State Administration of Taxation, Issues Relevant to the Application of Tax Laws to False Declaration of Losses by Enterprises Circular

Issued: March 4 2005
Applicability: "False declaration of losses by enterprise" means that the amount of losses reported in an annual enterprise income tax return by an enterprise is greater than that calculated according to tax collection provisions (Item One).

Main contents: Where an enterprise deliberately makes false declaration of losses resulting in the non-payment or underpayment of tax payable in the year concerned or in related tax years, the first paragraph of Article 63 of the PRC Administration of the Levy and Collection of Taxes Law shall apply. The tax authorities shall demand payment of the tax owed due to non-payment or underpayment and the late payment fine, and a fine of between 50% and five times the tax owed due to non-payment or underpayment shall be imposed. If the matter constitutes a criminal offence, criminal liability shall be pursued in accordance with the law (Item Two). Where an enterprise makes false declaration of losses in the tax years enjoying exemption from enterprise income tax in accordance with the law or in the tax years incurring losses, without causing non-payment or underpayment of tax payable in the year concerned or related tax years, the first paragraph of Article 64 of the PRC Administration of the Levy and Collection of Taxes Law shall apply. The tax authorities shall order the matter to be rectified within a specified time limit, and a fine of less than Rmb50,000 shall be imposed (Item Three).
Related legislation: PRC Administration of the Levy and Collection of Taxes Law (Revised),
Apr 28 2001, CLP 2001 No.5 p12
Repealed legislation: State Administration of Taxation, How to Handle False Declaration of Losses by Enterprises Circular, 1996 and State Administration of Taxation, Issues Relevant to Made-up Tax Payments and Fines for False Declaration of Losses by Enterprises Reply, 1996