China to Amend Tax Collection Administration Law

China to Amend Tax Collection Administration LawWith the view to safeguard the lawful rights and interests of taxpayers, the Legislative Affairs Office of China’s State Council released the “Amendment to the Law of the People’s Republic of China on the Administration of Tax Collection (Draft for Comments) (hereinafter referred to as the ‘Amendment’)” on June 7, 2013. Three key features of the Amendment can be found below.

Stipulating the reporting obligations of related parties

The Amendment provides that government departments and relevant organizations shall report the tax-related information in their possession to the tax authorities in a timely manner. Moreover, it specifies the scope of tax-related information to be provided by banks and other financial institutions.

Adding provisions concerning tax administration on individual taxpayers

The Amendment sets forth provisions on tax registration by individuals and requires the tax authorities to establish taxpayer identification number systems. Moreover, it expands the scope of tax preservation and enforcement from “taxpayers engaged in production or business operations” to “all taxpayers including natural persons.”

Making connections with relevant laws

  • To be consistent with the Administrative Enforcement Law, the term “overdue fine” has been changed to ” tax overdue fine,” so as to distinguish it from the overdue fine under the Administrative Enforcement Law.
  • To be consistent with Amendment VII to the Criminal Law, the term “tax evasion” has been changed into “tax payment evasion,” and relevant provisions regarding “tax dodging” have been added.
  • To be consistent with the Administrative Licensing Law, the legal status of certified tax agents and tax firms have been clarified.

Main Revised Contents

The Amendment has made changes to the current Tax Collection Administration Law in the following areas:

Tax registration

According to the Amendment, the following entities shall apply to the competent tax authorities for tax registration on the strength of relevant certificates within 30 days from the issuance of their business license:

  • Enterprises
  • Branch offices established outside an enterprise’s main office location
  • Production and business premises established outside an enterprise’s main office location
  • Individual businesses and public institutions engaged in production or business operations

The tax authorities shall handle the tax registration procedures and issue tax registration certificates to such entities on the day of receipt of such applications.

Moreover, the Amendment provides that individual taxpayers shall go through tax registration procedures with the tax authorities in the places where they reside, and the tax authorities shall establish taxpayer identification number systems.

Reporting obligations

The Amendment requires government departments and relevant organizations to report tax-related information in their possession to the tax authorities in a timely manner, while banks and other financial institutions shall provide tax authorities with information on customers’ deposit accounts, gross interest and investment income paid into or accrued on such accounts, as well as year-end (or term-end) account balances and other information about such accounts in their possession.

Tax inspection

The Amendment allows tax authorities to inspect the tax payment-related accounts and data of entities from which the individual taxpayers obtain their incomes.

Legal liabilities

According to the Amendment, where a taxpayer, by fraud or concealment, files false tax returns or fails to file any tax returns to evade taxes, the competent tax authorities shall demand the individual to pay the tax that they failed to pay along with a tax overdue fine. The tax authorities will concurrently impose a fine of more than 50 percent, but less than 500 percent, of the amount of the tax that the taxpayer fails to pay. Moreover, if the act of the taxpayer constitutes a crime, criminal liability shall be imposed according to the relevant laws.

Where a taxpayer fails to pay any tax due to negligence, and this has resulted in tax dodging, the competent tax authorities may impose a fine of not more than 20 percent of the amount of the tax that the taxpayer fails to pay. The tax authorities will also demand that the individual pays an additional “tax overdue fine” along with the amount that the taxpayer failed to pay in the first place.

The Amendment is currently seeking public opinions and comments, and such feedback can be submitted via the methods below through July 7, 2013.

  • Website: Log on to www.chinalaw.gov.cn, and submit comments through the “Opinion Collecting System” on the left side of the website’s homepage.
  • E-mail: sszgf@chinalaw.gov.cn
  • Address: Mailbox 2067, Beijing (Postal code: 100035)

For professional assistance in South China contact Fabian Knopf at fabian.knopf@dezshira.com or visit www.dezshira.com

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China Briefing hosts a wealth of business intelligence on legal, tax, and operational issues in China from a practical perspective. Knowledge, expertise and commentary for China Briefing is regularly contributed by Dezan Shira & Associates´ professional legal and tax staff. Currently located in Futian district, Dezan Shira & Associates has been assisting foreign companies in Shenzhen for 22 years.

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