China's taxpayers should pay taxes, late fees or provide appropriate guarantees before filing administrative reconsideration. In practice, taxpayers who cannot pay taxes and late fees can only provide tax guarantees and be confirmed by the tax authorities before entering the reconsideration process. Providing tax guarantee by real estate mortgage is the most common choice for taxpayers, but it faces practical difficulties in operation. In this paper, a case of an enterprise providing tax guarantee by real estate mortgage without confirmation by the tax bureau reveals the focus of tax dispute between taxpayers and enterprises and the review duties and practical difficulties of the tax authorities in providing tax guarantee by real estate mortgage.

I. Brief description of the case

On December 21, 2015, the Fourth Taxation Sub-bureau of Wuzhishan City Local Taxation Bureau of Hainan Province (hereinafter referred to as the Fourth Sub-bureau of Local Taxation) made the Notice of Tax Matters of Wuzhishan Local Taxation Fourth Sub-bureau Circular [2015] No. 80070 and No. 80071 to notify the Plaintiff, Wuzhishan Jianyingjie Civil Construction Engineering Company Limited (hereinafter referred to as Jianyingjie), that it should pay back the value-added tax on land in the amount of 3,274,678.4 Yuan, and business tax and surcharge of RMB 40,163.48, which were served on the Plaintiff on the same day.On December 23, 2015, the Plaintiff submitted the Application for Offsetting Taxes with Houses to the Local Tax Bureau, requesting that five unsold houses in the Xiangshan Garden project developed by the Plaintiff, which had a total value of RMB 35,374,353, be used for offsetting the taxes.On December 30, 2015, the Fourth Branch of the Local Tax Bureau made a Wuzhi Mountain Tax Quadratic Limitations Payment Circular [2015] No. 816, Notice of Payment of Taxes by a Time Limit, which notified the Plaintiff to pay the land value-added tax clearance tax of RMB 3,274,678.4 before January 6, 2016 at the Tax Service Office of the Local Tax Bureau. The notice was served on December 31, 2015 to the plaintiff. Upon receipt of the notice, the plaintiff filed an application for reconsideration with the Local Tax Bureau. As the Local Taxation Bureau did not process the reconsideration application filed by the Plaintiff, the Plaintiff sued the Wuzhishan City People's Court to request the Local Taxation Bureau to make a reconsideration decision in accordance with the law, and the Wuzhishan City People's Court rendered an Administrative Judgment No. 47 of (2016) Qiong 9001 Xingchu on December 17, 2016, which adjudicated that the Local Taxation Bureau make an administrative reconsideration decision. The Local Taxation Bureau appealed to the First Intermediate People's Court of Hainan Province, which rendered the administrative judgment No. 38 of (2017) Qiong 96 line final on March 27, 2017, which ruled to set aside the original judgment, and the Local Taxation Bureau made a decision on the Plaintiff's application for reconsideration. After the judgment went into effect, the DIR informed the Plaintiff on April 7, 2017 that it needed to provide security before April 14, 2017 to proceed with the administrative reconsideration, otherwise the DIR would issue a decision letter of inadmissibility.

On April 12, 2017, the Plaintiff provided tax guarantees with five houses located in Wuzhishan City, Wuzhishan City ××Dao# Residential Building, Room 201, 2# Residential Building, Room 106, Room 107, Room 206, Room 207, as collateral.On April 20, 2017, the DTA wrote to Wuzhishan City Bureau of Land and Resources to inquire whether the above houses could create mortgages and handle the transfer of the houses.On May 27, 2017, the Wuzhishan City Real Estate Registration Center under Wuzhishan City Land and Resources Bureau replied that "the property can be set up as a mortgage and handle the transfer, but before handling the above real estate registrations, it is necessary for Wuzhishan Jianyingjie Civil Engineering Co. Ltd. to go to the Center to improve the Xiangshan Garden project to build the library and drop the file".On June 16, 2017, the Local Taxation Bureau again inquired to Wuzhishan City Bureau of Land and Resources whether there were disputes or other circumstances that prevented the establishment of mortgages and the handling of transfers for the five properties in question.On July 17, 2017, the Wuzhishan City Bureau of Land and Resources replied that there was a problem of property transgressions in the Xiangshan Garden Project where the five properties in question were located, and that the Bureau's Real Estate Registration Center would not accept the registration of all the real estate of the Xiangshan Garden Project before the problem was resolved. Based on the above two replies, the Fourth Branch of the Local Taxation Bureau issued a Notice of Tax Matters (Wudi Tax Sitong [2017] No. 167) on July 26, 2017, deciding not to confirm the guarantees provided by the Plaintiffs and informing the Plaintiffs that they could apply for an administrative reconsideration to the Local Taxation Bureau of Wuzhishan City within 60 days from the date of receipt of the notice or file a complaint with the court within three months.

Jianyingjie Company filed a lawsuit with Wuzhishan City People's Court on October 24, 2017, because it did not accept that the Fourth Branch of the Local Taxation Bureau had made the Notice on Tax Matters (Wu Di Shui Si Tong [2017] No. 167).

II. Focus of Dispute and Views of the Parties

The dispute in this case is whether it is lawful for the IRD not to recognize the mortgage guarantee of the property?

Jianyingjie argued that it provided tax guarantee as collateral for five sets of houses located in Room 201, Room 106, Room 107, Room 206 and Room 207 of No.2# Residential Building, No.2# Residential Building, No.xxx Road, Wuzhishan City, with a total area of 643.17 square meters and a total value of about RMB 4502,190 yuan, which was fully deductible for VAT tax of RMB 3274,678.40 yuan, but the Defendant on On July 26, 2017, it made the Notice of Tax Matters No. 167 of the Fourth Branch of the Local Taxation (2017), which decided not to confirm the mortgage guarantee provided by the Plaintiff, and the five sets of properties whose ownership belonged to the Plaintiff were provided as the tax mortgage guarantee were fully in line with the conditions of the guarantee stipulated in the law, and the Defendant's notice of non-confirmation was in violation of the legal provisions, and it should be withdrawn according to the law.

The fourth branch of the local tax bureau that the plaintiff provided five sets of property should be examined for legality and mortgage registration. According to the "land with the house, the house with the land" principle, through the Wuzhishan city local tax bureau on the plaintiff provided five sets of property legality and whether the mortgage registration to the city of Wuzhishan housing, land management department for two times, the city of Wuzhishan housing, land management department replied to the registration of the inadmissibility of the answer, in view of the defendant on the plaintiff The five sets of real estate provided by the defendant will not confirm the guarantee. The plaintiff to provide five sets of property tax guarantee, must be examined by the defendant whether to comply with the relevant provisions of the law, and the house and land mortgage registration, but according to the city of Wuzhishan city housing, land management department's reply, the plaintiff provided five sets of property can not satisfy the legal requirements of the mortgage registration, so it is not improper to not confirm the guarantee of the five sets of property provided by the plaintiff.

The court held that the tax guarantee should be confirmed by the defendant by filling out the Tax Guarantee and the Tax Guarantee Property List, and then registering the mortgage of the tax guaranteed properties, and that the tax guarantee would only be valid from the date of the registration of the mortgage. In this case, the local tax bureau investigated that the above five sets of properties are currently unable to apply for the registration of various real estates, and the plaintiff's mortgages do not meet the conditions of the guarantee, and the fourth branch of the local tax bureau made a decision not to confirm the guarantee accordingly, which was found to be a clear-cut fact; in respect of the procedure, the defendant informed the plaintiff that the deadline for prosecution was three months in the notice 167, and the deadline for prosecution was six months according to the provisions of Article 46 of the Administrative Procedure Law of the People's Republic of China, which stipulates that the deadline for prosecution is three months. of the prosecution period is six months, the defendant informed the right to sue the content of the wrong, procedural violations, the judgment confirms that the fourth tax sub-bureau of the local tax to make the Notice of Tax Matters (five local tax four pass (2017) No. 167) behavior is illegal.

III. our point of view

This case is a typical case of providing tax guarantee with real estate mortgage not confirmed by the tax bureau, the case reflects the practice of providing tax guarantee with real estate mortgage levy and payment of the focus of the dispute between the two sides, the procedures and focus of the tax bureau review and the content of the law enforcement instrument of the right of action is wrong, etc., the author from the following aspects of the risk of prompting and suggestions:

(I) Taxpayers to provide tax guarantee by real estate mortgage, to ensure compliance with the statutory conditions

In this case, the ownership of the five sets of properties provided by Jianyingjie is clear, but whether the mortgage registration can be applied for is the key to whether or not the guarantee can be confirmed by the tax bureau. on April 20, 2017, the local tax bureau wrote to Wuzhishan City Bureau of Land and Resources inquiring whether or not the above houses can be set up as a mortgage and handle the transfer of the house. on May 27, 2017, Wuzhishan City Real Estate Registration Center under Wuzhishan City Bureau of Land and Resources replied that "the property can establish mortgage and handle transfer, but before handling the above real estate registration, Wuzhishan Jianyingjie Civil Engineering Co., Ltd. needs to improve the Xiangshan Garden Project building library fall to our center"; on June 16, 2017, the DRA again wrote to Wuzhishan City Bureau of Land and Resources inquiring whether the five sets of properties in question there were disputes or other circumstances under which mortgages could not be established and transfers could not be processed; on July 17, 2017, the Wuzhishan City Bureau of Land and Resources replied that there was a problem of property transgressing the boundary of the Fragrant Hills Garden Project in which the five properties in question were located, and that the Bureau's Real Estate Registration Center would not accept the registration of all the real estate of the Fragrant Hills Garden Project until the problem had been resolved. Based on the above two replies, the Fourth Branch of the Local Taxation Bureau made a decision not to recognize the guarantee provided by Jianyingjie.

In 2005, China promulgated and implemented the Trial Measures for Tax Guarantee, which clearly stipulates that with the consent or confirmation of the tax authorities, taxpayers or other natural persons, legal persons or economic organizations shall provide guarantees for the taxes and late payment fees payable by taxpayers by way of guarantee, mortgage or pledge. In this case, for example, the tax mortgage, due to the tax mortgage security requirements of the conditions are too harsh, where there is ownership uncertainty, disputes over the property are not allowed to set mortgage security, and the mortgage must be registered by the effective, which makes the mortgage to provide tax guarantees, especially real estate to provide tax guarantees are often difficult in the operation. Ltd. v. Hainan Provincial Local Taxation Bureau of the first inspection of tax guarantee dispute in the second trial, Hainan Guotuo its development and construction of the "Eight Mile Silver Sea" project in the sixth building as a collateral security to the provincial local tax first inspection of the tax guarantee application, and" The "Eight Mile Silver Sea" project had been seized by the First Inspection Bureau of Provincial Local Taxation, and the whole project of "Eight Mile Silver Sea" was still in the state of being seized when the company filed the application for tax guarantee, and the tax bureau determined that the tax guarantee collateral provided by the company did not meet the conditions, and refused to accept the application for tax guarantee, and the application for tax guarantee was not accepted after the litigation of first and second instance. After the first and second trial litigation were not supported by the court. Therefore, for taxpayers, if they want to provide tax guarantee by mortgage, they should first examine whether the property provided can be mortgaged in accordance with the provisions of the Trial Measures for Tax Guarantee, and they should know clearly that the property with unknown or disputed ownership and right of use, the property that has been seized, detained and supervised in accordance with the law, and the building that has been recognized as illegal and unauthorized in accordance with the legal procedures do not comply with the requirements of the mortgage guarantee and cannot be recognized even if they apply to the tax bureau. Even if they apply to the IRD, they will not be recognized. Taxpayers should be clear about whether the property provided can be mortgaged and whether the mortgage can be registered, so as to be able to deal with the process of mortgage tax guarantee and avoid unnecessary litigation disputes.

(II) Tax authorities shall conduct substantive review of real estate mortgages and shall actively cooperate with taxpayers to complete mortgage registration.

Paragraph 2 of Article 33 of the Rules for Administrative Review of Taxation provides that an applicant applying for administrative review in accordance with the provisions of the preceding paragraph must first pay or pay off the tax and late payment fees or provide corresponding guarantees in accordance with the amount of tax and time limit determined by the tax authorities in accordance with the laws and regulations, and then the application for administrative review may be filed within 60 days from the date of the payment of the tax and the late payment fees or the date on which the guarantees provided have been confirmed by the tax authorities which have made the specific administrative act; paragraph 3 provides that the means of guarantee provided by the applicant include guarantees and pledges. The application for administrative reconsideration shall be filed within 60 days from the date of payment of the tax and late payment or the confirmation of the guarantee provided by the tax authority that has made the specific administrative act. The tax authority that makes a specific administrative act shall examine the qualification and creditworthiness of the guarantor, and shall have the right to reject the guarantor if he/she does not have the qualification stipulated in the law or does not have the ability to guarantee. The tax authority that makes a specific administrative act shall examine the mortgage guarantee and pledge guarantee provided by the mortgagor or pledgor, and shall not recognize the mortgage guarantee or pledge guarantee that does not comply with the provisions of the law.

According to the above provisions, the tax bureau has the duty and obligation to examine the guarantee provided by the taxpayer, and shall not confirm the mortgage guarantee or pledge guarantee that does not comply with the legal provisions. Whether or not the tax security provided by the taxpayer meets the requirements is determined by the IRD in accordance with the provisions of the Trial Measures for Tax Guarantees.

Article 20 of the Trial Measures for Tax Guarantee stipulates that tax-secured property shall be registered as collateral. The tax mortgage shall take effect from the date of registration of the collateral.  ) If mortgaged by equipment and other movable assets of the enterprise, provide the certificates issued by the industrial and commercial administration department of the place where the property is located or the certificates issued by the notary department of the place where the taxpayer is located.

In this case, for the mortgage guarantee provided by Jianyingjie, the local tax bureau twice wrote to Wuzhishan City Bureau of Land and Resources to confirm whether the house can be set up as a mortgage and handle the transfer, the tax bureau in the fulfillment of the substantive review of the duty to clarify the clarity of ownership at the same time also reflects the impact of the mortgage registration of tax guarantees, and it can even be said that whether or not it is possible to carry out the registration of mortgages determines whether or not the mortgage of the property provided will be the key to be confirmed. From the provisions of the "Tax Guarantee Trial Measures", the taxpayer to provide tax security need to register the mortgage registration and tax authorities to issue supporting materials, in order to be able to get the confirmation of the tax authorities of the tax guarantee, the tax in order to successfully through the reconsideration process for the right to relief. In this case, the tax authorities to the land and resources department to inquire whether the mortgage registration, another more common practice is to let the taxpayer to the tax authorities to provide mortgage registration materials, which will appear realistic difficulties. China's real estate registration more consideration is equal between the civil subject of the claim, for the mortgage registration of tax security how to operate, whether China's "real estate registration operation specification (for trial implementation)" or "tax security trial measures", have not made special provisions, for example, anhui haitong pharmaceutical company limited to apply for tax mortgages in the case of the tax bureau refused to cooperate with the real estate mortgage registration. In this case, the tax bureau also only examined the substance of the guarantee provided by the taxpayer, and had not yet entered the mortgage registration process. Considering the current imperfections of the relevant provisions of the tax guarantee, it is recommended to draw on the relevant provisions of the civil mortgage, refer to the mortgage registration procedure, and the taxpayer and the tax bureau jointly submit the application, and the tax bureau actively cooperates with the registration of the mortgage.

(III) The tax authorities should correctly inform the taxpayers of their rights to relief when they make the decision of not recognizing the guarantee.

In this case, the fourth branch of the local tax made a "notice of tax matters" (five local tax four pass (2017) No. 167) to inform the plaintiff of the prosecution period of three months, the fourth branch of the local tax court argued that the content of the notice is the tax authorities in the system of the automatically generated format text, can not be modified, and its subjective fault does not belong to the procedural violations. In this regard, the court held that any office system should be modified and improved with the changes in the law, and the law can not be subordinate to the office system, the lag of the system can not be a reason for violation of the law, for the defendant's refutation is not adopted. In this case, the practice of the tax bureau issuing documents with the error of informing the statute of limitations and the refutation viewpoints are a microcosm of the procedural violation of the tax bureau in the tax practice. The Notice on the Issuance of National Uniform Tax Enforcement Instrument Format (Guo Shui Fa [2005] No. 179) was implemented in 2006, based on the Administrative Procedure Law of 1989, when Article 39 of the Administrative Procedure Law stipulated that a citizen, legal person or other organization that files a lawsuit directly to the people's court shall file it within three months from the date of its knowledge of the making of a specific administrative act. In 2014, the administrative litigation law was amended, article 46, paragraph 1, citizens, legal persons or other organizations directly to the people's court, shall know or should know the date of the administrative act shall be filed within six months. That is to say, according to the provisions of the amended Administrative Procedure Law in 2014, the statute of limitations for administrative litigation filed with the court since May 1, 2015 is six months. In this case, the court held that the fourth branch of the local tax office informed the right of action in the wrong content, and found that the procedure was illegal, and reminded the tax authorities not to violate the taxpayer's right of action on the basis of the format text automatically generated in the system of the tax authorities, and should be careful to guard against the risk of law enforcement in this type of procedural violation.

(IV) Tax authorities should give taxpayers the opportunity to make corrections to materials

In practice, some tax authorities believe that they are only responsible for reviewing whether the information submitted by taxpayers is in line with the relevant provisions of the tax guarantee, and they have no legal duties and obligations to actively inform taxpayers of the need to set mortgage guarantee to prepare the relevant materials and evidential materials, and this concept of levy and management can easily lead to the taxpayers' loss of the opportunity of reconsideration and relief due to the lack of compliance of the formal elements and the decision of non-confirmation of the tax guarantee made by the tax authorities, which will lead to unnecessary litigation burden.  From the perspective of protecting the rights and interests of taxpayers, the tax authorities should fulfill the obligation of notification. If the formal elements of the tax guarantee application submitted by the taxpayer are not in compliance with the regulations, the tax authority shall inform the taxpayer in writing of the relevant materials to be prepared and give the taxpayer the opportunity to correct the materials. For example, in the case of Zunyi Marriott Real Estate Development Co., Ltd. and Zunyi Municipal People's Government Tax Administration (Tax) II, after Zunyi Marriott filled out the Tax Guarantee Property List and Tax Guarantee with incomplete content on May 18, 2016, the Audit Bureau I made the Zun City Local Tax Audit Yiyi 〔2016〕 No. 13 Tax Matters Notification on May 23, 2016, which required the Zunyi Marriott Company to appoint an appraisal company to appraise the property provided by it before May 27, and to apply for real estate mortgage registration, fill in the Tax Guarantee and the Tax Guarantee Property List. In that case, the First Bureau of Inspection of Zunyi Local Taxation Bureau notified Zunyi Marriott of the information to be provided by Zunyi Marriott by means of a Notice on Tax Matters. In contrast, in the case of State Administration of Taxation Liaoyang City Taxation Bureau Inspection Bureau and Liu Lina Notice of Tax Matters, the Liaoyang City Taxation Inspection Bureau considered that it had no statutory duties and obligations to proactively inform the taxpayers that they needed to prepare relevant materials and evidential materials for setting collateralized security, and it was only responsible for reviewing the submitted materials to see if they were in compliance with the relevant provisions of the tax guarantee, and lost the case as it failed to get the support of the court.

Summary: Combined with the main content of China's current tax guarantee system, the core problem lies in its inability to protect the legitimate rights and interests of taxpayers and tax guarantors, setting too many serious and harsh thresholds. Tax authorities need to ensure that the national tax in full into the treasury, so the tax guarantee compared to the civil guarantee to be strict, but this leads to taxpayers collateral guarantee road difficulties can not be initiated successfully legal remedies. In our country has not abolished the tax front, for the taxpayer, should be provided in accordance with the provisions of the legal conditions of the tax guarantee, and actively communicate with the tax authorities; for the tax authorities, should fulfill the substantive audit duties, and actively cooperate with the taxpayer to complete the tax guarantee matters, to ensure that the taxpayer can successfully enter the rights relief procedures.