Correctly determining the tax recovery period, penalty statute of limitations, and criminal prosecution statute of limitations is of great significance to ensuring that national taxes are fully deposited in accordance with the law, urging tax authorities to actively perform their duties of investigating and dealing with tax violations, and safeguarding the legitimate rights and interests of taxpayers. In practice, the tax authorities and enterprises have different understandings on the identification of the three periods, which leads to disputes between tax authorities and enterprises. This article intends to analyze how to determine the three deadlines one by one from a real case for readers 'reference.

I. Case introduction: Twelve years ago, Enterprise A transferred equity and failed to declare and pay enterprise income tax

i.Basic facts

Recently, a certain tax authority issued a Tax Treatment Decision and a Tax Punishment Decision to Enterprise A. According to the document, in January 2012, Enterprise A transferred the equity held by Enterprise B to Enterprise C, signed the equity transfer contract with the contract amount of RMB 90 million Yuan, and went through the transfer formalities. However, in the equity transfer contract submitted to the industrial and commercial department for changing the industrial and commercial registration information, the contract amount is 9 million yuan. A. The enterprise failed to include the equity transfer payment received of RMB 90 million into its income and declare and pay enterprise income tax, resulting in an underpayment of enterprise income tax of RMB 5 million. In February 2024, the tax authorities filed an investigation on Enterprise A, holding that the transfer of equity by signing a Yin-Yang contract by Enterprise A belongs to one of the tax evasion behaviors stipulated by the two high tax-related judicial interpretations, and caused the consequence of underpayment of enterprise income tax. Therefore, the behavior was characterized as tax evasion, and Enterprise A was recovered for underpayment of tax, overdue fine was imposed, and a fine of 0.5 times of underpayment of tax was imposed. At the same time, the tax authorities intend to transfer Enterprise A to the public security organs and investigate its criminal responsibility for tax evasion.

However, Enterprise A believes that although it has transferred its equity by signing a Yin-Yang contract, it has not declared and paid enterprise income tax all the time, which belongs to the act of failing to declare tax and does not constitute tax evasion. This case has exceeded the longest tax recovery period, and its tax and late payment fine should not be recovered. To say the least, even if it is found to constitute tax evasion, the tax authorities should not punish it because it has exceeded the five-year penalty period. At the same time, Enterprise A also believes that even if it does not pay taxes, late fees and fines, it is suspected of constituting tax evasion crime, because its behavior of evading enterprise income tax has exceeded the time limit for prosecution, even if the tax organ transfers it to the public security organ, the public security organ should not file a case.

ii.The focus of the dispute

According to the views of both tax enterprises, three controversial points of this case can be summarized. The first is whether this case exceeds the tax recovery period; the second is whether this case exceeds the five-year limitation period for punishment; and the third is whether this case exceeds the limitation period for criminal prosecution. This is analysed in detail below.

II. Is the tax recovery period exceeded in this case?

Article 52 of the Law on the Administration of Tax Collection stipulates that "if a taxpayer or withholding agent fails to pay or underpays tax due to the responsibility of the tax authorities, the tax authorities may require the taxpayer or withholding agent to make up the tax within three years, but no late payment fine shall be imposed." Where the tax is not paid or underpaid due to errors in calculation by the taxpayer or withholding agent, the tax authorities may pursue the collection of tax or late payment fine within three years; in special circumstances, the period for pursuing the collection of tax may be extended to five years. For tax evasion, non-payment of tax or tax fraud, the tax authorities shall not be subject to the time limit prescribed in the preceding paragraph in pursuing the unpaid or underpaid tax, overdue fine or tax defrauded." The Reply of the State Administration of Taxation on the Time Limit for the Recovery of Undeclared Taxes (Guo Shui Han [2009] No. 326) stipulates that "Article 52 of the Tax Administration Law stipulates that tax authorities may pursue the unpaid or underpaid taxes, overdue fines or defrauded taxes indefinitely." The circumstances stipulated in Paragraph 2 of Article 64 of the Tax Administration Law where a taxpayer fails to file a tax return and thus fails to pay or underpays the tax payable are not tax evasion, non-payment of tax or tax fraud, and the period for recovery of tax is generally three years in accordance with the spirit stipulated in Article 52 of the Tax Administration Law, and may be extended to five years in special circumstances." The Reply of the State Administration of Taxation on Issues Related to the Time Limit for the Collection of Tax Arrears (Guo Shui Han [2005] No.813) stipulates that "Article 52 of the Tax Administration Law stipulates that if the unpaid or underpaid tax is not discovered within a certain period due to the responsibility of the tax authorities or taxpayers, it will not be recovered beyond this period." The tax authorities shall not be subject to the limitation of the recovery period stipulated in this Article and shall recover the tax indefinitely according to law."

According to this provision, the tax recovery period is divided into three cases. First, if the tax authorities are responsible for underpayment of tax, the tax recovery period shall be three years; second, if the taxpayer or withholding agent makes mistakes in calculation or fails to declare tax, resulting in underpayment of tax, the tax recovery period shall be three or five years; third, if the tax evasion, non-payment, fraud or arrears of tax are involved, the tax recovery period shall be indefinite. Then, does the transfer of equity by the enterprise involved in the case constitute tax evasion by signing a yin and yang contract? In our opinion, in this case, although the enterprise involved in the case signed the Yin-Yang Contract, it did not declare tax on the equity transfer price corresponding to the Yang Contract, but did not declare tax on all the equity price. Therefore, the result of non-payment of enterprise income tax by the enterprise involved in the case was caused by the non-declaration behavior, not caused by the signing of the Yin-Yang Contract. The tax authority determined that Enterprise A constituted tax evasion only by the behavior of signing the Yin-Yang Contract belongs to the applicable law error. However, it should be pointed out that if Enterprise A transfers equity and obtains the equity transfer price, it shall be fully included in the income according to law, and the settlement shall be handled before May 31 of the next year. In this case, Enterprise A collected 90 million yuan of price, which was not listed in the account book, belonging to the behavior of not listing or underlisting income, and because Enterprise A failed to settle this part of income, resulting in underpayment of tax since June 1,2013. According to Article 63 of the Tax Collection Management Law, Enterprise A still constitutes tax evasion. The tax authorities in this case hold that the reasons for Enterprise A constituting tax evasion are improper, but the conclusion is correct, and the underpayment of tax by Enterprise A should still be pursued indefinitely.

III.Is the time limit for punishment exceeded in this case?

Article 36 of the Law on Administrative Punishment stipulates that "if an illegal act is not discovered within two years, no administrative penalty shall be imposed; if it involves the life, health and safety of citizens and has harmful consequences, the above period shall be extended to five years." Unless otherwise provided by law. The time limit prescribed in the preceding paragraph shall be counted from the date on which the illegal act occurs; if the illegal act has a continuous or continuous state, it shall be counted from the date on which the act ends." Article 86 of the Law on the Administration of Tax Collection stipulates that "acts violating tax laws and administrative regulations that should be subject to administrative punishment shall not be subject to administrative punishment if they are not discovered within five years." According to this provision, in the case of tax evasion constituted by Enterprise A, the tax authorities shall punish Enterprise A. However, at the same time, from the date of tax evasion in Enterprise A, if the tax authorities have not found it within five years, they will lose the power to punish. Tax law stipulates five-year limitation of punishment. The legislative principle lies in restricting administrative power and protecting the rights of administrative counterparts. Specifically, for tax authorities, setting up five-year retroactive limitation of punishment can limit the punishment power of tax authorities, urge tax authorities to improve law enforcement efficiency and prevent them from neglecting to perform their duties; for taxpayers, it is beneficial to ensure the stability of basic legal relations and protect the legitimate rights and interests of taxpayers.

In the case of tax violation, how to define "the day of discovery" plays a key role in determining whether the time limit for punishment is exceeded. In the tax field, there is no legal norm defining the "date of discovery". The Law Working Committee of the National People's Congress has replied to the issue of the limitation of punishment for lawyers violating laws and disciplines. According to the "Research Opinions of the Legislative Affairs Committee of the Standing Committee of the National People's Congress on the Letter on the Identification of the Limitation of Administrative Punishment" Two Years Not Found "(Law Working Committee Fu Zi [2004] No.27), that is,"the subject of discovering violations of law and discipline stipulated in the Administrative Punishment Law is the punishment organ or the organ with the power to punish, and the public security, procuratorial, court, discipline inspection and supervision departments and judicial administrative organs are all organs exercising public power... Any of the above organs can be regarded as 'discovery' as long as they initiate investigation, evidence collection and filing procedures for lawyers 'violations of law and discipline;" After the people report is found to be true, the time limit for discovery shall be subject to the reporting time." With reference to this reply opinion, if it is a tax violation case reported by the masses, the date of discovery shall be subject to the reporting time. In other cases, the date of discovery shall be the date on which the tax authority initiates the investigation, evidence collection and filing procedures. In practice, the date on which the tax authority makes the inspection notice shall be regarded as the date of discovery. In this case, the tax authorities started the inspection procedure for this case in February 2024, which exceeded the five-year penalty period, so the tax authorities should not impose administrative penalty on Enterprise A.

IV.Is this case beyond the statute of limitations for criminal prosecution?

Article 87 of the Criminal Law stipulates that a crime will not be prosecuted after the following periods: (1) If the statutory maximum punishment is fixed-term imprisonment of less than five years, five years have passed;(2) If the statutory maximum punishment is fixed-term imprisonment of more than five years but less than ten years, ten years have passed." Article 89 states that "the period of prosecution shall be calculated from the date of the crime." Article 16 of the Criminal Procedure Law stipulates that "criminal responsibility shall not be investigated in any of the following circumstances; if criminal responsibility has been investigated, the case shall be dismissed, or prosecution shall not be initiated, or the trial shall be terminated, or acquittal shall be declared: (2) the limitation period for prosecution of the crime has expired." According to the provisions of the Criminal Law, the sentencing standard of tax evasion crime adopts the legislative mode of "amount + proportion". If the taxpayer evades paying tax more than 100,000 yuan but less than 500,000 yuan, and accounts for more than 10% but less than 30% of the tax payable, the maximum legal penalty is three years, and the five-year limitation of prosecution applies; If the taxpayer evades paying tax more than 500,000 yuan and accounts for more than 30% of the tax payable, the maximum legal penalty is seven years, and the ten-year limitation of prosecution applies. In this case, the amount and proportion of tax evaded by Enterprise A belong to the second sentencing interval, and the limitation of prosecution of ten years shall apply. The tax authorities transferred the case to the public security organs on the date after making the Tax Treatment Decision and Tax Punishment Decision, which exceeded the 10-year limitation period for prosecution. Even if the tax authorities transferred Enterprise A to the public security organs, the public security organs should not file a case.

In addition, a problem worthy of attention in this case is whether it is possible to convert into tax evasion behavior of "non-declaration" if Enterprise A still fails to perform after receiving tax treatment and punishment decision, so as to re-calculate the limitation period of criminal prosecution from the date when Enterprise A refuses to declare? We believe that this view is logically false and cannot be established. According to Article 1 of the Interpretation of the Supreme People's Procuratorate and the Supreme People's Court on Several Issues Concerning the Application of Laws in Handling Criminal Cases Endangering Tax Administration (Fa Shi [2024] No.4),"Taxpayers who have gone through establishment registration with registration organs according to law and fail to declare tax payment due to taxable acts" shall be deemed as "failure to declare tax" as stipulated in Paragraph 1 of Article 201 of the Criminal Law. According to this provision, there are differences in the connotation of "non-declaration" in criminal law and "non-tax declaration" in tax law. The tax law does not clearly stipulate that the failure of a taxpayer who has gone through tax registration to declare tax is a tax evasion act of "refusing to declare after notification". Therefore, if an enterprise fails to declare tax in the tax law, it shall be treated as an illegal act of failing to declare tax in accordance with the provisions of Paragraph 2 of Article 64 of the Tax Collection Administration Law, and tax evasion shall not be directly characterized. However, in criminal law, the behavior of taxpayers who have gone through tax registration is directly characterized as tax evasion behavior of "non-declaration", which is broader than tax law, covering not only tax evasion behavior of "refusing to declare after notification" stipulated in Paragraph 1 of Article 63 of Tax Collection Management Law, but also tax evasion behavior of "non-declaration" stipulated in Paragraph 2 of Article 64 of Tax Collection Management Law (only for taxpayers who have gone through tax registration).

Specifically to this case, since Enterprise A belongs to the taxpayer who has already handled tax registration, it has constituted both tax evasion behavior of "false tax declaration" and tax evasion behavior of "non-declaration" of hidden income since June 1, 2013, and it is impossible to realize the transformation from hidden income behavior to non-declaration behavior in the future. Moreover, Enterprise A has exceeded the criminal prosecution limitation period of ten years until the date of transfer to the public security, so the underpayment of tax has lost its criminal punishment. If it refuses to perform after receiving the punishment decision from the tax authorities, the infringed legal interest is still the underpayment of tax caused by the previous false tax declaration and non-declaration behavior, and the new tax legal interest is not infringed, so the latter refusal to perform does not have independent criminal punishability, and it cannot be considered that the behavior of refusing to perform by Enterprise A constitutes a new criminal fact, nor should the limitation of criminal prosecution be recalculated. The tax authorities can still enforce the execution of enterprise A according to the tax law, but they should not be transferred to the judicial authorities for handling.