents are guilty of several instances of tax evasion over a period of 5 years, but none of the instances was serious enough to constitute a crime, and where no administrative sanctions were imposed, fines shall be computed on a cumulative basis

Where the taxpayers or withholding agents have twice been subject to administrative sanctions over a period of 2 years for tax evasion, but again repeat the offense, and where the tax owed exceeds 10,000 yuan, the tax department shall impose penalties in accordance with the provisions for tax evasion sanctions.

Criminal Liability

Where taxpayers or withholding agents have been subject more than once to administrative sanctions for tax evasion, and where the State decides to prosecute, the People's Court shall by law try the case.

Where the court rules that criminal fines shall be imposed, these shall be imposed instead of the administrative fines.

Where all of the following criteria apply, criminal sanctions may be waived:

The tax owed is less than 50,000 yuan.
The taxpayers or withholding agents make good the tax and interest owed before the public security department files the case for investigation as a minor offense.
There is no need to impose criminal sanctions.

Calculation Principles

The total tax evaded refers to the total amount of taxes not paid or underpaid during a specified tax period.

The evasion ratio refers to the proportion of the total tax evaded to the total tax payable in a tax year.

Where taxpayers do not make tax payments by tax year, the ratio shall be taken as the proportion of the total tax evaded to the total tax payable in the year preceding the date of the last instance of tax evasion by the taxpayers.

Where the continuous tax obligation period does not amount to a full tax year, the ratio shall be taken as the proportion of the total tax evaded to the total tax payable in the actual tax obligation period occurring.

Where a particular instance of tax evasion covers several tax years, it shall still be treated as a tax evasion offense as long as the ratio and the amount of tax evaded in any 1 tax year reach the standards described above.

Fraudulent Declaration of Tax Base

Where taxpayers or withholding agents falsify the tax base, the tax department shall order them to rectify the situation, and shall impose a fine no exceeding 50,000 yuan.

Failure to Pay, Underpayment

Where taxpayers engage in any of the following activities, the tax department shall pursue the taxes still owed, as well as the interest on late payments, and shall impose a fine equivalent to 50%–500% of the taxes owed:

Failing to file tax returns.
Failing to pay the tax payable.
Paying less than the full tax payable.

Refusal to Pay Tax

General Principles

Where a taxpayer resorts to violence or threats when refusing to pay tax, he is guilty of the administrative offense of refusal to pay tax.

Where taxpayers refuse to pay tax, the tax department may impose both of the following penalties, in addition to collecting the tax owed:

A term of imprisonment or provisional apprehension not exceeding 3 years.
A fine equivalent to 100%–500% of the tax owed.
Where the case is serious, both of the following penalties may be imposed:
A term of imprisonment of 3–7 years.
A fine equivalent to 100%–500% of the tax owed.
Where the offense is not serious enough to constitute a crime, the tax department shall take both of the following measures:
Pursue the tax owed and the interest on late payments.
Impose a fine equivalent to 100%–500% of the tax owed.

Criminal Liability

The following acts of tax refusal constitute criminal offenses:

Instigating cases of inciting the masses to engage in acts of tax refusal.
Refusal to pay taxes amounting to more than 100,000 yuan.
Repeated refusal to pay tax.
Inflicting deliberate injury on others and causing light injuries in the process.
Other serious cases.

Deliberate Injury

Where the tax refusal act involves an act of deliberate injury, the following sentences shall apply, unless otherwise stipulated under the criminal law:

Light cases: The jail term may be 3–10 years.
Cases of serious injury: A jail term of 3–10 years.
Cases of death/disability by cruel means: A jail term of at least 10 years, life imprisonment, or the death sentence.
Cases of murder: The death sentence, life imprisonment, or a jail term of at least 10 years.

Accomplices

Where a taxpayer commits a tax refusal act together with a withholding agent or another taxpayer, the other parties involved shall be treated as accomplices in the act and penalized accordingly.

Transfer/Concealment of Property

Where taxpayers owing taxes obstruct the collection of tax arrears by transferring or concealing property, the tax department shall take both of the following measures:

Pursue the tax, and collect interest on late payments.
Impose a fine equivalent to 50%–500% of the arrears.
Where the act of obstruction prevents the tax department from pursuing the tax, and where the tax owed is between 10,000 yuan and 100,000 yuan, the tax department shall take both or either of the following measures, in addition to pursuing the arrears:
Impose a term of imprisonment or provisional apprehension not exceeding 3 years.
Impose a fine equivalent to 100%–500% of the arrears.

Where the arrears exceed 100,000 yuan, the tax department shall take both of the following measures:

Impose a jail term of 3–7 years.
Impose a fine equivalent to 100%–500% of the arrears.

Violations by Declaration/Logistics Enterprises

Where Customs declaration enterprises, or enterprises authorized by Customs to engage in the transportation, storage, processing, assembly, mail-order sale, or display of goods under Customs monitoring, commit the following violations, various measures may be taken against them:

Delayed duty payment.
Failure to perform duty payment obligations.
Allowing Customs to monitor goods to be damaged or lost, without being able to provide a reasonable explanation.
Below are the measures that the enterprises may face:
Being ordered to remedy the situation.
Being issued a warning.
Being suspended from conducting business for 6 months.

Fraudulent Procurement of Tax Refunds

General Principles

Where taxpayers fraudulently procure export tax refunds by making false export declarations or through other fraudulent means, the tax department shall take the following measures:

Pursue the collection of the refunds fraudulently procured.
Impose a fine of 100%–500% of the refunds fraudulently procured.
Where the refunds are large, both of the following penalties shall apply:
A term of imprisonment or provisional apprehension not exceeding 5 years.
A fine equivalent to 100%–500% of the refunds fraudulently procured.
Where the refunds are huge or other serious offenses are involved, both of the following penalties shall apply:
A jail term of 5–10 years.
A fine equivalent to 100%–500% of the refunds fraudulently procured.

Where the refunds are very huge, or other particularly serious offenses are involved, both of the following penalties shall apply:

A jail term of at least 10 years. Life imprisonment may apply in certain cases.
A fine equivalent to 100%–500% of the refunds fraudulently procured, or confiscation of property

Government Staff

Where government staff members participate in the offences described above, the punishment meted out to them shall be heavier.

Fraudulent Export Declarations

Where taxpayers falsify details relating to after-tax goods in the following ways, their export declarations are deemed to be fraudulent:

They falsify or sign false purchase-and-sale contracts.
They obtain the following documents by changing, forging, or other illegal means:
- Export goods declaration forms.
- Export exchange receipts.
- Special payment memoranda for exported goods.
- Other export refund documents.
- Vouchers.
They falsely fill in, forge, or illegally purchase special VAT invoices or other invoices that may be used to commit tax refund fraud.
They falsify other facts relating to the exportation of goods.

Other Fraudulent Means

Where taxpayers procure tax refunds in the following ways, they shall be deemed to be using fraudulent means:

They commit fraud so as to qualify for export tax refunds.
They treat goods on which taxes have not been paid, or goods exempt from tax as after-tax goods for export.
Although with such exportation of goods, the name, quantity, and price of the goods are falsified to cheat for the tax refund on the part not actually taxed.
Cheat to obtain the tax refund by other means.

Sums Involved

When dealing with cases of tax refund fraud, the tax department shall classify the tax amounts involved in the following manner:

Large: The refunds fraudulently procured amount exceed 50,000 yuan.
Huge: They exceed 500,000 yuan.
Very huge: They exceed 2.5 million yuan.

Assessing the Gravity of the Cases

Serious Cases

The following cases are deemed to be serious cases:

The offenders have caused the State to lose tax revenues exceeding 300,000 yuan, which cannot be pursued before the announcement of the first judgment.
The offenders have been subject to administrative penalties previously for tax refund fraud, they repeat the offense within 2 years, and the amount exceeds 300,000 yuan.
Other serious cases.

Very Serious Cases

The following cases are deemed to be very serious cases:

The offenders have caused the State to lose tax revenues exceeding 1.5 million yuan, which cannot be pursued before the announcement of the first judgment.
The offenders have been subject to administrative penalties previously for tax refund fraud, they repeat the offense within 2 years, and the amount exceeds 1.5 million yuan.
Other very serious cases.

Amalgam of Evasion and Fraud

Where the taxpayers cheat for the tax they have paid by the above fraudulent means, they shall be penalized as tax evasion.

The part of the tax cheated in excess of the tax paid shall be dealt with according to the above rules.

Extended Culpability of Enterprises

Where the following situation applies to companies or enterprises with import/exports rights, they shall be penalized in accordance with the rules described above and with the rules governing offenses by units:

They are aware of the intent to fraudulently procure export tax refunds.
They bring customers, goods and exchange bills, and make declarations to Customs in violation of State rules governing import/export administration.
The State is defrauded of export tax refunds as a result.

Minor Offenders

Where taxpayers are involved in acts of fraud, but do not actually procure tax refunds as a result, they may be penalized less stringently.

Special VAT Invoices

Where taxpayers commit fraud and falsely fill in special VAT invoices at the same time, they shall be penalized more stringently, as stipulated under criminal law.

Suspension of Rights

Apart from the penalties described above, the tax department may, upon approval by the SAT offices at or above the provincial level, suspend the tax refund rights of enterprises involved in fraudulent procurement of export tax refunds from the State, for 6 months or longer.

Non-Compliance, Offenses by Units

Where units commit the following violations, various measures may be taken:

Tax evasion.
Obstructing the collection of taxes by the tax department by transferring or hiding property.
Fraudulent procurement of tax refunds.
Illegal sales of special VAT invoices or other invoices.
Illegal purchases of special VAT invoices (including forged special VAT invoices).
Illegally buying and falsely filling in special VAT invoices.
Illegally selling or falsely filling in special VAT invoices.
Forging or privately producing invoices.
Selling forged or privately produced invoices other than special VAT invoices in a manner that constitutes an offense.
Described below are the measures that may be taken:
Fines shall be imposed on the units.
The chief person and other persons directly responsible for the violations shall be penalized in accordance with the criminal law.
The tax department shall pursue the taxes not paid or underpaid by the units.

Collection of Taxes/Fines Owed, Before Imposing Sanctions

Before penalties (fines, confiscation of property) are executed on taxpayers who commit the following violations, the tax department shall collect the tax payable and/or the tax refunds fraudulently procured.

Tax evasion.
Refusal to pay tax.
Flight from tax collection.
Fraudulent procurement of export tax refunds.
Falsely filling in special VAT invoices or other invoices for the purpose of fraudulently procuring tax refunds or tax credits.

Tax/Interest Collected by Other State Organs

Taxes and interest on late payments collected by the following State organs in the course of handling tax-related crimes shall be handed over to the tax department in a timely manner, for remitting to the State Treasury:

The public security department.
The People's procuratorial department.
The People's Court.

Cases Transferred for Prosecution

Tax Collection Documents

Where tax-related criminal cases are transferred by the tax department to the public security department, the tax department may collect the relevant tax in accordance with prevailing laws before the transfer. It shall then attach the tax collection documents to the files to be transferred to the public security department.

The tax collection documents should be enclosed with the case files when the public security department transfers the case to the People's procuratorial department for prosecution, after the detection/investigation groundwork has been completed, and when the People's procuratorial department tries the case before the People's Court.

Court Rulings, Non-Compliance

Once the People's Court has ruled on whether the tax should be collected or rebated, and once the ruling becomes effective, the tax department shall collect or rebate the tax in compliance with the ruling.

Where the defendant, other parties concerned, or relevant units refuse to pay or transfer the tax in compliance with the ruling, the People's Court shall undertake enforcement measures to implement the ruling.

Parties Engaged in Production/Business Operations

Where taxpayers or withholding agents engaged in production/business operations violate tax laws and refuse to comply with measures taken by the tax authorities, the tax authorities may confiscate the invoices or may stop selling invoices to them.

Banks, Financial Institutions

Non-Compliance with Registration Rules

Where banks or other financial institutions commit the following violations with respect to the accounts opened by taxpayers engaged in production/business operations, the tax department may take various measures against them:

Fail to enter the tax registration certificate numbers of the taxpayers in their accounts.
Fail to record the account numbers in the tax registration certificates of the taxpayers.
Below are the measures that may be taken by the department.
It shall order the banks or the financial institutions to remedy the situation.
It shall impose a fine of 2,000–20,000 yuan. In serious cases, the fine may be 20,000–50,000 yuan.

Failure to Cooperate in Investigations

Where the banks or financial institutions with which the taxpayer or withholding agent has opened a deposit account, commit the following violations, and these violations result in the loss of tax revenue, the tax department may take various measures against them:

They refuse inspection of the accounts by the tax department.
They refuse to execute the tax department's instructions to freeze the deposits and deduct taxes.
They refuse to help the taxpayer or withholding agent with the transfer of deposits after receiving written notification from the tax department.
Below are the measures that may be taken by the department:
It shall impose a fine of 100,000–500,000 yuan on the banks or financial institutions.
It shall impose a fine of 1,000–10,000 yuan on the relevant staff and other persons directly responsible for the violations.

Transport Hubs, Postal Enterprises

Where the tax department conducts tax inspections at the following venues or enterprises, it may take various measures against any unit refusing the inspection:

Railway stations.
Ports.
Airports.
Postal enterprises and their branches.
Below are the measures that may be taken by the department:
It shall order the unit to remedy the situation.
It may impose a fine of less than 10,000 yuan. In serious cases, the fine may be 10,000–50,000 yuan.

Illegal Provision of Accounts, Invoices

Where individuals or units illegally provide the following items/materials to taxpayers or withholding agents, resulting in the nonpayment or underpayment of taxes or in the fraudulent procurement of tax refunds, the tax department may take various measures against the individuals or units:

Bank account details.
Invoices.
Documents.
Other aids.
Below are the measures that may be taken by the department:
Expropriation of the illegal gains.
Imposition of a fine equivalent to the tax not paid, underpaid, or defrauded.

Tax Agents

Where tax agents commit both of the following violations, and these violations result in the nonpayment or underpayment of taxes by taxpayers, the tax department may take various measures against the agents and the taxpayers:

They overstep the limits of their agency.
They violate tax laws or regulations.
Below are the measures that may be taken by the department:
It shall pursue from the taxpayers the taxes not paid or underpaid, and interest on late payments.
It shall impose on the agents a fine equivalent to 50%–300% of the tax not paid or underpaid.

Violations of Administration/Collection Orders

General Principles

Where citizens, legal entities, or other organizations violate tax administration and collection orders, and are subject to administrative sanctions, the tax department shall impose the sanctions after verifying the facts.

Notification Before Execution of Penalties

Before making the decision to impose sanctions, the tax department should notify the party concerned of the following matters:

The facts, the reasons, and the grounds for the decision.
Any rights that the party may enjoy, such as statement, argument.

On-The-Spot Execution of Penalties

Where the following situations apply, the tax staff enforcing the measures may determine whether to impose the sanctions on the spot:

There is conclusive evidence that citizens have committed violations on a legal basis, and they are subject to a fine not exceeding 50 yuan.
There is conclusive evidence that legal entities or other organizations have committed violations on a legal basis, and they are subject to a fine not exceeding 1,000 yuan.

In other situations, the tax department may determine the treatment only after investigation. Inspections may be conducted where necessary.

Requests for Hearings

Before imposing the following administrative sanctions, the tax department should notify the party concerned of his right to request a hearing:

Citizens: A fine exceeding 2,000 yuan.
Legal entities, other organizations: A fine exceeding 10,000 yuan.

Where the party concerned requests a hearing, the tax department should organize one, and make its decisions after the hearing, in accordance with prevailing laws.

Expenses incurred during the hearing shall be borne by the tax department.

Where the fines are less than 2,000 yuan, the tax collection stations may decide the manner in which the administrative sanctions shall be imposed, in accordance with the tax administration law.

Customs

Before imposing the following administrative sanctions, the tax department should notify the party concerned of his right to request a hearing:

Suspension of the relevant business.
Cancellation of the Customs registration.
Imposition of fines exceeding 10,000 yuan for citizens, and fines exceeding 100,000 yuan for legal persons or other organizations.
Confiscation of the relevant goods, articles, or transportation tools.

If the party concerned requests a hearing, Customs should organize one.

Failure to Comply Within Specified Time Limits

Once the tax administrative sanction has been decided in accordance with prevailing laws, the party concerned should comply within the specified time limits.

Where the party concerned fails to do so, the tax department may take the following measures:

Where the party fails to pay tax after the deadline has expired, it may impose, on a daily basis, a charge equivalent to 3% of the fines.
It may dispose of any sealed-up or confiscated property by auction or sale, and use the proceeds to offset the fines.
It may instruct frozen deposits to be transferred to settle the tax payment.
It may apply to the People's Court for enforcement measures.

Economic Difficulty

Where the party concerned is in real economic difficulty, he may apply to the tax department for approval to defer the payment of the fines or to pay the fines in installments.

Customs

Where the party concerned fails to comply, within the specified time limits, with administrative sanctions by Customs, it may take the following measures:

It may impose, on a daily basis, an additional fine equivalent to 3% of the original fines.
It may sell any sealed-up or confiscated property, and use the proceeds to offset the fines.
It may use guaranties previously lodged to offset the fines.
It may apply to the People's Court for enforcement measures.

Economic Difficulty

Where the party concerned is in real economic difficulty, he may apply to Customs for approval to defer the payment of the fines or to pay the fines in installments.

Administrative Reviews, Appeals

Where the party concerned objects to decisions by the tax department relating to administrative sanctions, he may, by law, apply for a tax administrative review or institute a tax administrative appeal.

Enforcement Measures

Where the party concerned fails to act as described below, the tax department may implement enforcement measures or apply to the People's Court for enforcement measures.

He does not apply for a tax administrative review of the administrative sanction in question.
He does not institute a tax administrative appeal.
He does not comply with the decisions within the specified time limits.

Issuance of Receipts

When imposing fines on or expropriating illegal gains from taxpayers, withholding agents, or other concerned parties, the tax department must issue receipts.

Otherwise, they shall have the right to refuse to pay.

Remittance of Fines to the State Treasury

Tax-related revenue from fines imposed by the tax department and the judicial departments should all be remitted to the State Treasury of different budgetary levels.

Public Dissemination

The tax department shall make public effective administrative decisions related to tax offences through announcements or in other ways for public monitoring.

These decisions are normally highlighted on bulletin boards set up in public areas by the tax investigation division, or their relevant tax offices at the provincial, municipal, and county levels.

In serious cases or other typical cases, the information may be announced through newsletters or press conferences.

Violations Exceeding Statutory Limits

Where activities that violate tax laws or administrative regulations, and that should be penalized, are not discovered within 5 years of the date that they first occurred, no administrative penalties shall be imposed.

Violations by Tax Staff

Tax staff who violate laws or rules shall face legal sanctions.

Failure to Turn In Cases

Where tax officials practise favoritism or engage in embezzlement, and their actions result in failure to turn in tax-related criminal cases to the judicial department, the following measures shall apply:

Serious cases: A term of imprisonment or provisional apprehension not exceeding 3 years.
Cases with serious consequences: A jail term of 3–7 years.

Improper Impoundment

Where the tax department or tax staff seal up or impound the taxpayer's house or items that he needs to support his family and himself, the following measures may be taken:

The tax department or tax staff shall be ordered to return the house or items.
They shall be subject to administrative disciplinary sanctions.
Where their actions constitute an offense, criminal responsibility shall be pursued.

Private Distribution of Impounded Items

Where tax officials privately distribute among themselves commodities, goods, or other property that have been impounded or sealed up, the following measures may be taken:

They shall be ordered to return the items.
They shall be subject to administrative sanctions.

Where their actions are so serious as to constitute an offense, criminal responsibility shall be pursued.

Complicity in Tax Offenses

Where tax officials are involved in the following situations, their actions shall be treated as joint offenses under criminal law, and penalties shall be imposed accordingly:

They induce or assist taxpayers or withholding agents to commit tax evasion or tax flight.
They collude with taxpayers or withholding agents to fraudulently procure tax refunds.

Where their actions do not constitute an offense, they shall be subject to administrative disciplinary sanctions.

Bribery

Where tax officials accept or ask, by way of post, for property or other unfair advantages from taxpayers or withholding agents, and where their actions constitute an offense, criminal responsibility shall be pursued.

Where their actions do not constitute an offense, they shall be subject to administrative disciplinary sanctions.

Those that ask for bribes shall be heavily penalized.

Bribes Exceeding 100,000 Yuan

Individuals accepting bribes of more than 100,000 yuan shall be subject to both or either of the following measures:

A jail term of at least 10 years. Life imprisonment may apply in certain cases.
Confiscation of property.
Where the cases are very serious, both of the following measures shall be imposed:
The death penalty.
Confiscation of property.

Bribes of 50,000–100,000 Yuan

Individuals accepting bribes of 50,000–100,000 yuan shall be subject to both of the following measures:

A jail term of at least 5 years.
Confiscation of property.

Where the cases are very serious, both of the following measures shall be imposed:

Life imprisonment.
Confiscation of property.

Bribes of 5,000–50,000 Yuan

Individuals accepting bribes of 5,000–50,000 yuan shall be subject to the following measure:

A jail term of 1–7 years.
Where the cases are very serious, the following measure shall be imposed:
A jail term of 7–10 years.

Bribes of less than 5,000 Yuan

Individuals accepting bribes of less than 5,000 yuan shall be subject to the following measures:

Serious cases: A term of imprisonment or provisional apprehension not exceeding 2 years.
Minor cases: An administrative sanction by the units or a higher tax department.

Abuse of Power, Neglect of Duties

Where tax officials are involved in the following situations, they shall be sentenced to a term of imprisonment or provisional apprehension not exceeding 3 years:

They abuse their power as tax officials, resulting in heavy losses to the interests of the State and the people.
They neglect their duties, resulting in non-collection or under-collection of taxes that causes heavy losses in State revenue.

In serious cases, they shall be sentenced to a jail term of 3–7 years.

Where their actions do not constitute an offense, they shall be subject to administrative disciplinary sanctions.

Heavy Losses to State and People

Where tax officials commit any of the following acts, and the acts result in heavy losses to the interests of the State and the people, they shall be sentenced to a term of imprisonment or provisional apprehension not exceeding 5 years:

They practise favoritism.
They engage in acts of embezzlement.
They abuse their power as tax officials.
They neglect their duties.

In very serious cases, they shall be sentenced to a jail term of 5–10 years.

Heavy Losses in State Revenue

Where tax officials fail to collect or under-collect tax for the following reasons, and their actions result in heavy losses in State revenue, they shall be sentenced to a term of imprisonment or provisional apprehension not exceeding 5 years:

Favoritism.
Embezzlement.

Where they cause very heavy losses, they shall be sentenced to a jail term of at least 5 years.

Where their actions do not constitute an offense, they shall be subject to administrative disciplinary sanctions in accordance with prevailing laws.

Improper Handling of Invoice Sales, Tax Credits, Tax Refunds

Where tax officials practise favoritism or engage in embezzlement in violation of prevailing laws or regulations while carrying out the following activities, and their actions cause heavy losses to State interests, they shall be sentenced to a term of imprisonment or provisional apprehension not exceeding 5 years:

Selling invoices.
Handling tax credits.
Handling tax refunds.

Where they cause very heavy losses, they shall be sentenced to a jail term of at least 5 years.

Where their actions do not constitute an offense, they shall be subject to administrative disciplinary sanctions in accordance with prevailing laws.

Taxable Output Valuations for Agriculture Tax

Where tax officials overvalue or undervalue the taxable output for Agriculture Tax in violation of prevailing laws or administrative regulations, and either of the following consequences ensues, those whose actions constitute a crime shall bear criminal responsibility, and those whose actions do not constitute a crime shall face administrative sanctions:

Overpayment or underpayment of tax.
Infringement of the legal rights and interests of peasants, or of State interests.

Deliberate Harassment of Taxpayers, Withholding Agents

Where tax officials abuse their powers, and deliberately create difficulties for taxpayers or withholding agents, both of the following measures shall apply:

They shall be removed from office.
They shall face administrative sanctions.

Retaliatory Acts Against Those Disclosing Tax Violations

Where tax staff retaliate against taxpayers, withholding agents, or other persons who accuse them of tax-violating activities or who disclose their tax-violating activities, they shall face administrative sanctions.

Where their actions constitute an offense, criminal responsibility shall be pursued.

Failure to Recuse

Where tax staff are open to conflicts of interest while carrying out the following activities, and fail to recuse themselves, as stipulated by prevailing laws, the head of the unit and other persons directly responsible shall face administrative sanctions:

Tax collection.
Investigations of tax violations.

Breaches of Confidentiality

Where tax officials or staff fail to observe confidentiality for taxpayers, withholding agents, or reporters, the head of the unit and other persons directly responsible for the breaches of confidentiality shall face administrative sanctions by their offices or relevant units.

Unlawful Tax Decisions

General Principles

Where the following administrative decisions are made in violation of prevailing laws or regulations, various measures shall apply:

Starting or stopping a tax.
Starting or stopping tax reductions, tax exemptions, tax refunds, or tax repayments.
Other decisions that contravene prevailing tax laws, or administrative regulations or rules.
Below are described the various measures that may be taken:
A higher tax department shall pursue the administrative responsibility of the head of the unit and other persons directly responsible for the decisions.
The arbitrary decisions shall be rescinded.
Taxes that should have been collected, shall be collected.
Taxes that should not have been collected, shall be returned.

Where the decisions constitute an offense, criminal responsibility shall be pursued.

Late/Delayed Collections, Improper Apportioning

Where tax officials or staff commit the following acts in violation of prevailing laws or administrative regulations, they shall be ordered to rectify the situation by a higher department or the administrative supervisory department:

Collecting taxes before the date stipulated by prevailing laws.
Delaying tax collections.
Apportioning taxes.

The head of the unit and other persons directly responsible shall, by law, face administrative sanctions.

Arbitrary Changes in Scope, Budgetary Level

Where the tax department arbitrarily makes the following changes in violation of prevailing rules, it may take various measures:

The tax administration or collection scope.
The budgetary level of tax revenues.
Below are described the various measures that may be taken:
The department shall be ordered to rectify the situation.
The head of the unit and other persons directly responsible shall be demoted or removed from office.

Unauthorized Collections

Where individuals or units collect taxes without the authorization of the tax department, both of the following measures shall apply:

They shall be ordered to return the taxes collected.
They shall be subject to administrative sanctions or penalties.

Where their actions infringe on the legal rights or interests of others, they shall be responsible for compensation.

Where their actions constitute an offense, criminal responsibility shall be pursued.

Smuggling Activities

General Principles

Where individuals or units engage in smuggling activities that do not constitute an offense, Customs shall confiscate the smuggled goods, items, or illegal income. It may also impose a fine.

Duty Evasion

Where individuals or units evade duty payments, Customs may impose a fine not exceeding 300% of the duty payable.

Items Used for Smuggling

The following items used for concealing acts of smuggling shall be confiscated:

Goods or articles used specially for this purpose.
Goods or articles used several times for this purpose.
Transportation tools used specially for this purpose.
Transportation tools used several times for this purpose.

Concealment of Smuggled Goods

Special facilities used to hide smuggled goods or items shall be destroyed or confiscated.

Repeat Offenders

Where Customs has previously imposed criminal or administrative sanctions on individuals for smuggling, and where they engage in smuggling activities again within 2 years of the date that the sanctions were imposed, they should face more severe penalties.

Penalties

Where individuals or enterprises smuggle goods or articles other than weapons, cultural relics, gold, exotic animals and plants or drugs, and where their actions constitute an offense as stipulated by the State, they shall face the penalties discussed below.

Tax Evaded Exceeds 500,000 Yuan

Where the tax evaded exceeds 500,000 yuan, both of the following measures shall apply:

A jail term of at least 10 years. Life imprisonment may apply in certain cases.
A fine equivalent to 100%–500% of the tax evaded, or confiscation of property.
In very serious cases, both of the following measures shall apply:
Life imprisonment or the death penalty.
Confiscation of property.

Tax Evaded Amounts to 150,000–500,000 Yuan

Where the tax evaded amounts to 150,000–500,000 yuan, both of the following measures shall apply:

A jail term of 3–10 years.
A fine equivalent to 100%-500% of the tax evaded.
In very serious cases, both of the following measures shall apply:
A jail term of at least 10 years. Life imprisonment may apply in certain cases.
A fine equivalent to 100%–500% of the tax evaded, or confiscation of property.

Tax Evaded Amounts to 50,000–150,000 Yuan

Where the tax evaded amounts to 50,000–150,000 yuan, both of the following measures shall apply:

A term of imprisonment or provisional apprehension not exceeding 3 years.
A fine equivalent to 100%–500% of the tax evaded.

Offenses by Units

Where units commit the offenses described above, the following measures shall apply:

Fines shall be imposed on the units.
The head of the unit and other staff directly responsible shall be sentenced to a term of imprisonment or provisional apprehension not exceeding 3 years.
In serious cases, they shall be sentenced to a jail term of 3-10 years.
In very serious cases, they shall be sentenced to a jail term of at least 10 years.

Cumulative Treatment of Repeat Offenses

Where individuals or units engage repeatedly in smuggling activities, but have not previously been subject to sanctions, fines for the tax evaded through the smuggling of goods or items, shall be calculated on a cumulative basis.

Bonded Goods, Tariff-Reduced or Tariff-Exempt Goods

The penalties described above shall be imposed on those who, without permission from Customs and without settling the tax payable, sell the following items at discretion in China for profit, where their actions constitute an offense:

Bonded goods such as raw materials, parts, products, or equipment permitted for importation for contract processing, imported parts assembly, or compensated trade.
Goods or articles that were imported at reduced tariffs or that are exempt from tariffs.

Disposal of Confiscated Goods, Fines

The following items confiscated in accordance with the rulings of the People's Court or in accordance with administrative decisions by Customs, shall be disposed of by Customs in accordance with prevailing laws:

Smuggled goods or articles.
Illegal income.
Transportation tools.
Special equipment.

The resulting proceeds and the fines collected by Customs shall all be remitted to the Treasury of the Central Government.

Customs Declaration Enterprises

Responsibility for Under-Collection, Non-Collection

Where all of the following situations apply, Customs declaration enterprises shall bear associate responsibility for the under-collection or non-collection of duty or interest on late payments, together with the duty payers:

The enterprises are entrusted by the duty payers to undergo declaration formalities on their behalf.
The enterprises contravene prevailing rules, resulting in the under-collection or non-collection of duty by Customs.

Responsibility for Duty Payment

Where the enterprises are entrusted by the duty payers to handle declaration formalities on their behalf, the enterprises and the duty payers shall bear associate responsibility for duty payment.

Except in cases of force majeure, the persons responsible for the storage of Customs control goods shall bear the responsibility of duty payment if the goods are damaged or lost during the period that they are stored for Customs control.

Violations by Customs Staff

Standards of Conduct

Customs staff must observe the following standards of conduct:

Impartial implementation of the law.
Honesty.
Self-discipline.
Dedication to their work.
A commitment to provide worthwhile services.
They should refrain from the following activities:
Shielding, wink smuggling, or smuggling in collusion with other persons.
Illegally restricting the freedom of others.
Illegal examinations of persons, premises, or places.
Illegal inspections or impoundment of transportation tools, goods, or items.
Pursuing their own private interests or those of other persons through postal services.
Requesting or accepting bribes.
Disclosing State secrets, or the commercial or business secrets of Customs.
Abusing their power as Customs staff.
Deliberately hardening or delaying monitoring or checks.
Buying, personally distributing, or appropriating confiscated smuggled goods or items.
Participating in profit-making business activities, or joining in such activities on an actual basis.
Executing their duties in a manner that contravenes statutory procedures.
Executing their duties in a manner that exceeds their authority.
Other offenses.

Penalties

Where Customs staff commit any of the violations described above, they shall, by law, face administrative sanctions.

Where they have amassed illegal income, the income shall, by law, be confiscated. Where their actions constitute an offense, criminal responsibility shall be pursued.

Taxation in China