what we think

By Maarten Roos & Kathleen Cao

In the Announcement of the State Taxation Administration [2021] No. 6 issued on 31 March, China’s tax office tried to make the country’s tax system a little friendlier. As part of the 2021 "Spring Wind Campaign - Making Tax Easy for Taxpayers" and following initiatives of the State Council (China’s chief administrative authority), the new rules introduce a list of tax offenses which will be exempt from administrative penalties if:

• the offense was committed for the first time;
• the harmful consequences are minor; and 
• the offense is corrected voluntarily either before being discovered, or upon discovery if within the time limit prescribed by the tax office.

The main significance of the Announcement is to give local tax offices more discretion to not issue administrative penalties. However, this applies only if the offense has not resulted in the avoidance of evasion of taxes (in that case, late fees and fines will continue to apply).

Therefore, international companies that invest in China should focus on setting up compliance systems to ensure that taxes are fully paid, for example with the help of a corporate service provider or law firm.

The list of offenses in the Announcement, by the taxpayer:

1. Failure to report information on all of its bank accounts to tax authorities
2. Failure to establish or retain account books or retain accounting vouchers or any relevant information
3. Failure to timely file a tax return or make any other submission for tax payment
4. Failure to timely report to tax authorities the data of an invoice issued by it with a tax control device (provided that there are no illegal proceeds)
5. Failure to obtain compliant invoices, and instead using any other voucher in lieu of invoices (provided that there are no illegal proceeds)
6. Failure to compliantly turn over issued invoices for cancellation (provided that there are no illegal proceeds)

By the withholding agent:

7. Failure to establish or retain account books on the taxes withheld and remitted or collected and remitted or retain accounting vouchers or any other relevant information on the taxes withheld and remitted or collected and remitted
8. Failure to timely file relevant information on the taxes withheld and remitted or collected and remitted
9. Failure to compliantly issue a tax receipt
10. And by a domestic institution or individual who contracts out any engineering works or labor services to a non-resident, failure to report any related matter to tax authorities in compliance with relevant laws.

R&P China Lawyers is a full-service law firm that supports international businesses in China. The firm’s tax practice focuses on compliance, advice when dealing with irregularities, and representing clients in discussions and negotiations with the tax office. For more about our practice, please email Mr. Maarten Roos at roos@rplawyers.cn), or your usual contact at R&P China Lawyers.