Sui Zhong Fa [2020] No. 90
Notice of Guangzhou Intermediate People’s Court and Guangzhou Tax Service of State Taxation Administration on Issuance of the Several Opinions on Handling Tax-related Issues in Bankruptcy Proceedings (for Trial Implementation)
To all primary people’s courts and all departments of Guangzhou Intermediate People’s Court, the tax service of all districts of Guangzhou Tax Service of State Taxation Administration, and all offices and departments, branches and institutions of Guangzhou Tax Service,
With a view to serving and ensuring high-quality economic development, improving the withdrawal mechanism of market entities, further optimizing the business environment, and effectively solving the tax issues involved in bankruptcy cases, the Several Opinions on Handling Tax-related Issues in Bankruptcy Proceedings (for Trial Implementation) is hereby published and distributed to you, please implement it carefully.
Guangzhou Intermediate People’s Court
Guangzhou Tax Service of State Taxation Administration
May 26, 2020
Several Opinions on Handling Tax-related Issues in Bankruptcy Proceedings (for Trial Implementation)
To serve and ensure high-quality economic development, improve the withdrawal mechanism of market entities, further optimize business environment, and effectively solve taxissues involved in bankruptcy cases, in accordance with the Enterprise Bankruptcy Law of the People’s Republic of China, the Law of the People’s Republic of China on the Administration of Tax Collection, the Social Insurance Law of the People’s Republic of China and applicable laws and regulations, based on the Implementation Plan of Guangdong Province for Deepening the Reform of the Withdrawal System of Market Entities and the Measures of Guangdong Province on the Implementation for the Reform of the Cancellation and Withdrawal System of Enterprises and relevant policies and documents, the following opinions shall be followed when handling tax-related issues in bankruptcy proceedings:
I. Issues relating to the Claims Reported by Tax Authorities
1．After the people’s court decides to accept the bankruptcy application, the administrator shall, within ten (10) business days after accepting the court’s appointment, issue a written notice to the competent tax authority in the district (county) to which the bankrupt enterprise is subject or, if the competent tax authority could not be determined, to the tax authority in the district (county) where the enterprise is located. The tax authority in the district (county) which first receives the notice shall bear the first inquiry responsibility, and if it is not the competent tax authority, it shall promptly transfer the Notice to Report Claims to the competent tax authority or Guangzhou Tax Service. The administrator should not send the Notice to Report Claims repeatedly or to several tax authorities.
2．After receiving the Notice to Report Claims, the competent tax authority at district (county) level shall, in accordance with the law, check and verify the overdue tax owed by the enterprise within Guangzhou, the non-tax income collectable by the tax authority, and the arrears of social insurance premium known by the tax authority, late fees and fines, and report the claims within the time limit set by the court. If the tax authority fails to report the claims within the time limit, a supplementary report may be submitted before the final distribution of the bankruptcy estate. However, supplementary distribution will not be made for the distribution that has been made.
3．The late fees and fines owed by the enterprise, and the interests from the special tax adjustment shall be calculated and determined by the deadline date which is the date when the people’s court decides to accept the bankruptcy application. The enterprise’s late fees before the bankruptcy case is accepted and the interests from the special tax adjustment shall be reported by the tax authority as ordinary bankruptcy claims. The fines imposed by the tax authority on the debtor shall be inferior claims.
4．When the tax authority reports its claim in bankruptcy proceedings, it shall submit to the administrator of the bankruptcy case the Claim Report and relevant basis for claims, such as screenshots and brief description of outstanding tax, late fees and fines, or the basis and calculation thereof if there is no screenshot. The Decision on the Handling of Tax Issues, Written Decision of Administrative Punishment and other related documents should be also submitted, if any. If the administrator knows or has information about the debtor’s outstanding tax, non-tax income and social insurance premium which is unknown to the tax authority, it should inform the tax authority.
5．Where the administrator has objections to the claims reported by the tax authority for the tax, non-tax income and social insurance premium in bankruptcy proceedings, it shall promptly submit written objection to the tax authority before a Decision of No Confirmation is made. The tax authority shall review the objection upon receipt of the written objection. If the tax authority deems that the objection is valid, it may change the amount or type of the reported claims; if not, it shall provide the administrator with the calculation method and collection basis for the claims of the tax, non-tax income and social insurance premium of the objected part.
6．The administrator shall perform the duties of tax (fee) declaration, liquidation declaration and tax cancellation according to law. If the administrator fails to perform its duties and fails to handle tax-related matters on behalf of the enterprise in accordance with the tax laws and regulations, resulting in the enterprise failing to pay or underpay the tax (fee), the competent tax authority may order it to make corrections within required time limit and shall have the right to inform the people’s court of the relevant information, and the court shall urge the administrator to perform its duties according to law.
II. Tax Administration in Bankruptcy Proceedings
7．During the period between the date when the court decides to accept the bankruptcy application and the date of cancellation of the enterprise, the debtor shall be subject to the tax administration of the tax authority and fulfill the relevant obligations stipulated in tax laws. In case of taxable occurrence in bankruptcy proceedings, tax shall be declared according to law. If the enterprise terminates its business activities after the people’s court decides to accept the bankruptcy application, it shall carry out liquidation income tax process, and the liquidation income shall be calculated using the liquidation period as an independent tax year.
8．Where a taxpayer entering bankruptcy proceedings applies for tax relief or exemption from property tax or urban land use tax, the tax authority shall verify and deal with it according to law.
9．Any tax (fee) and late fee arising from the continuing performance of contracts, production, operation or disposal of the debtor’s property in bankruptcy proceedings, and the fines arising from the occurrence or handling of tax violations shall be the “expenses for administration, conversion and distribution of the debtor’s property” stipulated in Article 41 of the Enterprise Bankruptcy Law. The administrator shall declare and pay such tax (fee) from the debtor’s property on behalf of the enterprise within the time limit stipulated in the tax laws and regulations, and the tax authority is not required to report the claims separately.
The administrator shall provide the tax authority with an auction confirmation or other certificates of property ownership transfer, the ownership certificate of the property being disposed of, the information of the identity of the transferor and transferee, to declare the tax according to law, and pay taxes from the bankruptcy expenses. In bankruptcy proceedings, the social insurance premiums of the personnel retained by the bankrupt enterprise shall be continuously declared by the administrator in the name of the bankrupt enterprise, and paid from the bankruptcy expenses, until the enterprise is declared bankrupt and its registration canceled, or until the end of the month that their labor relations are terminated in case of early termination of labor relations.
10．Where the debtor needs to issue an invoice for continuing performance of contracts, production, operation or disposal of property, the administrator may in the name of the enterprise apply for and issue invoices in accordance with applicable provisions, or apply to the tax authority for the issue of invoices, and for which it shall contact the competent tax authority with the written ruling on accepting the bankruptcy application and the decision on the appointment of administrator made by the people’s court. The tax authority shall complete the matter within the time limit stipulated for relevant matters.
The administrator shall properlykeep the invoices, which shall not be lost or issued in violation of the laws and regulations. Where the administrator violates applicable laws and regulations, such as the Measures of the People’s Republic of China for the Administration of Invoices, the tax authority shall handle the matter in accordance with relevant regulations.
III. Release of the Abnormal Status of the Debtor
11．The administrator shall, according to the debtor’s account books taken over by it, resubmit tax filing for the period of abnormal status before the bankruptcy application is accepted. If the administrator pays a fine and resubmits the tax filing, it may use the official seal of the enterprise or the official seal of the administrator.
12．Where the administrator fails to take over the account books of the debtor, fails to grasp the debtor’s actual situation during the abnormal status before the bankruptcy application is accepted, or fails to find out the taxable acts of the debtor, it may temporarily resubmit the tax return as Nil Return and handle it in batches. Where the administrator discovers in the bankruptcy proceedings that the debtor has the obligation to pay tax (fee) during the period of abnormal status before the bankruptcy application is accepted, or the debtor is suspected of under-reporting the underpayment of tax (fee), it shall promptly report to the tax authority truthfully.
13．After a debtor who has been recognized as in abnormal status resubmits the tax (fee) return, the tax collection and management system will automatically release the abnormal status without applying for special release. A debtor who has been recognized as in abnormal status of social insurance premium should first cancel the abnormal status of social insurance premium before re-declaration of the social insurance premium. Release of abnormal status is not prerequisite for corporate tax cancellation of a bankrupt debtor.
IV. Handling of Tax-related Issues in Bankruptcy Restructuring
14．Bankruptcy restructuring that involves changes in assets such as land and meets the preferential tax conditions shall be dealt with in accordance with relevant tax policies. The special tax treatment may be applied to the income from debt restructuring that occurs during the restructuring of a bankrupt enterprise, which meets the prescribed conditions.
15．The tax authority may re-evaluate by reference to “newly established enterprise” at the request of an enterprise to improve the mechanism of tax credit repair for the restructuring enterprise, so as to ensure the normal operation and subsequent development of the restructuring enterprise. Where the restructuring enterprise meets the requirements of the Circular of the State Administration of Taxation on Matters Related to the Tax Credit Repair ([2019] No. 37), it may apply to the competent tax authorities for tax credit repair within the prescribed time limit.
V. Cancellation of Tax Registration after Bankruptcy Liquidation
16．For a debtor who has been declared bankrupt by the people’s court, the administrator may apply to the tax authority for cancellation of tax registration with the court’s written ruling on concluding the bankruptcy proceedings. The tax authority will immediately issue tax clearance document for cancellation of tax registration and write off the “bad debt” in accordance with relevant regulations. When handling the above matters, the administrator shall provide materials regarding acceptance of the bankruptcy case, the written ruling of the people’s court on concluding the bankruptcy proceedings, and the administrator’s identity certificate. The tax authority may not refuse on the grounds that the administrator fails to provide the original ID card and signature and personal seal of the legal representative of the bankrupt enterprise, tax registration certificate and invoice receipt book, decision to revoke business license, approval documents of higher authorities or resolutions of the board of directors.
17．The cancellation window of Taxpayer Service Hall is designated to be responsible for the enterprise bankruptcy liquidation with designated personnel and one-stop service. The tax authorities also provide online channels for tax cancellation processing.
VI. Miscellaneous
18．The tax authorities shall ensure that the administrator perform its duties according to law. Where the administrator fails to affix the official seal of the enterprise to relevant documents submitted to the tax authorities because the official seal is lost or not taken over, the administrator may affix its official seal and make written explanation.
19．The tax authorities shall provide administrators with services and conveniences in tax information inquiry and tax policy advice. Where a administrator makes inquiry to competent tax authority about tax (fee) declaration and fine payment by the bankrupt enterprise, and consults tax policies to advance the bankruptcy proceedings, the competent tax authority shall provide promptly. The tax authorities should also provide convenient access to online inquiry and advice.