CHINA Law and Practice Contributed by: Mei Zhang, DaHui Lawyers
• Right to enquire – to ask taxpayers and withholding agents about issues and circumstances related to tax payment or withholding and collection of taxes, and to prepare written records of the enquiry. • Account enquiry rights – with the approval of the director of the tax bureau (branch) at the county level or above, individuals and authorised enti- ties may enquire about the account information of taxpayers and withholding agents in banks or other financial institutions; enquiries about the savings deposits of suspected person(s) require approval from the director of the tax bureau at the city prefecture-level or autonomous prefecture level or above. • Right to inspect electronic data – this includes the right to inspect taxpayers’ electronic information systems and to use technical means to extract and copy electronic data (but not to damage the origi - nal data or affect the operation of the system). • Right to conduct cross-regional investigations – this embodies the right to carry out cross-regional investigations and collect evidence through the co- operation of tax authorities in different regions. • Preservation and enforcement rights – tax pres - ervation measures (such as freezing deposits and seizing property) can be taken against taxpayers suspected of evading tax obligations, and enforce - ment measures (such as auctioning property to offset tax payments) can be taken against those who fail to pay taxes on time. The PRC Tax Collection and Administration Law and its regulations are used to address most tax-related violations, and core penalties include: • For tax evasion (such as concealing cross-border income) – the tax authorities may recover the tax owed, impose late-payment fees, and impose a fine of up to five times the amount of tax not paid (Article 63). • For tax fraud (such as fraudulently obtaining export tax refunds) – fraudulently obtained tax may be recovered, and a fine ranging from 100% to 500% 6. Penalties and Sanctions 6.1 Tax Penalties Legal Framework and Main Penalties
of the fraudulent amount may be charged (Article 66). • For failure to fulfil withholding obligations (such as failure to withhold tax when paying overseas dividends) – the withholding agent may be fined between 50% and 300% of the non-withheld tax amount (Article 69). • For those who evade, refuse or otherwise obstruct the tax authorities’ inspections (such as refusing to provide cross-border information) – they may be ordered to rectify the situation and may be fined up to RMB10,000; in serious cases, they may be fined between RMB10,000 and RMB50,000 (Article 70). The Implementing Agency The power to impose penalties is exercised by multi - ple administrative departments, such as the following: • Tax authorities – The STA and its subordinate tax authorities are responsible for investigating and punishing tax evasion, tax fraud and other tax- related violations. For enforcement actions that exceed their statutory administrative powers (eg, compulsory enforcement against property), they must apply to the people’s courts for execution. • Customs – The General Administration of Customs and its subordinate customs offices at all levels are responsible for investigating and punishing smug - gling, violations of customs supervision regula - tions, and other similar activities. • Co-ordinating regulatory departments – Other financial and regulatory agencies, including local commerce departments, branches of the People’s Bank of China, financial regulatory bureaus, and the State Administration of Foreign Exchange, play a supporting role. They are tasked with strengthen - ing monitoring, facilitating information sharing, and promoting regulatory co-ordination to combat tax- related offences that involve cross-border capital flows or complex financial arrangements. 6.2 Criminal Penalties In China, most criminal penalties for tax fraud and tax evasion are described in the Criminal Law of the People’s Republic of China (“Criminal Law”).
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