Editor's Note: In the process of production and operation, enterprises may have difficulties in cash flow, or due to improper tax treatment, etc., and under the current regulatory model of "double random, one open", the past tax non-compliance of enterprises may easily lead to the risk of tax reimbursement. Article 203 of the Criminal Law provides for the crime of evading the recovery of tax arrears, which is a "crime of refusing to execute" in the field of taxation. In the state of tax arrears, it is worth paying attention to what behaviors of taxpayers may face the accusation of the crime of evading the recovery of tax arrears. In March this year, the two high judicial interpretations for the first time clearly defined the crime of evading the recovery of tax debts, providing a legal basis for the application of the crime, activating this long-dormant crime, and its related elements of the crime, the circumstances of the crime are worth further discussion. This paper analyzes the boundary between the crime and non-crime of tax-defaulting enterprises evading the recovery of tax arrears in conjunction with cases, with a view to providing reference for enterprises to prevent and respond to criminal risks.

I. The judicial interpretations of the two high courts clarify for the first time the criminal behavior of the crime of evading the recovery of tax arrears and fill in the gaps of the crime.

In April 1992, the Standing Committee of the National People's Congress issued the Supplementary Provisions on Punishment of Tax Evasion and Tax Resistance Crimes (Presidential Decree No. 61 of 1992), which clarified for the first time the concept of the crime of evading the collection of tax arrears and its penalties, and the Criminal Law as amended in 1997 absorbed the aforementioned provisions and added new Article 203 on the crime of evading the collection of tax arrears to clarify the concept of the crime of evading the collection of tax arrears in the form of a separate piece of criminal legislation and defined the criminal criteria and statutory penalties of the crime of evading the collection of tax arrears. It clarifies the concept of the crime of evading the collection of tax debts and defines the criminal standard and legal penalty for the crime of evading the collection of tax debts, and the provisions of this article have been used until now. However, due to the simplicity of the above provisions and the lack of relevant judicial interpretations to further clarify what is meant by "adopting the means of transferring or concealing property", the application of this crime in practice is relatively rare, and there is a lack of relevant cases.

In March this year, the Supreme People's Court and the Supreme People's Procuratorate issued the Interpretation of Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Tax Collection and Administration (Fa Shi [2024] No. 4, hereinafter referred to as the "Two High Judicial Interpretations"), for the first time on the crime of evading the collection of unpaid taxes, what is meant by "adopting the means of transferring or concealing property". The two High Court Judicial Interpretations have further explained what is meant by "adopting the means of transferring or concealing property" in the crime of tax evasion, clarified the crime of tax evasion by way of positive enumeration and underpinning provisions, and activated the application of the crime of tax evasion by means of judicial interpretations, which provided a clear basis of adjudication for the judiciary in investigating and dealing with this kind of cases.

The judicial interpretations of the two high courts have filled the blank of the crime of tax evasion and recovery and activated the vitality of the judicial application of the crime. Enterprises should pay full attention to the related risks and pay attention to which behaviors of the enterprises under the state of tax arrears are prone to arouse the suspicion of tax evasion and recovery. After searching the cases related to the crime of tax evasion, the author found that the persons involved in the case mostly transferred or hid the property by means of unauthorized disposal of assets seized by the tax authorities, transferring the funds collected from the company's public account to the personal account, changing the registered address and the information of the legal representative and failing to notify the tax authorities, etc. The crime and the misdemeanor of this crime are the same as the crime of tax evasion. In the discussion of crime and non-crime of this crime, whether the case-handling authority needs to examine the legality of the fact of tax arrears, whether the tax authorities need to exhaust the means of recovery of tax enterprises, etc., there is a big controversy, the following author will be combined with the relevant judicial cases to analyze the three kinds of reasons for the crime of avoiding the recovery of tax arrears for the reference of the readers.

II. The three causes of the crime of evading the collection of tax arrears

(I) The existence of the fact of tax arrears is the prerequisite for the crime of evading the recovery of tax arrears.

Article 203 of the Criminal Law makes it clear that the prerequisite for the crime of evading the recovery of tax debts is the existence of the fact that the taxpayer owes the tax due. Then, what is "tax arrears", the "Measures for Announcement of Tax Arrears (for Trial Implementation)" has made clearer provisions: tax arrears refers to the taxpayers exceeding the time limit stipulated by tax laws and administrative regulations or the taxpayers exceeding the time limit for tax payment determined by the tax authorities in accordance with the tax laws and administrative regulations. (1) the taxpayer has not paid the tax within the deadline for tax payment after the tax declaration has been made; (2) the taxpayer has not paid the tax within the deadline for tax payment after the deadline for tax payment has expired upon approval of the extension of tax payment; (3) the taxpayer has not paid the tax within the deadline for tax payment after the tax inspection has determined the amount of the taxpayer's compensable tax; (4) the tax authorities have approved the amount of the taxpayer's taxable amount in accordance with Article 27 and Article 35 of the Taxation Levy and Administration Law; and the taxpayer has not paid the tax within the deadline for tax payment. , the taxpayer has not paid the tax within the tax payment deadline; (5) other taxes of the taxpayer that have not been paid within the tax payment deadline.

In practice, tax arrears are generally accompanied by specific tax collection behavior of tax authorities, such as taxpayers obtaining non-compliant invoices for pre-tax deduction, and in the case where it is impossible to reissue and exchange the invoices, the tax bureau requires the enterprise to adjust the payment of enterprise income tax, and the enterprise forms tax arrears due to the failure to make timely payment. In the administrative procedures, the enterprise may not be able to initiate the remedial procedures such as reconsideration and litigation due to the failure to settle the tax due to financial difficulties, or the fact of tax arrears still exists if the reconsideration authority or the court refuses to support the relevant remedial procedure after initiating the relevant remedial procedure. If the enterprise enters into the charge of the crime of evading recovery of tax arrears due to the situation of transferring or concealing property, it is controversial as to whether the case-handling authority needs to further review the legality of the specific administrative act that has led to the fact of tax arrears. In the author's opinion, the existence of the fact of tax arrears is the premise of the crime of evading the recovery of tax arrears, and the relevant case-handling authorities should review the legality and reasonableness of the specific administrative acts, for example, whether the tax collection acts made by the tax authorities are factually clear, sufficiently substantiated, and correctly applied by the law, and whether they are in line with the provisions of the recovery period, etc. By reviewing whether the "fact of tax arrears" exists or not, it can only be reviewed if it is not. By examining the existence or non-existence of "tax arrears fact", it is possible to further discuss whether it constitutes the crime of evading the recovery of tax arrears.

The above viewpoints have also been verified in judicial practice. A judgment of a district court on the crime of evading recovery of tax arrears shows that "the case should be examined to see whether there is any tax payable by a certain company. Although the administrative processing decision issued by the tax authority has determined that a company should pay back taxes, the administrative processing decision should be regarded as one of the evidences proving the facts of the case, and whether there is any tax payable by a company should be examined and judged by combining the relevant evidences of the whole case and in accordance with the relevant provisions of the tax law". Therefore, the case-handling authorities shall examine whether the subject involved in the case has the fact of tax arrears, and if there is no tax arrears, it does not conform to the premise of the crime of evading the recovery of tax arrears and does not constitute the crime of evading the recovery of tax arrears.

(II) The tax authorities need to take full administrative measures authorized by law to recover tax debts.

(1) The tax law grants the tax authorities the right to enforce, exercise subrogation and revocation, etc. to recover taxes in arrears.

In the case of taxpayers defaulting on tax payment, the Tax Collection and Administration Law stipulates that the tax authorities may take tax preservation measures or compulsory execution measures for the tax arrears. For the taxpayers defaulting on tax payment, if the taxpayers are negligent in exercising the due claims, or give up the due claims, transfer the property without compensation, or transfer the property at an obviously unreasonably low price and the transferee is aware of the situation, which will cause damages to the state tax, the tax authorities can also Exercise the right of subrogation and right of withdrawal.

Is the tax authority required to exhaust all means to recover the tax?

From the constituent elements of the crime of evading recovery of unpaid taxes, the objective result of the crime is that "the tax authorities are unable to recover the unpaid taxes in the amount of ......", and there is a controversy as to what is meant by "the unpaid taxes that the tax authorities are unable to recover". There is a controversy over what constitutes "tax arrears that cannot be recovered by the tax authorities". There is a view that constituting the crime of evading the recovery of tax arrears does not require the tax authorities to "exhaust all means" to recover the tax arrears, and the means of recovery of the tax authorities stipulated in the Law on Administration of Tax Collection is the competence granted by the law to the tax authorities, and the tax authorities can choose to adopt what kind of collection measures according to the actual situation, and the crime does not require the tax authorities to "exhaust all means" to recover the tax arrears. The offense does not require the tax authorities to "exhaust the means" to recover the tax debts and fail to do so. In the author's opinion, this crime adopts the amount of sentencing standards, and the amount of tax arrears that the tax authorities are unable to recover is directly related to the determination of whether to meet the prosecution standard and the sentence, if the tax authorities do not exhaust the means of recovery, it is impossible to measure and calculate how much taxpayers' tax arrears that the tax authorities are unable to recover, and there is no way to determine whether to meet the prosecution standard and how to determine the penalty, so the tax authorities need to fully take the administrative measures authorized by law to recover the tax arrears. Therefore, the tax authorities need to fully take the administrative measures granted by the law to recover the unpaid tax is a constituent element of this offense.

The judgment of a middle court also supported the above viewpoint, "the public prosecution accused Zhang Moumou of the crime of evading the collection of tax debts, after investigation, because the evidence provided by the public prosecution could not fully confirm that the tax authorities had fully taken all the measures given by the law, which made it impossible to collect the unpaid taxes. Therefore, this charge is not supported." "It was found that the tax authorities did not take tax preservation measures or enforcement measures on the accounts and properties of a company in accordance with the law after issuing a Notice Ordering the Payment of Taxes by a Time Limit. The appellant Zhang Moumou was found guilty of the crime of evading the collection of tax arrears, lack of constitutive elements stipulated in the law. Therefore, the reasons for this protest are not supported."

In addition, there is another pair of judgment on how to determine the amount of the crime of evading the recovery of tax arrears can also support the above point of view that the tax authorities should be sufficient to take means of recovery, the judgment of a court shows that, "the State Administration of Taxation of a municipal tax bureau inquired about the defendant's unit of the account, the balance of 1,130.12 yuan, the tax authorities can be withheld from the amount of money for payment of tax arrears, the tax authorities did not Withholding, so the amount does not belong to the tax authorities can not recover the tax, should not be calculated as the amount of the crime. The Court corrects the Public Prosecution's allegation that the defendant unit evaded the recovery of $52,264.71 in unpaid taxes, and determines that the amount is $46,383.25."

(III) The act of transferring assets is not necessarily a crime, and it is also necessary to examine whether the subjective behavior of the perpetrator has the intention of avoiding payment of tax arrears.

The judicial interpretations of the two high courts have clearly stipulated five kinds of means to evade payment of tax arrears. In the author's opinion, from the principle of subjective-objective consistency, the above means is an important criterion for determining whether the taxpayer has the intention of evading payment of tax arrears rather than the only criterion. If there is evidence proving that the taxpayer has committed the above acts, but it is based on other reasonable reasons rather than evading the tax authorities to recover the tax and failing to fulfill the tax obligations, the taxpayer cannot be recognized as evading the recovery of tax debts. Judges of the Supreme Court held a similar view in the article "Understanding and Application of the "Two High Courts" <Interpretation and Application of Several Issues Concerning the Application of Law in Handling Criminal Cases of Hazardous Tax Collection and Management>", which reads, "Understanding of the manifestation of the means stipulated in this article of the Interpretation should be limited to the subjectively being for the purpose of Evading the tax authorities to recover the money".

In practice, some courts have also held that subjectively having the intention to evade the recovery of tax arrears is one of the constituent elements of the crime. For example, the non-indictment letter of a procuratorate showed that the public security authorities accused Zhang, the person in charge of a company, of authorizing his employees not to account for the business income belonging to the company and transferring the funds to his personal account in case of tax arrears. Procuratorate through combing Zhang someone bank water, employee water and company operations related books of information, found that the company is due to debt disputes by creditors sued to the court, the company account was frozen by the court, Zhang free to arrange for the company's funds to pay employee wages, engineering and repayment of the company's borrowings, the company's income will be transferred to a personal account to be used, the relevant evidence of the funds flow can be proved that Zhang will be transferred to their own The relevant fund flow evidence can prove that Zhang will transfer to his personal account of the company's income is used for the company's operations and repayment of company debts, no transfer, conceal the company's property for the purpose of tax avoidance, and Zhang has arranged for the employees to pay some of the outstanding taxes. The Procuratorate examined that the evidence in the case was not sufficient to conclude that Zhang's subjective purpose of transferring the company's property to his personal account was to avoid payment of tax arrears, and that the subjective elements constituting the crime of tax arrears evasion were unknown, and that the case was not in line with the conditions for prosecution.

III. How should enterprises prevent the risk of tax evasion?

The above judicial precedents have enumerated the three types of criminal circumstances of tax evasion in practice. Enterprises should pay attention to tax compliance management in daily operation, respond appropriately when tax arrears occur, and fully analyze and apply the above circumstances to prevent the risk of criminal liability for the crime of tax evasion and non-payment, specifically:

(I) If there are objections to tax matters, they should communicate with the tax authorities and make statements and defenses in a timely manner to avoid the formation of tax arrears.

Enterprises that have objections to the decision made by the tax authorities to investigate and make up the amount of tax payable should communicate with the tax authorities in a timely manner, and with the help of tax lawyers and other professional forces to assist the enterprises in sorting out the materials, submitting the relevant evidence and the situation description for representation and defense, in order to strive for a good outcome and prevent the formation of tax arrears.

(II) Timely reporting of bank accounts and fulfillment of asset disposal reporting obligations

The Tax Collection and Management Law stipulates that taxpayers shall report the opening of basic deposit accounts and other deposit accounts in banks or other financial institutions to the tax authorities, and taxpayers who fail to fulfill the reporting obligations will face fines, while in the case of tax arrears, taxpayers concealing information on other bank accounts for fund transactions may face the suspicion of concealment and transfer of assets. Therefore, in the state of tax arrears, enterprises using other deposit accounts due to the freezing of bank accounts should take the initiative to report account information to the tax authorities to avoid inducing tax inspections by the tax authorities as well as the illegal characterization of evading the recovery of tax arrears and elevating the risk of criminal charges.

In addition, Article 49 of the Tax Collection and Administration Law stipulates that "taxpayers who owe a large amount of tax shall report to the tax authorities before disposing of their real estate or large assets". According to the Implementing Rules of the Tax Collection and Administration Law, the "larger amount" here refers to more than 50,000 RMB, i.e., taxpayers owing more than 50,000 RMB shall report to the tax authorities before disposing of their real estate or large assets. Therefore, tax-defaulted enterprises should report to the tax authorities in a timely manner if they have relevant asset disposal behaviors in their ongoing business activities.

(III) Actively Responding to the Problem of Tax Arrears, Escaping and Losing Contacts Easily Leads to Criminal Liability for the Crime of Avoiding Recovery of Tax Arrears

One of the "means of transferring or concealing property" stipulated in the Judicial Interpretations of the Two High Commissions is "not fulfilling tax obligations and leaving the supervision of the tax authorities", which is derived from the "Announcement on Issues Relating to the Recognition and Treatment of Value-added Tax Special Invoices Issued by Enterprises that have Fled (Out of Jointness)" (SAT Announcement). This situation is derived from the definition of "fleeing (out-of-connection) enterprises" in the Announcement on Issues Concerning the Determination and Treatment of VAT Special Invoice Issued by Fugitive (Out-of-connection) Enterprises (Announcement of State Administration of Taxation No. 76 of 2016). In practice, some enterprises have fled and lost contact after defaulting on payment of taxes, and do not pay taxes by way of "evasion". In such cases, if the tax authorities are unable to find out the whereabouts of the enterprises and the relevant personnel of the enterprises through on-site investigations, telephone inquiries, verification of handling of tax-related matters, and other means of levy and management, the enterprises will be judged to have fled and lost contact, and the relevant responsible persons may trigger the evasion of recovery of taxes. The responsible person may trigger the risk of criminal liability for the crime of evading recovery of tax debts. Therefore, the author suggests that, in case the enterprise is unable to pay the tax arrears, it can apply to the tax authorities for a tax deferment to extend the period of tax payment, and pay the tax within the deferment period as far as possible, so as to avoid avoid paying the tax arrears by means of fleeing and losing contact with the tax authorities.

(IV) When facing criminal charges, actively communicate with the case-handling authorities in light of the specific circumstances of the case and strive for a good characterization.

When facing the charge of the crime of evading payment of unpaid taxes, enterprises and relevant responsible persons should grasp the "golden period" of criminal defense, timely hire professional lawyers to intervene, fully communicate with the judicial authorities on the crime and non-crime of the case and the circumstances of the sentencing, etc., and analyze the facts of the unpaid taxes in the light of the circumstances of the case to determine whether the facts of the unpaid taxes are substantiated or not, and whether the tax authorities are sufficiently taking administrative measures to recover the unpaid taxes given by the law. Whether the fact of tax arrears is established, whether the tax authorities have taken sufficient administrative measures to recover tax arrears under the law, etc., and strive for the application of the circumstances of the crime, so as to avoid bias in the characterization of the case by judicial authorities.