China’s Tax Offenders Blacklist System in a nutshell

July 5, 2017
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In 2016, a blacklist system was implemented in order to promote tax recording and reporting “best practices” among all business based in China. The relevant authorities now have the ability to enforce 18 new disciplinary measures against any business involved in violation of tax regulations. These new measures include: restricted access to governmental funds, banning companies to leave China, and enforced disclosure of relevant information via the National Enterprise Credit Information Publicity System. Additionally, several other penal regulations are as follows:

  • Restrictions on assuming certain positions in market entities
  • Restrictions on credit rating , limiting financing by financial institutions
  • Constrains on purchasing certain commodities and services
  • Restrictions on obtaining land offered by the government
  • exclusion from participating in governmental procurement
  • Disqualification from managing customs-certified companies
  • Restrictions on some operations in the securities and insurance markets
  • Prohibition from the transfer of rights and interests of toll roads
  • Restrictions on  governmental funds support
  • Inability to issue corporate bonds
  • Restrictions on applying to import quotas of agricultural products
  • Banning from publishing information via a major news website

The State Administration of Taxation (SAT) also established measures to assist companies in violation of the new regulations to reestablish their previous business status to ensure transparent business operations. Under that system, companies that fulfill all tax requirements are eligible to certain incentives, such as preferential treatment when applying for tax deductions, or other financing requests.

As an ongoing evaluation of tax compliance, Guangdong’s provincial tax authorities will rate companies and assign them to one of four levels: A, B, C, D. Level A comprises of companies that received the highest grade by the government, whereas level D, include companies that received the lowest grades

This year, around 710,000 taxpaying entities are expected to be assessed and assigned a rating. Their information will be collected online through the tax credit management system, which will then calculate the scores each company will receive.

The aim of the reform is to encourage tax paying companies to routinely follow regulations, on one hand and on the other hand, this reform enables the government to identify level D companies that might need increased supervision and support.

PTL GROUP assists international companies in tax planning and tax management in China. We’ll be happy to assist you as well. Contact us.

Understanding China’s Tax Offenders Blacklist System