CHINA Trends and Developments Contributed by: Haitao (Harry) Liu, King & Wood Mallesons
crimes, again strongly indicate the determination of the Chinese government to crack down on corruption and to foster a clean and upright atmosphere both in the governance of the state and the regulation of the market. Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Collection and Administration of Taxes Tax evasion is not a new issue. From 1992, the Supreme People’s Court has issued several judicial interpretations guiding the trials of tax-related crimes. However, they are no longer sufficient as the crimes themselves, the relevant criminal legislation and the disputes over the application of the law in this area have evolved. This new Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Collection and Admin - istration of Taxes was published in 2024 and aims to tackle these new issues and to accelerate the creation of a market-oriented, law-based and internationalised business environment. From the technical perspec - tive, it refines the rules (such as the identification of tax evasion methods), restricts the criminal circle of issu - ing false invoices, strengthens the dual punishment system for corporate crimes, balances the behaviours and incentives for market entities’ compliance rectifi - cation, and implements precise crackdowns on sub - stantive harm. The Supreme People’s Procuratorate’s report shows that around 23,000 people were prosecuted for crimes involving tax evasion and smuggling in 2024, while the number of people prosecuted in 2023 for crimes of jeopardising the administration of tax collection (eg, false VAT invoices and export tax rebate fraud) was 9,428 which is a 10.9% year-on-year increase com - pared to 2022. This partially explains why the new interpretation was issued. The increase of prosecu - tion numbers may also be attributed to the construc - tion of the fourth phase of the Golden Tax Project, which enhanced the tax inspection function, cover - ing aspects such as intelligent analysis, early warning signs, and assessment of illegal trends. It is likely that the number of prosecutions and trials will continue to increase in 2025. This can be seen in the active involve - ment of tax authorities on different levels investigating
tax-related matters when companies are investigated by competition authorities for commercial bribery. If any amount of money is ascertained by the competi - tion authorities as a corruption cost, the tax authority may follow with more sanctions and may even refer the case to the relevant criminal investigation authority if the circumstances are serious since the booking of the corruption cost in the accounting ledgers is cer - tainly understood as a way of evading tax. Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Money Laundering The crime of money laundering was first provided for in the Criminal Law in 1997. In 2006, a new crime, that of “covering up or concealing criminal gains or the proceeds of criminal gains”, was added into the law to plug the loopholes left by the crime of money laun - dering, which only covers the illicit gains out of seven specific types of crime. The new crime is intended to cover the illicit gains from all other crimes. After the Criminal Law was further amended in 2021, self- money laundering was incorporated into Article 191 in response to pressure from the Financial Action Task Force on Money Laundering’s assessment of China’s anti-money laundering efforts. From the development of the legislation on anti-money laundering, it can be clearly seen that the Chinese government has tak - en painstaking efforts to punish relevant crimes and maintain the financial administrative order. The Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Money Launderingwas published in 2024. In addition to clarifying the standard to determine self-money laundering and third-party money laundering, it added the circumstance of money laundering through virtual currency trade, reflecting new developments in money laundering techniques. In China, criminals have used tools such as “Rewards in Live Streaming” and the “Paofen Platform”. Among all these money laundering tools, cryptocurrency is the most used way to “wash” illicit funds. According to the Supreme People’s Proc - uratorate’s annual reports, in 2023, 2,971 people were prosecuted for money laundering, which represents year-on-year growth of 14.9%, and this number has increased to 3,032 people in 2024. In both years’ reports, cryptocurrency is singled out as one of the
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