Tax Inspection Rules in China

Recently, the State Taxation Administration ("STA") has issued the Provisions on the Case Handling Procedures for Tax Inspection (the "Provisions"), which shall come into effect on August 11, 2021.

Compared with the old version, the Provisions make the following amendments:

1. further clarifying the legislative purpose;

In the past judicial practice, some courts did not recognize that the original "Regulations" can be used as a legal basis for judging the legitimacy of inspections. The newly promulgated "Regulations" are issued to the public in the legal form of departmental rules, and will become the statutory reference basis for the people's courts to try administrative litigation cases in the future.

2. improving the aim of legislation;

3. increasing the protection of personal information of administrative counterparts;

4. specifying the requirements for recording the entire process of administrative law enforcement;

Administrative law enforcement agencies are required to record the initiation of administrative law enforcement, investigation and evidence collection, review decisions, delivery and execution, etc., through text, audio and video records, etc., and file them in a comprehensive system to ensure that the entire process of law enforcement can be traced and traceable manage.

5. refining the procedures for extracting electronic data;

Added "To collect and extract electronic data", inspectors should make on-site transcripts, indicating the source, reason, purpose or object of the electronic data, extraction time, location, method, process, storage location of the original storage medium, and storage of electronic data. Sealing of the medium, etc.

6. refining relevant provisions on ensuring the administrative counterparts' right to know and the right to make a statement and defend themselves;

Article 15 Paragraph 2 and Article 20 Paragraph 2 of the "Provisions" require inspectors to inform the inspected object of their rights and obligations when presenting or serving the Tax Inspection Notice, and the inspector shall be subject to the inquiry during the interrogation process. Notice of rights and obligations.

7. incorporating the evidence in the scope of the penalty decision;

Article 44 stipulates that the specific content of the tax administrative penalty decision should include "evidence of tax violations."

8. adding the procedures for the disclosure and withdrawal of tax administrative penalty decisions;

If the public administrative penalty decision is changed, revoked, confirmed as illegal or invalid in accordance with the law, the original administrative penalty decision information shall be withdrawn within 3 working days and the reasons shall be publicly explained.

9. clarifying the deadlines for handling tax inspection cases;

The Inspection Bureau shall make an administrative handling, penalty decision, or conclusion that there is no tax violation within 90 days from the date of filing the case. If the case is complicated and requires an extension, it may be extended for no more than 90 days with the approval of the Director of the Taxation Bureau; special circumstances or force majeure needs to continue. In case of extension, it shall be approved by the deputy director of the taxation bureau at the next higher level, and a reasonable extension period shall be determined.

10. adding provisions on the suspension or postponement of payment of fines;

Article 51 allows "If the parties do have financial difficulties and need to postpone or pay the fine in installments, they may apply to the Inspection Bureau, and the payment may be postponed or paid in installments after approval by the Director of the Taxation Bureau."

11. clarifying the procedures for publicizing notice before implementing tax enforcement;

Article 52 clarifies that “before a compulsory execution decision is made", a reminder document shall be prepared and served to remind the parties to perform their obligations, and to hear the parties’ statements and defense opinions. After a reminder, the parties still fail to perform the administrative decision within the time limit without justified reasons, With the approval of the director of the taxation bureau at or above the county level, compulsory enforcement shall be implemented.

12. improving the working mechanism for re-making the treatment and punishment decisions.

The Regulations clarify that after decisive documents such as tax treatment decisions and tax administrative penalty decisions are served, the inspection bureau may re-issue the decisive document in accordance with the law in any of the following circumstances: (1) The decisive document is revoked by the people's court; (2) Where the decisive document is revoked by the administrative review agency; (3) Where the tax authority believes that it is necessary to modify or revoke the original decisive document; (4) Where it is necessary to modify or revoke the original decisive document in accordance with the law.