Enterprises are the most important main body of market economy, and the compliance construction of enterprises plays an important role in preventing their own business risks and creating a favorable market environment. Taxation accompanies the whole life cycle of enterprises, and tax compliance is the main content of compliance construction of enterprises, and is also an important guarantee for the sustained and healthy development. Recently, Mr. Zhang Qian from Hwuason Law Firm was interviewed by ZHONGGUO SHUIWU BAO on the issue of corporate tax compliance, reminding the importance of corporate tax compliance, analyzing the necessity of building an organizational structure for tax compliance management, and analyzing the key points of tax compliance in terms of establishment, operation, merger and acquisition, and deregistration of enterprises.

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Corporate Tax Compliance: “Heart” is more important than action

Hong Yue, Intern Reporter

“Tax compliance is increasingly becoming a 'must' for businesses.”“Tax compliance is the cornerstone of ensuring sustainable business development!” “Legal operation and paying taxes in accordance with the law is the long-term solution.” On November 19, the article “Comply with Business and Pay Taxes According to Law, Escort the High-Quality Development of Enterprises” published on the front page of China Taxation News was reprinted on the WeChat public number of the State Administration of Taxation, and the reading volume quickly reached 100,000+, with some readers leaving comments to express their views on tax compliance.

In recent times, the reporter further interviewed some enterprises and industry experts around the topic of tax compliance. Zhang Qian, partner of Hwuason Law Firm, said that nowadays, more and more enterprises not only realize the importance of tax compliance, but also take the initiative to take steps to build compliance. For enterprises, the establishment of a tax compliance system is a systematic project that requires practical actions to achieve practical results. “When it comes to tax compliance, 'heart' is more important than action.” Zhang Qian said.

Who is in charge?

Large enterprises choose to set up compliance management entities, or the formation of cross-departmental “tax compliance team”, or the establishment of risk prevention function of the relevant institutions, the volume of relatively small enterprises, tend to seek help from tax-related professional services.

In the interview with Zhang Qian, the reporter's eyes fell on her desk calendar - in November divided into 30 grids, densely packed with to-do items and travel nodes. Zhang Qian, who has just returned from a client's office, said to the reporter straight away: “In recent years, we have received more and more tax compliance consulting projects. The focus of our service is to help customers establish an effective tax compliance system. To put it bluntly, it is to ensure that companies have someone to do this.”

Compliance management is a multidisciplinary, systematic project and a huge system.In 2009, the State Administration of Taxation (SAT) issued the “Guidelines on Tax Risk Management for Large Enterprises (for Trial Implementation)”, which suggests that enterprises can combine the characteristics of production and operation and the requirements of internal tax risk management to set up tax management organizations and positions, and to clarify the duties and authorities of the positions. The Compliance Management System Requirements and Guidelines for Use (GB/T35770-2022) issued by the State Administration for Market Supervision and Administration 2022, the Measures for Compliance Management of Central Enterprises issued by the State-owned Assets Supervision and Administration Commission of the State Council 2022, and the Measures for Compliance Management of Financial Institutions (Draft for Public Opinion) issued by the General Administration of Financial Supervision and Administration in August this year, have all put forward the setting up of the compliance management departments or positions with clear requirements. The general principle of these documents is that enterprises and their branches that have the conditions should set up tax compliance management departments; enterprises and their branches that do not have the conditions for the time being should set up compliance positions that are sufficient for the fulfillment of their duties.

“Tax compliance is an important part of the enterprise compliance management system.” Zhang Qian told the reporter that no matter which ministry issued the compliance guidelines, they all emphasize the importance of building an organizational structure for tax compliance management. Enterprises must achieve standardization and legality of tax-related matters through clear assignment of duties, process design and resource allocation. For example, Chapter 2 of the Measures for Compliance Management of Central Enterprises specifically emphasizes “Organization and Responsibilities”, specifying the specific responsibilities of the Party Committee (Party Group), Board of Directors, Managerial Team, Principal Officers, Compliance Committees, Chief Compliance Officers, and Business and Functional Departments of the Central Enterprises. In this regard, some central enterprises attach great importance to it. As early as July 2019, China Railway Construction has made it clear that the company's vice president and general counsel will serve as the chief compliance officer to promote the construction of a system-wide compliance organization system.

The reporter noted that although some enterprises have not explicitly set up tax compliance management positions, they have set up relevant organizations or positions that focus on preventing tax risks-an important part of tax compliance.2024 On December 3, 2019, listed company CITIC Pacific Special Steel Group Corporation announced that the company's headquarters set up a tax expense management function, specializing in the parent company's tax management and overall tax risk control, as well as providing tax guidance and advice to its subsidiaries. Subsidiaries at all levels set up tax management positions to ensure the strict fulfillment of tax obligations and prevent tax risks.

According to the reporter's understanding, regardless of the size of the enterprise, generally on the basis of business, finance and legal affairs, the addition of risk control personnel and external support staff, the formation of a preliminary compliance management structure. Large companies generally specialize in the establishment of corporate compliance department, to achieve tax compliance is one of its important work objectives. At the same time, although some companies do not have an entity in charge of tax compliance, they will draw personnel from various teams to form a cross-departmental “virtual department”. (hereinafter referred to as Capital Intelligence) is an intelligent environmental protection enterprise committed to providing the industry with “leading technology, data-driven, intelligent synergy”, with operations in many provinces and cities. Wuyi, the financial officer of CCTC Intelligence, introduced that when the project may encounter tax-related problems, the company will arrange for tax personnel to take the lead in forming a temporary “tax special working group” to solve the tax compliance problems of the specific project.

“In practice, many companies choose to seek help from tax-related professional service organizations.” As a tax lawyer, Zhang Qian has completed dozens of tax compliance consulting projects in recent years. In Zhang Qian's opinion, the external support team for enterprise tax compliance is often able to provide targeted tax compliance services by combining the tax compliance needs of enterprises.

What to manage?

Tax compliance management has its own priorities. Generally speaking, enterprises should attach great importance to typical tax risks, prevent high-frequency tax risks and take into account potential tax risks.

Tax compliance plays a crucial role in all stages of business establishment, operation, merger and acquisition, and deregistration. However, each stage has its own focus, and only by targeting can we enhance the effectiveness of tax compliance management.

“In the early stage of enterprise establishment, you need to focus on the typical tax risks behind the choice of organizational form.” Zhang Qian introduced that different organizational forms, such as limited liability companies, partnerships, and sole proprietorships, correspond to different tax liabilities, and the manifestation of the corresponding tax risks will also be different. In practice, some taxpayers take advantage of the partnership tax system and tax incentives, the form of shareholding platform “from the company into a partnership”, it is easy to trigger tax risks.

For example, Company A, a limited liability company, relocated from City A to City C, but did not make any changes in business and tax registration. After the completion of the relocation, the enterprise type of Company A was changed from a limited liability company to a limited partnership. Thereafter, the competent tax authority issued a Notice of Tax Matters to Company A, requesting it to submit a tax clearance report on the conversion of organizational form. Zhang Qian analyzed that the change of Company A from a legal person to a partnership should be regarded as liquidation, and Company A and its shareholders need to perform the corresponding tax obligations. As Company A did not register the change of information in time and did not fulfill the corresponding tax obligations according to the regulations, it faces the risk of paying late fees and penalties.

During the expansion stage, when there are mergers and acquisitions, relocation and other situations, it is also important to focus on the HF compliance risk, and to liquidate and pay the tax according to the regulations. Xinao Group is an innovative clean energy company founded in Langfang, Hebei province, with business covering distribution, trading, transmission and storage, production, engineering and smart manufacturing and other scenarios. Cui Liyan, the group's tax director, introduced that during the continuous development of Xinao Group, the enterprise's gas business segment radiates to many provinces and cities across the country, with a gradual increase in the number of branches. In this process, the group's headquarters will send tax specialists to subsidiaries around the country to carry out their work, and on the basis of a full understanding of the substance of specific transactions and local conditions, they will put forward suggestions on the compliance treatment of each transaction from a compliance perspective. “Specific analysis of specific issues is the prerequisite for steady business expansion and the key to tax compliance management.” Cui Liyan said.

With the continuous development of enterprises, when there is a business need for mergers and acquisitions and reorganization, it is especially important to pay attention to identify and prevent tax-related risks. Zhejiang Provincial Association of Certified Public Accountants recently issued a “major risks of mergers and acquisitions and reorganization expert tips” clearly mentioned that the implementation stage of mergers and acquisitions and reorganization of enterprises to focus on tax compliance risks, mainly including mergers and acquisitions in an unreasonable manner resulting in the assumption of a high level of tax, mergers and acquisitions and reorganization of the tax program is not in compliance, as well as the subject enterprise's own legacy of tax risks and other three aspects. Among other things, it is important to focus on reviewing whether the Subject Enterprise has any historical legacy tax issues and the amount that may be involved. If necessary, it may communicate with the relevant tax authorities to understand the compliance situation of the subject enterprise's tax payment in the past years.

How to manage?

Combined with the actual situation of enterprises, starting from the specific objectives of tax compliance, the compliance requirements of the regulatory authorities are put into practice through information technology, and efforts are made to build an enterprise compliance culture.

How exactly to carry out tax compliance management? In this regard, whether it is the Compliance Management System Requirements and Usage Guidelines (GB/T35770-2022) issued by the State Administration for Market Supervision and Administration (SAMSA), the Measures for Compliance Management of Central Enterprises issued by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), the Measures for Compliance Management of Financial Institutions for Consultation by the General Administration of Financial Services (GACF), or the Guidelines for Risk Management of Taxes for Large Enterprises (Trial) issued by the SAT, all indicate clear guidelines. ), all indicate clear directions and put forward specific requirements. As an enterprise, the focus is to take into account the actual situation of the enterprise and start from the specific objectives of tax compliance, so as to put the various compliance requirements of the regulatory authorities into practice.

Among the compliance requirements of the regulatory authorities, informationization is a very important aspect. For example, the Measures for Compliance Management of Central Enterprises set up a special chapter on “Informationization Construction”, which makes clear provisions on how central enterprises can realize compliance management by means of informationization. Among them, Article 34 stipulates that central enterprises shall regularly sort out business processes, identify compliance risk points, use information technology to embed compliance requirements and preventive and control measures into the processes, strengthen compliance review of key nodes, and enhance process control. The Guidelines on Tax Risk Management for Large Enterprises (for Trial Implementation) also dedicates a chapter on “Information and Communication”, suggesting that enterprises should apply information technology to tax risk management in accordance with their business characteristics and the principle of cost-efficiency and establish a risk management information system covering the basic risk management process and all aspects of the internal control system.

Company N, a scientific research unit directly under a large state-owned company, fully utilizes emerging information technology to build functional modules for invoice management, tax declaration, preferential enjoyment, risk prevention and control in phases, and fully applies them in dozens of taxpaying bodies of the group, and strives to build an enterprise intelligent tax management platform. It is understood that N has realized the visualization of dozens of tax display subjects by constructing a unified tax big data pool for the whole group and summarizing the data of invoices, tax-related business, tax-related accounting, tax declaration and other data of the group and units at all levels.

As a private enterprise, Xin'ao Group also attaches great importance to the construction of tax management informationization. Cui Liyan introduced that in order to do a good job in tax compliance management, Xinao Group takes informationization tools as a hand to gradually explore the “tax sharing” mode - through the integration of enterprise data resources, strengthening the compliance management information system and other information systems, such as finance, investment, procurement and so on. By integrating enterprise data resources, we strengthen the interconnection between the compliance management information system and other information systems such as finance, investment and procurement, so as to realize data sharing. Particular attention has been paid to the development of big data, artificial intelligence and other aspects of information technology, regular combing of business processes, finding compliance risk points, embedding compliance requirements and preventive and control measures into the process, and then more efficiently realizing real-time dynamic monitoring of key links and key businesses. “Use the gas pedal of informationization tools, tax compliance management is twice the result with half the effort.” Cui Liyan said.

In strengthening the tax management “hard power” at the same time, some enterprises also increasingly emphasize the construction of compliance culture. In promoting the formation of a compliance culture “soft power”, the first smart in the group headquarters under the guidance of the strengthening of compliance capacity training and other ways to actively guide the company's employees consciously practicing the concept of compliance, to comply with compliance requirements. Wuyi told the reporter that the company's human resources department takes the lead in conducting compliance thematic training every quarter, and the legal department regularly organizes reading materials such as compliance guidelines to help business lines and financial lines understand the risk points. “Through regular compliance training, employees can keep abreast of the latest changes and details of relevant laws and regulations, and thus effectively avoid compliance risks.” Wuyi said.

“Deployment without implementation equals zero, and implementation without supervision equals zero.” Zhang Qian told reporters that supervision and accountability, too, is an important part of tax compliance management. In this regard, the Measures for Compliance Management of Central Enterprises and the Guidelines for Tax Risk Management of Large Enterprises (for Trial Implementation) have all put forward specific requirements. For enterprises, it is both necessary and important to establish incentive and accountability mechanisms for tax compliance management - this is the key to ensuring that all tax compliance management systems are put into practice.