Recently, the State Taxation Administration publicly exposed eight consumption tax evasion cases investigated and handled by local tax authorities in recent years, covering sectors such as gold, silver and jewelry, liquor, and refined oil. The total supplementary taxes and fines amounted to nearly 100 million yuan, sending a signal that the state is strengthening tax supervision over consumption tax. Based on these eight cases, this article summarizes the methods used to evade consumption tax obligations and alerts corresponding tax risks for readers’ reference.

Editor’s Note：With the full implementation and in-depth operation of Golden Tax Phase IV, China’s tax administration has achieved a fundamental transformation from tax administration by invoices to tax governance by data, marking a new stage of data-driven tax governance, data penetration, and all-dimensional intelligent supervision. Relying on cross-departmental data interconnection and the collection of all tax-related information, combined with precise risk control models built on big data and artificial intelligence, tax authorities have achieved a leapfrog upgrade in their ability to monitor, verify, and issue early warnings for enterprise tax risks. Tax early warning indicators, as quantitative criteria for risk prompts, serve as the core basis for tax authorities to identify tax-related risks and push risk alerts, and also an important reference for taxpayers to conduct self-inspections and proactively prevent potential tax risks. This paper sorts out the common types of tax early warning indicators in practice, analyzes the causes of tax risks, and provides professional references for taxpayers to carry out tax compliance reviews.

Editor’s Note: When tax authorities conduct tax inspections on enterprises that engage in illegal activities such as off-book business operations and concealed income, they usually adopt the deemed collection method to assess and recover underpaid Corporate Income Tax (CIT) on the enterprises’ off-book income. During the defense and explanation process in response to such inspections, enterprises often have disputes and disagreements with tax authorities over issues including whether off-book income and book-recorded income should be taxed separately or deemed collectively for collection, whether taxable income increased upon tax inspection may be used to offset prior-year losses, and whether annual taxable income after inspection adjustment is eligible for preferential tax treatment for small and micro enterprises. Based on a specific case, this article analyzes these three difficult controversial issues.

Editor's Note: Under China's VAT chain-based tax administration system, once an upstream company absconds, goes missing, or is characterized as having engaged in fraudulent invoicing, the risk readily propagates downstream along the invoice chain. Invoices obtained by downstream recipient companies are frequently classified as abnormal tax deduction vouchers or fraudulent invoices, triggering a cascade of consequences — including reversal of input VAT credits, disallowance of pre-tax deductions for corporate income tax, characterization as tax evasion, and even criminal prosecution. Drawing on current tax regulations and practical experience, this article analyzes the criteria for characterizing upstream absconding and fraudulent invoicing, the risk transmission mechanisms involved, and the primary tax risks faced by downstream companies. It also offers actionable compliance strategies for invoice recipient companies.

Editor's Note

On May 1, 2016, the nationwide pilot program for the replacement of business tax with value-added tax (hereinafter referred to as the "BT-to-VAT Reform") was fully launched, bringing all business tax taxpayers, including those in the real estate industry, into the scope of the pilot program. To ensure that the tax burden of the real estate industry would only decrease and not increase after the BT-to-VAT Reform, the State Administration of Taxation (SAT) formulated the Interim Measures for the Administration of VAT Collection on Real Estate Projects Developed and Sold by Real Estate Development Enterprises (SAT Announcement No. 18 of 2016). The Announcement stipulates that where general VAT taxpayers of real estate development enterprises sell self-developed real estate projects and apply the general tax calculation method, the land price may be deducted when calculating the sales amount. The calculation formula is: Sales amount = (Total consideration and non-price charges - Land price permitted to be deducted in the current period) ÷ (1 + 9%).

This provision means that the state allows real estate development enterprises to offset the VAT included in the land price against output VAT. However, there are divergent views in practice on the treatment of the VAT offset against the land price in the liquidation of land value increment tax (hereinafter referred to as "LVIT"), which will have different impacts on the LVIT payment of real estate development enterprises. This paper intends to conduct analysis and discussion based on a real case for readers' reference.

Editor's Note: Recently, a number of well-known listed companies have been subject to tax adjustments by tax authorities on the grounds that their equity and asset transfers by book-entry fail to meet the conditions for special tax treatment. According to the disclosed case details, the core challenge from tax authorities focuses on the following: the transferor, which received equity payment in the transfer, transferred the acquired equity to a third party within 12 months after the completion of the equity transfer, resulting in a change in the equity structure. Then, does the statutory condition for special tax treatment on equity and asset transfer by book-entry include the continuity of shareholder interest principle? Will the transfer of the acquired equity by the transferor within 12 months after the transfer disqualify the restructuring transaction from special tax treatment? The author conducts an analysis based on a typical case.

Editor’s Note: Recently, we have received inquiries from a number of enterprises regarding their tax credit ratings. These enterprises were notified through pop-up alerts in the Electronic Taxation Bureau that their tax credit ratings had been directly downgraded to Grade D. Why would an enterprise’s tax credit rating be directly downgraded to Grade D? What impact does a Grade D rating have on the enterprise? Will this tax credit information be publicly disclosed or made available for public inquiry? How can the tax credit rating be restored quickly? This article provides an analysis of these questions.

Editor's Note: In our articles Legal Consequences of Non-compliant Document Filing Under the New Export Tax Refund (Exemption) Rules and What Impacts Do the New Rules Have on "Fake Self-operation, Real Agency" Practices?, we analyzed and discussed issues related to document filing and "fake self-operation, real agency" practices in conjunction with the new rules. This article intends to trace the origin of the regulations on export foreign exchange receipts, analyze the changes brought by the new rules and their impacts on enterprises, for readers' reference.