China's New Measures for Untrustworthy Entities

China State Administration of Taxation (“SAT”) announced on 31 December 2021 the “Administrative Measures for the Information Disclosure of Major Tax Offenses and Untrustworthy Entities” (SAT Order [2021] No. 54, “SAT Order 54”).


SAT Order 54 has been issued following several opinions from central authorities about the construction of a long-term mechanism based on social credit and the improvement of the restriction system for untrustworthy entities, companies, and individuals; it provides administrative measures for the public disclosure of the major tax offences and the entities that shall be considered untrustworthy.


Untrustworthy entities refer to taxpayers, withholding agents, and other tax-related parties discovered to have committed significant tax offences, such as having unpaid taxes of over 1 million RMB (or more than 10% of the total tax payable in the current year) by means of forging, altering, concealing, or destroying accounting books, and vouchers, and refusing or filing false tax returns. The category also includes those defrauding export VAT refunds or escaping from tax authorities before completing tax inspections. In addition, the definition of major tax offence also covers the improper issuance of VAT invoices:

  • false issuance of special VAT invoices or other invoices with the purpose to obtain export VAT refund or tax deductions,

  • false issuance of more than 100 general VAT invoices (or with a value exceeding 4 million RMB); and

  • issuance of invoices without authorization or by forging invoice seals.

Tax authorities shall notify the involved entity about the procedure and, once the entity is determined as untrustworthy, publicly disclose the tax offence information for three years. Companies determined as untrustworthy entities will be assigned a D-score tax credit and treated by authorities accordingly.


To encourage untrustworthy entities to take the initiative in amending illegal actions, SAT Order 54 also stipulates that the public information about the untrustworthiness can be removed in the following three cases:

  • the unpaid taxes and relevant late payment fees and fines are paid;

  • the entity goes bankrupt, and the tax authorities receive compensation in accordance with the law; or

  • during major natural disasters, public health, social security, and other emergencies, the entity makes outstanding contributions in participating to rescues, prevention and control, or major project construction.

The above provision will not apply to entities that after being determined as untrustworthy, are subject to administrative penalties for tax evasion, false invoicing, or other violations; or that are determined to be untrustworthy entities more than twice within five years.


SAT Order 54 will be implemented starting from 1 February 2022, replacing the previous SAT Announcement “On Issuing the Measures on the Release of Information About Major Tax Offense Cases” (“SAT Announcement [2018] No. 54).


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