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	REPLY OF THE STATE ADMINISTRATION OF TAXATION ON ISSUES CONCERNING THE HANDLING OF ENTERPRISE INCOME TAX OF ENTERPRISES WITH FOREIGN INVESTMENT AND OF FOREIGN ENTERPRISES FOR THEIR FALSE REPORT ON LOSSES

	(No. 296 [2004] of the State Administration of Taxation February 24, 2004)


SUBJECT : ADMINISTRATIVE MEASURES; TAX COLLECTION; CORPORATE TAX
ISSUING DEPARTMENT : THE STATE ADMINISTRATION OF TAXATION
ISSUE DATE : 02/24/2004
IMPLEMENT DATE : 02/24/2004
LENGTH : 554 words
TEXT :

Your Request for Instructions on Issues concerning Tax Handling of the Enterprises with Foreign Investment for their False Report on Losses (No. 145 [2003] of Chongqing Administration of State Taxation) has been received. We hereby make the following reply on how to make taxation administrative punishment on false report of losses by enterprises with foreign investment and foreign enterprises (hereinafter referred to the "enterprises") after the implementation of the newly amended Law of the People's Republic of China on the Administration of Tax Collection (hereinafter referred to the Collection Administration Law):

I. For the issue concerning the taxation administrative punishment on false report of losses by enterprises, since the newly amended Collection Administration Law has made clear provisions on it, the implementation of the provisions of Article 1 of the Notice of the State Administration of Taxation on Issues concerning the Handling of Taxes of Enterprises with Foreign Investment for their False Report on Losses (No. 102 [1997] of the State Administration of Taxation) shall be stopped.

II. Where an enterprise makes false report on losses, which constitutes act of compiling false basis for computation of income tax, it shall be imposed upon a taxation administrative punishment in accordance with the relevant provisions of the Collection Administration Law and its detailed implementation rules respectively according to the following conditions:

1. Where an enterprise compiles false basis for computation of income tax, which has led to its failure to pay or underpaying the amount of tax payable in the year of occurring such act or in the relevant years actually, the competent taxation authorities may regard it as the act of tax dodging, and impose a punishment on it in accordance with paragraph 1 of Article 13 of the Collection Administration Law.

2. Where the enterprise is in its year of enjoying the preference of exemption of enterprise income tax, or is in the year of occurring losses, and the act of the enterprise of compiling false basis for computation of individual income tax does not result in its failure to pay or paying less than the amount of tax payable, the competent taxation authorities may impose a punishment on it in accordance with paragraph 1 of Article 64 of the Collection Administration Law.

III. The compiling of false basis for computation of individual income tax mentioned in the preceding Article shall include that an enterprise declares less or fails to declare the taxable income or declares the loss more than the fact by forging, altering, concealing or destroying without authorization the account books, bookkeeping vouchers, or through overstating or not stating expenses or understating income in account books, or through filing fraudulent tax returns or by other illegal means.

IV. When investigating into and punishing the cases concerning the enterprises' compiling of false basis for computation of income tax, whether the acts are punished in accordance with the provisions of paragraph 1 of Article 63 of the Collection Administration Law, or in accordance with the provisions of paragraph 1 of Article 64 of the Collection Administration Law, the relevant provisions of the No. 102 [1997] document of the State Administration of Taxation shall still be followed for issues concerning the computation and adjustment of the amount of taxable income of the relevant years, profit gaining years, or the amount of taxes deducted or exempted.