Editor's Note: The filing and review of laws and regulations is an important system for maintaining the unity of the rule of law in the country.2024 On August 30, the State Council promulgated the newly revised Regulations on the Filing and Review of Laws and Regulations (hereinafter referred to as the “Regulations”), which put forward new requirements for the filing and review and supervision of the filing and review of local laws and regulations, departmental rules and regulations of local governments. Currently, the form of tax laws is heavily represented by departmental rules, normative documents and local regulations, and it will be difficult to change them for a long period of time in the future, and the Regulations will undoubtedly have a direct impact on the tax legislation. In addition, the local financial subsidy policy will face a more severe filing review situation, and the industries relying on higher financial subsidies will also be affected.

I. What are the changes in the Regulations compared to the Regulations on Filing of Laws and Regulations?

(i) the main content of the revised Regulations

As early as December 2001, the State Council promulgated the Regulations on the Filing of Laws and Regulations, since then, with the two amendments to the Legislative Law and the special decision of the Standing Committee of the National People's Congress to improve and strengthen the filing and review system, the old regulations can no longer meet the requirements of filing and review work in the new era. For this reason, the Ministry of Justice, after a long period of repeated research, formed the Regulations (Draft), which was submitted to the State Council executive meeting for consideration on August 19, 2024, and on August 30, 2024, Premier Li Qiang signed the State Council Decree to formally promulgate the Regulations, which were amended as follows:

(ii) Main highlights of the amendments to the Regulations

Judging from the above amendments, there are four major highlights in this revision:

First, the Regulations are fully harmonized with the Legislative Law.

1.The expression “larger cities” is unified to “cities and autonomous prefectures with districts”, which is consistent with the adjustments made to the main body of the formulation of local laws and regulations and local government regulations in the Legislative Law; the expression “legal system organs of the State Council” is unified to “legal system organs of the State Council”, which is consistent with the adjustments made to the main body of the formulation of local laws and regulations in the Legislative Law. The expression “the State Council's legal system institutions” is adjusted to “the State Council's record review organization”, and the “Legislative Law” clearly by the State Council's record review organization on behalf of the State Council to exercise the right to review the record is consistent.

2.“Shanghai Pudong New Area regulations”, “Hainan Free Trade Port regulations”, “regulations formulated by the institutions provided for by law” into the scope of record review and supervision, with the Legislative Law Provisions coincide with the provisions of the Legislative Law.

3. The new methods of active review and special review are more diversified and scientific, in line with the Legislative Law, which makes it clear that the State Council's record-examination agencies can take the initiative and be proactive in carrying out active review and special review.

4. refine the content of the Legislative Law to improve the record review linkage mechanism, clear in the dual filing linkage, transfer of processing, consulting, consultation and coordination, information sharing, capacity enhancement and other aspects of strengthening collaboration and cooperation with other organs of the filing review work agencies, to enhance the coordination of the filing review system of great significance.

Second, the new record review principles.

1. the requirement to adhere to the people-centered filing review principle, specifically expressed in the “Regulations” new Article 15, the State Council filing review agencies review regulations and rules, through symposiums, on-site research and other ways to listen to social organizations, stakeholders and other subjects, emphasizing that the filing review to carry out the whole process of the people's concept of democracy, and to play the system of safeguarding the legitimate rights and interests of the people. The principle is also reflected in the Law of the People's Republic of China. In addition, this principle is also embodied in Article 12 of the Regulations, citizens who believe that local regulations, rules and normative documents violate the supreme law, can submit a written review proposal to the State Council, the State Council record review work agencies to study and deal with, that is, the review of regulations not only occurs in the legislative process, in the legislation is completed, at any time, the citizens can take the initiative to propose to start the review process.

2. the implementation of the “must have pieces, there are prepared to review, there are errors must be corrected,” the record review work principle, “three must” principle can be traced back to 2004, the State Council issued “on the implementation of the implementation of <comprehensively promote the implementation of the Outline of the Administration in accordance with the law> implementation of the opinion, the opinion The Legal Affairs Office is required to “improve the supervision system and mechanism for regulations and normative documents, and make sure that all documents must be prepared, all preparations must be examined, and all mistakes must be corrected”, and subsequently, the Decision of the Standing Committee of the National People's Congress on Improving and Strengthening the System of Filing and Examination and the Provisions for the Filing and Examination of Regulations and Normative Documents of the Communist Party of China are all incorporated into the “Three Necessities” principle. The “three must” principle, the “Regulations” will be “three must” principle is clear as one of the principles of the record review work, help to strengthen the review function after the record, to protect the rule of law to provide a solid and powerful basis for the unity of the legislation to put an end to the arbitrariness of the legislation.

Thirdly, the content of the review of regulations and rules for the record has been expanded.

1. new political review matters. The Regulations explicitly review the content of regulations and rules “whether they are in line with the major decisions and deployments of the Party Central Committee and the State Council and the direction of major national reforms”.

2. increase the appropriateness of the review. The Regulations also incorporate into the review of regulations “whether the measures provided for in the regulations are in line with the legislative purpose and the actual situation”.

Fourth, improve the way of correcting errors in the record review.

1. the new laws and regulations referred to the NPC Standing Committee of the Legal Affairs Commission to study and deal with the correction of errors. In case of conflict between local regulations and administrative regulations, before the State Council submits them to the Standing Committee of the National People's Congress for processing, the Legal Affairs Committee of the Standing Committee of the National People's Congress will study and process them, which is conducive to improving the efficiency of error correction.

2. new communication with the enacting authority, put forward a written review of the regulations of the way to correct errors. In the case of regulations that should be corrected, the State Council's record-examining organization shall communicate with the enacting authority and put forward written examination opinions to respect the views of the enacting authority, and avoid adopting a rough and simple way of correcting errors.

II. What impact will the Regulations have on the tax law system?

(i) Internal conflicts of tax laws and norms are expected to be solved.

In the system of tax laws and norms, there are many complicated regulations and normative documents formulated by the Ministry of Finance and the State Administration of Taxation, and there are conflicts between some of the regulations and normative documents and tax laws and regulations, for example:

1. Costs and expenditures comply with the three requirements of the EIT but cannot be deducted before tax due to obtaining non-compliant vouchers

Article 8 of the Enterprise Income Tax Law provides that “Reasonable expenditures actually incurred by an enterprise in connection with the acquisition of income, including costs, expenses, taxes, losses and other expenditures, shall be allowed to be deducted in calculating taxable income”, and Article 27 of the Regulations for the Implementation of the Enterprise Income Tax Law provides that ” Relevant expenditures referred to in Article 8 of the Enterprise Income Tax Law refer to expenditures directly related to the acquisition of income. Reasonable expenditures referred to in Article 8 of the Enterprise Income Tax Law refer to the necessary and normal expenditures that are in line with the routine of production and business activities and should be recognized in the profit and loss of the current period or in the cost of the relevant assets”. Accordingly, the requirement of pre-tax deduction for enterprise income tax meets the requirements of authenticity, reasonableness and relevance, i.e., the expenditure of the enterprise really occurs, is fully consistent with the actual amount of expenditure, the expenditure is related to the income obtained by the enterprise and is reasonable, and the enterprise enjoys the right of pre-tax deduction in accordance with the law.

However, Article 6 of the Circular of the State Administration of Taxation on the Issuance of <Circular on Several Specific Measures for Further Strengthening Tax Levy and Administration> (Guoshifa [2009] No. 114) stipulates that “...... legal and valid vouchers not obtained in accordance with the regulations shall not be deducted before tax”, and that the “Enterprise Measures for the Administration of Vouchers for Pre-tax Deduction of Income Tax”, Article 12 further stipulates that ”Enterprises obtaining invoices that are not in conformity with the regulations such as privately printed, forged, altered, voided, illegally obtained by the invoicing party, falsely issued, and filled out in an irregular manner, as well as obtaining other external vouchers not in conformity with the national laws and regulations and other relevant provisions shall not be deducted as vouchers for pre-tax deduction “. Accordingly, the normative documents to the taxpayer to obtain pre-tax deduction vouchers need to be legally compliant obligations, in practice, once the enterprise to obtain the invoice is characterized as false and in the prescribed period can not be exchanged for invoices, even if the enterprise expenditures really occur and reasonable, part of the tax authorities will also be used to require enterprises to make up for this normative documents to pay the enterprise income tax.

In fact, the superseding law “Enterprise Income Tax Law” “Regulations for the Implementation of the Enterprise Income Tax Law” emphasizes the real, reasonable and relevant pre-tax deductions, and does not make requirements for the legitimacy of pre-tax deduction vouchers, while the two aforementioned normative provisions of the enterprise to obtain non-compliant and illegal vouchers shall not be deducted before the tax, detracting from the taxpayer's right to pre-tax deductions, increasing the taxpayer's obligations. In practice, there have been a large number of cases that the deduction of vouchers management approach contradicts the supreme law, for example, Urumqi High-tech Zone (New Urban District) Tax Bureau that Urumqi Jufeng Hengtong Construction Engineering Co., Ltd. although the acquisition of false invoices for the cost, but the business of the real incidence of the pre-tax deduction; and then the Intermediate Court of Tangshan and the Lubei District Court of Tangshan that the use of false invoices for the salary expenditure, although its behavior is illegal, but the salary expenditure belongs to the Objective existence of the cost, at the same time can not be illegal to the source of funds to negate the reasonableness of the expenditure, so the use of false invoices to arbitrage the salary expenditure can be deducted before tax.

2.The pure trade behavior of refined oil production enterprises is subject to consumption tax.

Article 1 of the Provisional Regulations on Consumption Tax stipulates that the production, commissioned processing and import of taxable consumer goods is a taxable act of consumption tax, and the units and individuals who are subject to consumption tax are the taxpayers of consumption tax. It can be seen that the trade behavior of purchasing taxable consumer goods and then selling them to the outside world does not belong to the taxable behavior of consumption tax and is not required to pay consumption tax.

However, Article 2 of the Circular of the State Administration of Taxation on Certain Taxation Issues of Consumption Tax (GuoShuiFa [1997] No. 84) stipulates that, “For industrial enterprises which have self-produced taxable consumer goods and at the same time purchase the same taxable consumer goods as self-produced taxable consumer goods for sale, the purchased taxable consumer goods sold by the enterprises shall be subject to consumption tax, and at the same time the taxed amount of purchased taxable consumer goods can be deducted. At the same time, the tax paid on the purchased taxable consumer goods can be deducted. The above purchased taxable consumer goods for which deduction of tax paid is allowed are limited to tobacco, wine, alcohol, cosmetics, skin care and hair care products, jewelry and jade, firecrackers and fireworks, automobile tires and motorcycles”. Accordingly, if a refined oil production enterprise simultaneously engages in self-produced refined oil and the trade behavior of selling purchased refined oil, the trade behavior is regarded as a taxable act of consumption tax, and the refined oil production enterprise is required to pay consumption tax on the sale of purchased refined oil, which can be seen as a clear breakthrough of the Provisional Regulations on Consumption Tax by this normative document, and also violates the basic principle of the one-time levy of consumption tax.

According to Article 12 of the Regulations, if enterprises, institutions or citizens think that other generally binding administrative decisions and orders issued by the departments of the State Council contradict the laws and administrative regulations, they may submit a written proposal for review to the State Council, which will be studied and dealt with in accordance with the prescribed procedures. The State Council put forward in writing a review proposal, the State Council record review working body to study and put forward processing opinions, in accordance with the provisions of the procedure for handling” provisions, citizens request a review of the object not only includes regulations and rules, but also includes universally binding administrative decisions and orders, the tax normative documents, such as taxpayers believe that contradicts the supreme law, can also be submitted to the State Council in writing to review the proposal. For tax normative documents, if taxpayers believe that they are in conflict with the higher law, they can also submit review proposals to the State Council in writing.

(ii) Disputes between tax legal norms and external legal norms are expected to be resolved

The amendment of the Regulations also helps to promote the resolution of disputes between tax legal norms and external legal norms. For example:

According to Paragraph 2 of Article 33 of the Rules for Administrative Review of Taxation, “Where an applicant applies for administrative review in accordance with the provisions of the preceding paragraph, the applicant must first pay or pay off the tax and the late payment fee in accordance with the amount of tax and the time limit determined by the tax authorities in accordance with the laws and regulations or provide the corresponding guarantee before the payment of the tax and the late payment fee is made or the guarantee provided is confirmed within 60 days from the date of confirmation by the tax authorities that have made the specific administrative act. The application for administrative reconsideration can only be filed within 60 days after the payment of the tax and late payment or after the guarantee provided has been confirmed by the tax authority that has issued the specific administrative act”. The Notice of Tax Matters usually requires the taxpayer to handle the tax reimbursement matters within 15 or 30 days from the date of receipt of the notice. In practice, the taxpayer is difficult to make the tax reimbursement in accordance with the deadline stipulated by the tax authorities due to objective reasons such as raising funds, and some of the tax authorities consider that the taxpayer fails to pay the tax or provide the guarantee in accordance with the deadline and the administrative reconsideration proposed by the taxpayer is inadmissible.

However, according to Paragraph 1 of Article 20 of the Administrative Reconsideration Law, “Citizens, legal persons or other organizations who believe that an administrative act infringes on their lawful rights and interests may file an application for administrative reconsideration within sixty days from the date when they know or should have known of the administrative act; however, except for those cases in which the deadline for filing an application stipulated by the law is more than sixty days,” therefore, the administrative Therefore, the relative can apply for administrative reconsideration as long as he pays the tax and late fee or provides guarantee within 60 days from the date of receipt of the notice. Disputes often arise between tax enterprises on how to understand and apply the Tax Administrative Review Rules and the Administrative Review Law. If the Tax Administrative Review Rules are applied, the taxpayers in the aforementioned cases will lose the right to review; if the Administrative Review Law is applied, the taxpayers still enjoy the right to review.

The Regulations have added three major principles of filing review, which will practice the people-centered concept at the level of the filing review system, and for the conflict between the subordinate law and the superior law, there is an opportunity to promote legislative adjustments in the form of case recommendations in the future to further resolve the conflict between the tax legal norms and other external legal norms.

III. the Regulations will have what impact on the industry?

Since this year, audit, tax, development and reform commission and other departments issued a letter requiring strict investigation of irregular financial rebates, regulations and rules for the record review system revised, for the local financial rebate policy cleanup provides a path. The business model relying on financial rebates is facing great uncertainty, and how to survive and develop in the future has become a problem for the industry, which is mainly highlighted in the flexible labor industry, logistics and transportation industry, and renewable resources industry. Specifically:

For the flexible labor industry, flexible labor platforms, as a bridge connecting labor-using enterprises and flexible workers, have shown a booming trend and a steady growth in market size, which has greatly contributed to the development of the industry. Most of the flexible labor platforms rely on financial rebates from local governments to achieve profitability. Currently, flexible labor platforms, whether they adopt the intermediary aggregation business model or the service resale business model, generally need to issue 6% VAT invoices to labor-using enterprises, and as far as VAT is concerned, flexible labor platforms need to bear 6% VAT and 0.72% urban construction surtax, which means that they can only charge more than 6.72% of the VAT on the VAT to labor-using enterprises. This means that it can only realize profit if it charges more than 6.72% service fee to the enterprises, but in reality, the service fee pricing in the market is generally below 6%, and once the flexible labor platform loses the financial rebate, it will face the predicament of loss.

For the logistics and transportation industry, the network freight platform from the beginning of the birth of the responsibility to solve the problem of individual drivers to provide transport services but do not want to invoice for the consignor enterprise, it can be registered for the platform members of the driver invoicing, objectively played the effect of the aggregation of tax sources. Local provinces have also introduced various forms of policies such as government incentive funds to attract freight platform enterprises, support its development, in fact, making the network freight platform in the external 9% of the transport invoice but charges 5-6% service fee can still be profitable, once the financial return policy is cleaned up, network freight platform enterprises will face the same problem with the flexible labor platform.

For the renewable resources industry, for a long time, the renewable resources recycling enterprises are subject to the source invoice dilemma, and they usually need to rely on the local rebate policy to reduce the tax burden, even though the current reverse invoicing policy has solved the problem of the source invoice, but it can only reverse the issuance of 1% or 3% VAT invoices, and the reality is that the waste enterprises usually ask the recycling enterprises to issue 13% invoices, which means that the recycling enterprises This means that recycling enterprises still need to rely on financial rebates to reduce the cost of tax burden. After canceling the financial rebates, recycling enterprises have to consider how to reshape their business model.

Currently, governments around the world are working hard to adjust the regulations on financial rebates and explore and reformulate rules and regulations to support the development of flexible labor, logistics and transportation, and the recycling industry. The Ministry of Justice, in its reply to a reporter's question on the Regulations, emphasized that in the future, it will focus on issues affecting the national unified market and damaging the business environment, strengthen the filing review of rules and regulations in key areas such as fair competition and research on the issues, and make efforts to eliminate local protection and market segmentation, and help build a national unified market and optimize the business environment, so it can be foreseen that in the future, the introduction of rules and regulations by the local governments involving subsidies and other support for the industry will face a tougher challenge. It is foreseeable that local governments will face a more severe filing review situation in the future when they introduce laws and regulations to support the development of the industry, such as subsidies. Not only that, the record review organization can also play a proactive role, to take the “Regulations” new initiative to review, special review and joint review and other ways to review the rules and regulations related to awards and subsidies, relying on the government to support the development of flexible labor industry, logistics and transportation industry, renewable resources industry will face the record review of the major challenges and pressures brought about by the review.