Global Tax Alert | 9 July 2013

China issues draft revisions to Tax Collection and Administration Law

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Executive summary

China's Tax Collection and Administration (Law) is the basic procedural law governing China's tax administrative matters, which became effective 1 January 1993. In order to address practical needs and developmental trends due to rapid development of the Chinese market economy, the Legislative Affairs Office of the State Council announced the “Amendment to the Law (Discussion Draft)” (Draft Law) on 7June 2013 for the purpose of seeking public opinion prior to finalization.


Some of the more substantive revisions in the Draft Law include:

  • For tax unpaid/underpaid due to a taxpayer or withholding agent's negligence, the tax bureau would be authorized to collect the unpaid/underpaid tax and assess a late tax payment surcharge within 3 years from the date the tax liability was due, which may be extended to 5 years under special circumstances, or in the case of tax evasion, protest or fraud, the period would be extended indefinitely.
  • With respect to late tax payment surcharge (essentially equivalent to an interest payment) and/or penalties:
    • Could result in the imposition of penalties of from 50% to 500% of the unpaid/underpaid tax liability plus late tax payment surcharge in cases of evasion of tax payment due to fraudulent or concealment actions that lead to false tax filings or failure to file;
    • The Draft Law removes the provision that penalties of from 50% to 500% of the unpaid/underpaid tax liability can be imposed if a taxpayer fails to file tax, fails to pay or underpays tax in the existing Law. However, as stated above, in cases of evasion of tax payment by taxpayers who make fraudulent tax filings or fail to file tax due to deception or concealment, the penalties will still be applied; and
    • Penalties not to exceed 20% of the unpaid/underpaid tax liability, and late tax payment surcharge can be imposed if a taxpayer or withholding agent fails to pay tax or underpays tax due to negligence.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Services Limited, Hong Kong
  • Jane Hui
    +852 2629 3836
  • Becky Lai
    +852 2629 3188
Ernst & Young LLP, China Desk, New York
  • David Kuo
    +1 212 773 3660
  • Vickie Lin
    +1 212 773 6001
  • Susan Qiu
    +1 212 773 9382
  • Jessia Sun
    +1 212 773 5955
  • Diana Wu, San Jose
    +1 408 947 6873
Ernst & Young LLP, Asia Pacific Business Group, New York
  • Chris Finnerty
    +1 212 773 7479
  • Jeff Hongo
    +1 212 773 6143
  • Kaz Parsch
    +1 212 773 7201
  • Bee-KhunYap
    +1 212 773 1816

EYG no. CM3608