Editor's Note:The development of new internet business models has spawned a large number of online influencers, whose internet traffic generates substantial income. However, some of these influencers exhibit weak legal awareness and poor tax compliance, leading to involvement in tax evasion scandals. In recent years, China’s State Taxation Administration has repeatedly exposed multiple cases of tax evasion by live-streamers and celebrities, making taxation a recurring "high-risk zone" for online celebrities and content creators. Today, tax authorities announced another high-profile case of tax evasion by a renowned online influencer, sparking widespread discussion. This article will dissect typical tax evasion tactics, their legal consequences, and provide concrete compliance recommendations based on the case, for our readers’ reference.

Ⅰ. Prominent Online Influencer Penalized for Tax Evasion: Taxation Issues Become a Hotbed for Violations

Today (March 21), the Beijing Municipal Taxation Bureau of China’s State Taxation Administration publicly disclosed a case involving an online influencer suspected of tax evasion, sparking widespread discussion on the internet. According to the announcement, Sima X, between 2019 and 2023, underreported personal income tax and value-added tax by concealing income and making false declarations, totaling ¥4.6243 million. Additionally, a film and television planning center under Sima X’s control falsely inflated costs and improperly claimed preferential policies for small and micro enterprises, resulting in underpayment of corporate income tax of ¥753,200. Ultimately, the tax authorities decided to recover the overdue taxes, impose late fees, and levy fines totaling ¥9.2694 million, all of which have now been fully paid.  

In fact, industries such as internet entertainment have long been a key focus of China’s tax authorities. In recent years, multiple cases involving celebrities and online influencers evading personal income tax and corporate income tax have been investigated, with significant amounts involved and far-reaching impacts. So, why is the internet entertainment industry prone to tax risks, and what specific risks does it face? These are questions that online influencers, celebrities, and content creators should understand and address through self-examination and correction.

Ⅱ. Under the Background of Data-Driven Tax Governance, Risks of Personal Income Tax for Influencers and Big Vs Must Be Vigilantly Addressed

(Ⅰ) Risks of Altering the Nature of Personal Income  

According to the *Personal Income Tax Law*, income earned by online influencers, if classified as wages, salaries, or labor remuneration, is subject to a comprehensive progressive tax rate ranging from 3% to 45%. However, if classified as business income, it is subject to a tax rate of 5% to 35%, and costs such as equipment purchases, venue rentals, and team operations related to live-streaming activities can be deducted. This tax difference creates an objective space for tax burden adjustment. Some influencers establish entities such as individual businesses or sole proprietorships to convert income that should be subject to comprehensive tax rates into business income for declaration. Some even exploit the approved collection policies in tax havens to further reduce their tax burden.  

However, it must be emphasized that while influencers can operate through personal studios and enjoy the tax rates applicable to business income, whether an income constitutes business income must be determined based on the substantive nature of the business, not merely by altering the legal form of the entity. The boundary between tax compliance and illegal tax evasion lies in the alignment with the substantive nature of the business. If an influencer legally establishes a market entity before conducting activities, signs genuine and valid service agreements with platforms and merchants, undertakes business through the studio, and establishes a complete business flow, contract flow, cash flow, and invoice flow, the business income tax category can generally apply. Conversely, if an influencer alters the nature of income after earning it by retroactively signing contracts or fabricating transactions, it constitutes a post-facto "conversion of income nature," posing risks of tax evasion.  

Additionally, the connection between the business and the individual business or sole proprietorship also affects the determination of income nature. If an influencer solely conducts business in their own name without any connection to the individual business or sole proprietorship, merely using these entities to receive funds and enjoy tax benefits, they also face risks of being subject to piercing oversight.  

(Ⅱ) Risks of Splitting Income to Improperly Apply Preferential Policies  

Under current tax policies, the tax benefits available to individual businesses and sole proprietorships have clear limits. For example, according to the *Announcement on Further Supporting the Development of Small and Micro Enterprises and Individual Businesses* (Ministry of Finance and State Taxation Administration Announcement No. 12 of 2023), from 2023 to 2027, the portion of annual taxable income not exceeding ¥2 million for individual businesses can be subject to a halved personal income tax rate, but the portion exceeding ¥2 million does not qualify for this benefit. For high-income influencers, their earnings often far exceed this limit, making it impossible to fully enjoy tax reductions through a single market entity. Furthermore, if the same individual registers individual businesses or sole proprietorships in multiple locations or earns business income from multiple sources, all business income must be consolidated during the annual tax settlement. To circumvent these policy limitations, some practitioners use methods such as registering under others’ names or fabricating business contracts to split income across multiple individual businesses or sole proprietorships for declaration.  

Article 1 of the *Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Tax Collection and Administration* (Judicial Interpretation [2024] No. 4) explicitly states that "splitting income or property under others’ names" constitutes a clear method of tax evasion. Therefore, the risks associated with such practices are extremely high.

(Ⅲ) Risks of Concealing Income Through “Dual contracts”  

​“Dual contracts”​ refer to a practice where two parties sign two agreements with ​significantly different amounts. The“declared contract”, which states a falsified lower transaction price, is submitted to tax authorities for tax reporting, while the “actual contract”, which reflects the true transaction value, governs the real execution of the deal. This deliberate separation of declared income from actual financial flows results in severe misrepresentation of taxable income.

The entertainment industry, with its high remuneration, is a high-risk area for “Dual contracts.” Cases such as Fan XX and streamer Jin XX have both involved such practices. Some practitioners split the actual substantial service fees into a basic service fee in the “declared contract” and additional benefits in the “acutal contracts,” systematically concealing the true income, thereby constituting tax evasion. The *Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Tax Collection and Administration* (Judicial Interpretation [2024] No. 4) explicitly lists “Dual contracts” as a method of tax evasion, posing significant administrative and criminal risks.  

(Ⅳ) Risks of MCN Agencies Failing to Fulfill Withholding and Remittance Obligations  

1. Legal Liability Analysis for MCN Agencies Failing to Withhold Taxes  

Currently, many online influencers sign agreements with MCN agencies and receive payments from them. According to regulations, MCN agencies are required to withhold and remit personal income tax for influencers when making actual payments. If taxes are not withheld, the agency may face fines ranging from 0.5 to 3 times the amount. Article 69 of the *Tax Collection and Administration Law* states: “If a withholding agent fails to withhold or collect taxes that should be withheld or collected, the tax authorities shall recover the taxes from the taxpayer and impose a fine of 50% to 3 times the amount of taxes that should have been withheld or collected.”  

For influencers, even if the MCN agency fails to withhold taxes, they, as the income recipients, are still obligated to pay taxes; otherwise, they risk tax evasion. If an influencer refuses to declare taxes after being notified by the tax authorities, they may still be deemed to have evaded taxes.  

2. Legal Liability Analysis for Agencies Withholding but Failing to Remit Taxes  

For agencies, withholding but failing to remit taxes falls under Article 68 of the *Tax Collection and Administration Law*: “If a taxpayer or withholding agent fails to pay or underpays the taxes that should be paid or remitted within the prescribed period, and still fails to pay after being ordered by the tax authorities to do so within a specified time limit, the tax authorities may, in addition to taking compulsory enforcement measures to recover the unpaid or underpaid taxes, impose a fine of 50% to 5 times the amount of unpaid or underpaid taxes.” To emphasize the punitive nature of such actions, the law increases the upper limit of fines for withholding agents who fail to remit taxes compared to those who fail to withhold taxes.  

For influencers, although the MCN agency, as the payer, is the statutory withholding agent, the influencer, as the actual income recipient, remains the primary taxpayer. In other words, influencers, as taxpayers, cannot use the agency’s failure to remit taxes as a defense. The tax authorities will recover the unpaid taxes from the taxpayer (the influencer), who can then seek civil compensation from the MCN agency.

Ⅲ. MCN Companies and Controlling Enterprises Inflating Costs: Risks of Tax Evasion and Fraudulent Invoicing Coexist

In recent years, enterprises associated with online influencers have frequently encountered tax risks. For example, the Sima X case also involved tax evasion by the controlling enterprise regarding corporate income tax.  

(Ⅰ) Obtaining Fraudulent Invoices to Inflate Costs as a Common Tax Evasion Tactic  

MCN agencies or enterprises controlled by influencers often reduce their tax burden through fictitious business operations and inflated costs, which has become a typical method of tax evasion. This practice usually involves using associated enterprises or individual businesses to issue invoices for “consulting fees” or “technical service fees,” leveraging the difficulty in quantifying and verifying such services to falsely inflate costs.  

However, such operations often lack a complete business chain, manifesting in features such as service contracts without specific delivery standards, no records of service deliverables, and closed-loop fund transfers between associated accounts. Once subjected to tax audits, these practices are almost certain to be classified as tax evasion.  

(Ⅱ) Abuse of Tax Incentives Also Constitutes Tax Evasion  

Currently, China offers tax incentives for small and micro-profit enterprises, allowing them to calculate taxable income at 25% and pay corporate income tax at a 20% rate. Article 5 of the *Announcement on Further Supporting the Development of Small and Micro Enterprises and Individual Businesses* (Ministry of Finance and State Taxation Administration Announcement No. 12 of 2023) stipulates that small and micro-profit enterprises must meet three conditions: annual taxable income not exceeding ¥3 million, fewer than 300 employees, and total assets not exceeding ¥50 million.  

For many MCN agencies and enterprises controlled by influencers, their taxable income far exceeds these limits. To enjoy the benefits for small and micro-profit enterprises, they often resort to splitting business operations or concealing income to control taxable income, which constitutes typical tax evasion.  

(Ⅲ) Surging Administrative and Criminal Risks of Fraudulent Invoicing  

In the entertainment industry, the primary cost for MCN agencies and enterprises controlled by influencers is often the labor remuneration of the influencers themselves. Taking online streamers as an example, due to the lack of standardized business entity status among streamers, it is difficult to issue compliant invoices directly. Many MCN agencies choose to obtain input invoices through flexible employment platforms.  

It is important to note that a common misconception in the industry is that as long as the streamer has indeed provided genuine labor, issuing invoices through flexible employment platforms is considered legal. However, this view is merely the MCN agency’s wishful thinking. Especially when streamers are directly recruited and managed by the MCN agency, such invoicing models are highly likely to raise questions from tax authorities about the authenticity of the business. Since core elements such as the streamer’s work content, scheduling, and profit-sharing are directly controlled by the MCN agency, if the flexible employment platform only serves as a fund transfer and invoice issuance mechanism without substantially intervening in employment management or service supervision, its role may be pierced and deemed a “invoice platform,” lacking a legitimate business purpose.  

At the administrative level, this behavior constitutes both fraudulent invoicing and tax evasion. If tax evasion is established, the tax authorities will recover the unpaid or underpaid taxes and late fees, and impose a fine of 50% to 5 times the amount of unpaid or underpaid taxes. If it constitutes a criminal offense of fraudulent invoicing, depending on the type of invoice issued, it may trigger charges of fraudulent issuance of ordinary invoices or fraudulent issuance of value-added tax (VAT) special invoices, carrying severe criminal liabilities.

Ⅳ. Tax Regulation Intensifies: Influencers and "Big Vs" Must Prioritize Tax Compliance

(Ⅰ) Do Not Blindly Trust Agency Tax Payment Promises; Individuals Should Regularly Verify Tax Payments  

In practice, there are cases where agencies withhold taxes or make false declarations. If influencers fail to actively verify their tax payments, they may be held liable for unpaid taxes. It is recommended that even if MCN agencies have fulfilled their withholding and remittance obligations, influencers should regularly download tax payment certificates through the Natural Person Electronic Tax Bureau or the personal tax app to verify the actual payment of taxes. Cross-checking bank statements with tax payment amounts each month is essential, and any discrepancies should be promptly reported to the tax authorities to avoid accumulating late fees.  

(Ⅱ) Retain Evidence of Business Authenticity to Mitigate Invoice Risks  

As tax regulation increasingly emphasizes the substance of business activities, influencers and their associated enterprises must pay special attention to the systematic management of evidence proving business authenticity. All cost deductions must ensure that contracts, funds, invoices, and business substance form a complete closed loop, which is the core defense against tax risks. For sensitive items such as "consulting services" or "technical services," it is crucial to retain communication records, meeting minutes, and delivered business outcomes to substantiate the actual occurrence of costs.  

(Ⅲ) Engage Professional Tax Lawyers to Develop Tax Compliance Plans  

Since the income of online influencers often involves multiple attributes such as labor remuneration, business income, and incidental income, different classification methods directly impact applicable tax rates and declaration obligations. Lawyers can assist in constructing a tax declaration framework that aligns with the principle of substantive taxation, based on evidence chains such as business contracts and fund flows. They can also establish compliance safeguards for high-risk areas like related-party transactions and cost deductions.  

(Ⅳ) Timely Response to Tax Risks is Essential  

Given that many influencers and online streamers have limited time and energy, they often outsource tax declaration and other tax-related matters to third-party agencies, which can inevitably lead to tax risks. If influencers or streamers are already facing tax inspections or even criminal investigations, it is crucial to promptly engage professional lawyers to help organize business materials, restore the true business facts as much as possible, and clarify responsibility divisions to prevent tax issues from affecting their future development.