A few days ago, the Supreme People's Court and the Supreme People's Procuratorate jointly issued the Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Tax Collection and Administration. In particular, in recent years, there have been several cases in the entertainment sector in which income and property have been concealed or decomposed in the name of others to evade taxes, which have had a very bad impact, and clearly define the signing of "yin-yang contracts" as one of the ways to evade taxes, providing a definite basis for judicial organs to handle such cases in the future.
"Yin-yang contract" refers to the conclusion of two or more contracts with different contents between the parties to the same matter, one internal and one external. The external part is not an expression of the true intentions of both parties, nor will it be actually performed, and is usually used for filing or review by the relevant administrative organs, and the purpose of the parties signing the contract is to avoid supervision, reduce taxes, etc., which is generally called a "yang contract";
Case review
At the beginning of April 2021, the First Inspection Bureau of the Shanghai Municipal Taxation Bureau accepted the issue of Zheng's suspected tax evasion in accordance with the law, and carried out a comprehensive and in-depth inspection on Zheng's suspected tax evasion through the use of the "yin-yang contract", as well as the tax-related issues of Zheng's performing arts projects and related enterprises and personnel after the tax order of the film and television industry was regulated in 2018.
After investigation, Zheng starred in the TV series "A Chinese Ghost Story" in 2019, agreed with the producer to pay 160 million yuan, and actually obtained 156 million yuan, failed to truthfully declare taxes in accordance with the law, evaded taxes of 43.027 million yuan, and underpaid other taxes of 16.1778 million yuan. At the same time, it was found that Zheng had other performing arts income of 35.07 million yuan, tax evasion of 2.2426 million yuan, and other underpaid taxes of 10.3429 million yuan. In total, Zheng failed to declare his personal income of 191 million yuan from 2019 to 2020, evaded taxes of 45.2696 million yuan, and underpaid other taxes of 26.5207 million yuan.
Zheng's above-mentioned behavior violated the requirements of the Propaganda Department of the Central Committee, the Ministry of Culture and Tourism, the State Administration of Taxation, the State Administration of Radio and Television, the State Film Administration and other departments since 2018 to strictly prohibit the "sky-high remuneration" and "yin and yang contracts" of the film and television industry.
In accordance with the Law of the People's Republic of China on the Administration of Tax Collection, the Individual Income Tax Law of the People's Republic of China, the Provisional Regulations of the People's Republic of China on Value-Added Tax and other relevant laws and regulations, the First Inspection Bureau of the Shanghai Municipal Taxation Bureau recovered the tax, imposed late fees and imposed a fine of a total of 299 million yuan on Zheng. Zheng did not raise any objection when the tax department delivered the administrative penalty decision, indicating that he would not reconsider or prosecute, and had paid all taxes and late fees within the prescribed time limit. The tax authorities are urging them to pay the fines within the prescribed time limit in accordance with the law.
At the same time, the tax department also inspected and found that Zhang, one of the whistleblowers in this case, as the agent of Zheng's "A Chinese Ghost Story" project, was suspected of planning the split contract of 160 million yuan of agreed remuneration, the establishment of a "cover company" and other matters, and directly operated the specific implementation of the contract, dunning and collecting money and other activities to help Zheng evade taxes. The First Inspection Bureau of the Shanghai Municipal Taxation Bureau has filed a case for inspection of Zhang in accordance with the law, and will deal with it separately in accordance with the law. In addition, the relevant enterprises are suspected of providing convenience for Zheng to split the contract, concealing remuneration, helping Zheng evade taxes and other tax-related illegal acts, and the tax department has also filed a separate case in accordance with the law.
Relevant Laws
Article 146 of the Civil Code of the People's Republic of China provides that civil juristic acts carried out by the actor and the counterpart with false expressions of intent are invalid. The effectiveness of civil juristic acts concealed by false expressions of intent is to be handled in accordance with the relevant provisions of law.
Article 63 of the Law of the People's Republic of China on the Administration of Tax Collection and Collection stipulates that a taxpayer who forges, alters, conceals, or destroys account books or accounting vouchers without authorization, or lists more expenditures or omits or understates income in the account books, or refuses to declare or makes false tax declarations after being notified by the tax authorities, and fails to pay or underpays the tax payable, shall be guilty of tax evasion. If a taxpayer evades taxes, the taxation authorities shall recover the taxes not paid or underpaid and the overdue fines, and impose a fine of not less than 50 percent but not more than five times the amount of taxes not paid or underpaid; if a crime is constituted, criminal responsibility shall be investigated according to law.
If a withholding agent fails to pay or underpays the withheld or collected tax by means listed in the preceding paragraph, the tax authorities shall recover the tax not paid or underpaid and the overdue fine, and impose a fine of not less than 50% but not more than five times the amount of the tax not paid or underpaid;
Article 201 of the Criminal Law of the People's Republic of China stipulates that a taxpayer who makes a false tax declaration or fails to make a tax declaration by means of deception or concealment, and evades the payment of tax in a relatively large amount and accounts for more than 10 percent of the tax payable, shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention and shall also be fined;
According to the prosecutor
Paying taxes in accordance with the law is the responsibility and obligation of every citizen, and the act of attempting to evade taxes through "yin and yang contracts" and other means violates the principle of good faith, and will face administrative penalties from the tax authorities at least, and may even constitute a crime in serious cases. In addition to the legal risks and economic losses directly faced by both parties, the signing of "yin-yang contracts" by civil entities will also cause losses to the state's tax revenue, and will shake the society's confidence in honest management, contract performance and tax payment, and disrupt the order of the socialist market economy. I hope that every citizen can consciously abide by the principle of tax integrity, abide by the law, seek truth from facts, do not have a fluke mentality, fulfill tax obligations in accordance with the law, and resolutely say no to the "yin and yang contract"!
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