Administrative Measures on the Information Disclosure of Entities with Material Tax-Related Illegal and Dishonest Acts in China

March 2022

Joyce Wen

On December 31, 2021, the State Administration of Taxation promulgated the Administrative Measures on the Information Disclosure of Entities with Material Tax-Related Illegal and Dishonest Acts (hereinafter, the “Measures”), which revise and improve the Measures for the Disclosure of Information on Cases of Tax Violations and Dishonest Acts accordingly.  The Measures shall go into effect on February 1, 2022.  The purpose of this article is to sort out the important contents of the Measures.

1. The criteria for determining the entities with dishonest acts are clarified.

Article 6 of the Measures specifies 11 circumstances where entities with material tax-related illegal and dishonest acts are identified (hereinafter, the “Dishonest Entities”), specifically including: (1) falsification, alteration, concealment, unauthorized destruction of books of accounts, bookkeeping vouchers, or overstatement of expenses or understatement of income in the books of account; or refusal to file a tax return or filing of a false tax return after being notified by the tax authorities to file a tax return; or non-payment or underpayment of tax payable in excess of RMB 1 million with the unpaid or underpaid tax payable for any year accounting to over 10% of all categories of tax payable of the year, or non-payment or underpayment of withheld or collected tax amount in excess of RMB 1 million through the aforementioned means; (2) default in the payment of tax payable or employment of means of transferring or concealing property to undermine the collection of outstanding tax by the tax authorities, (3) acquisition of state export tax refunds by fraudulent means; (4) refusal to pay taxes by means of violence or threats; (5) false issuance of special VAT invoices or other invoices used to fraudulently obtain export tax refunds or offset taxes; (6) false issuance of more than 100 ordinary VAT invoices or of invoices amounting to over RMB 4 million; (7) unauthorized printing, forgery, or alteration of invoices, illegal manufacture of special invoice anti-counterfeiting products, or forgery of invoice supervisory seal; (8) acts of tax evasion, evasion of tax arrears recovery, fraudulent export tax refund, tax resistance, false invoicing, etc., or failure to perform tax obligations and an escape from the supervision of taxation authorities before the audit case is completed, where the taxpayers are confirmed by the tax authorities to have fled (lost connection); (9) illegal provision of bank accounts, invoices, or other conveniences resulting in unpaid or underpaid tax in excess of RMB 1 million, or fraudulent acquisition of state export tax refunds; (10) tax agents violating tax laws and administrative regulations, resulting in the non-payment or underpayment of taxes in excess of RMB 1 million; and (11) other tax violations of vicious nature, in material aspects and with greater social harm.

2. Emphasis is placed on the legitimate rights and interests of tax administrative counterparties.

Article 4 of the Measures, which provides for the protection of the personal information of the Dishonest Entities, requires the tax agencies at all levels to maintain the confidentiality of the state secrets, trade secrets or personal privacy, and personal information learned in the information disclosure and management of the Dishonest Entities with material illegal tax-related acts.  In addition, Article 12 of the Measures stipulates that if the Dishonest Entity is a legal person or any other organization, only the legal representative or responsible person of the Dishonest Entity at the time of the illegal act or the person actually responsible as determined by an effective decision of the people’s court shall be disclosed when the information of the Dishonest Entity is disclosed to the public.  The basic information of the tax-related professional service institutions and practitioners who are directly responsible for the material tax violation and dishonesty cases will no longer be disclosed.

3. The circumstances under which the Dishonest Entities may apply to the tax authorities to stop disclosing the dishonesty information are clarified.

Pursuant to Article 18 of the Measures, the Dishonest Entity may apply for early cessation of dishonesty information disclosure in any of the following three circumstances, including (1) taxes, late payment fees, and fines are paid (refunded) in accordance with the Decision on Tax Treatment and the Decision on Administrative Punishment for Taxation, and the dishonest information of the Dishonest Entity has been disclosed for six months, or (2) the dishonest entity is declared bankrupt with the people’s court rendering a decision to approve the reorganization plan or recognize the settlement agreement, and the tax agency is compensated in accordance with law; (3) in the event of major natural disasters, public health, social security, and other emergencies, those who make outstanding contributions due to participation in emergency rescue and relief, epidemic prevention and control, major project construction, or fulfillment of social responsibility.