CHINA Law and Practice Contributed by: Mei Zhang, DaHui Lawyers
• Article 77 of the PRC Tax Collection and Admin - istration Law stipulates that a tax authority will transfer all cases involving a tax offence suspected of constituting a crime to the judicial system for criminal prosecution. • Article 3 of the Regulations on the Transfer of Suspected Criminal Cases by Administrative Law Enforcement Agencies stipulates that if an adminis - trative law enforcement agency suspects the com - mission of a crime when investigating illegal acts, it must transfer the case to a public security organ. • Article 48 of the Regulations on the Procedures for Handling Tax Inspection Cases stipulates that for tax violations suspected of constituting a crime, the inspection bureau will, after approval by the director of the tax bureau, transfer the case to the public security organ along with supporting evi - dence. Administrative-Judicial Co-Ordination Mechanism Currently, tax and judicial authorities primarily com - municate through the “normalised collaboration mechanism”, which ensures the dual connection between administrative law enforcement and crimi - nal proceedings. Regarding the connection of legal procedures, exist - ing regulations have already introduced some policies to standardise the process. For example, according to the Regulations on the Transfer of Suspected Crimi - nal Cases by Administrative Law Enforcement Agen - cies, the principal leading official or the leading official in charge of the work of an administrative organ for law enforcement must plan and decide on whether to approve the transfer or not within three days of receipt of the report. Should they decide to approve the transfer, they must transfer the case to the public security organ within 24 hours; if they decide not to approve the transfer, they must record the reason in the file. However, at the same time, there are still certain con - flicts and ambiguities among the current administrative laws, regulations, rules, and normative documents. In practice, there are situations where tax authorities impose administrative penalties first and then transfer the case to the public security organs, and there are also situations where the case is transferred to the
public security organs before tax administrative penal - ties have been imposed. Comprehensive Collaboration Framework A multi-layered co-ordination system has been estab - lished, comprising the following: • Joint consultation mechanisms – Local govern - ments have instituted regular joint meetings involving tax authorities, public security bureaus, procuratorates and the courts to address complex issues such as legal characterisation of major or novel cases (including cross-border matters) and evidentiary standards. • Information sharing and joint enforcement– The authorities exchange data through dedicated information platforms and conduct co-ordinated investigations and evidence collection for major cases, enhancing enforcement effectiveness. • Oversight and accountability – Higher-level authori - ties supervise compliance with transfer obligations, preventing failures to transfer, the substitution of administrative fines for criminal penalties, and the obstruction of inter-agency co-ordination. 7. Administrative Co-Operation 7.1 Legal Framework for Administrative Co- Operation In China, the legal basis for international tax co-opera - tion is grounded in domestic laws, international treaty standards and bilateral agreements. Domestic Law: the Legal Framework for Operational Procedures • Both the PRC CIT Law and PRC Tax Collection and Administration Law stipulate that if a cross-border tax treaty or agreement between the PRC and a foreign country contains provisions different from those of domestic law, the provisions of the inter - national treaty or agreement will prevail. • The Administrative Measures of Special Tax Inves - tigation and Adjustment and Mutual Agreement Procedure,which are enacted in accordance with the PRC CIT Law and the PRC Tax Collection and Administration Law, reconcile domestic tax law with international treaty obligations, by incorporat -
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