Detailed explanation! Under the new regulations, how should companies apply for proactive disclosure?

How do companies apply for proactive disclosure under the new regulations?

On June 30th, 2022, the General Administration of Customs issued Announcement No. 54 of 2022, “Announcement on Handling Matters Related to Voluntarily Disclosing Tax-related Violations” (hereinafter referred to as Announcement 54), further releasing policy dividends. What is the difference between this announcement and No. 161 of 2019? Under the new rules, how should companies apply for voluntary disclosure? Let me explain in detail for you.

Part.01 What’s new in the new rules?

Q: What are the differences between the newly introduced Announcement 54 and previous announcements?

A: The main differences are as follows:

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For import and export enterprises and units that voluntarily disclose tax-related violations, no administrative penalties shall be imposed if one of the following circumstances occurs:

(1) Voluntarily disclosed to the customs within six months from the date of the tax violation;

(2) Voluntarily disclosed to the customs within one year after six months from the date of the tax violation. The amount of tax underpaid or evaded accounts for less than 30% of the tax payable, or the amount of tax underpaid or evaded is less than RMB 1 million.

Announcement 54 has set a clear validity period, from July 1, 2022 to December 31, 2023. Enterprises should actively conduct self-inspection to avoid missing the application period for relevant policy dividends.

Part.02 Does voluntary disclosure affect enterprises?

Q: If an enterprise voluntarily discloses its tax-related violations, will it affect its credit status?

A: For import and export enterprises and units that voluntarily disclose and are fined less than RMB 1 million or receive a warning from the customs, the disclosure will not be recorded in the customs’ assessment of the enterprise’s credit status. For advanced certified enterprises that voluntarily disclose tax-related violations, the customs will not suspend the application of corresponding management measures during the investigation period.

Q: If a company voluntarily discloses to the customs, can the punishment be mitigated if there is still an administrative penalty?

A: For import and export enterprises and units that actively disclose, if they violate customs supervision regulations, the customs shall impose a lighter or mitigated administrative penalty.

Q: Can the late payment penalty of related taxes generated by the company’s voluntary disclosure of its tax violations be reduced?

A: Import and export enterprises or units that voluntarily report their tax violations to the customs in writing and accept customs processing, and are determined by the customs as not subject to administrative penalties for voluntary disclosure, may apply to the customs for reduction or exemption of tax late payment penalties in accordance with the law. If they meet the requirements, the customs shall reduce or exempt the penalties.

Part.03 How can companies apply for voluntary disclosure?

Q: What channels can we use to apply for voluntary disclosure?

A: There are currently two ways for companies to apply for voluntary disclosure:

(1) Submit application materials to the on-site customs window at the customs declaration, actual import and export, or registered place.

(2) Submit an application to the customs declaration, actual import and export, or registered place customs through the “Internet+” platform. The process is as follows: log in to the General Administration of Customs website → Internet+ Customs → Enterprise Management and Inspection Enterprise Audit.

Q: What materials need to be submitted to apply for voluntary disclosure?

A: Companies need to provide the “Voluntary Disclosure Report Form” and accompanying materials such as account books and certificates.

(1) The “Voluntary Disclosure Report Form” should briefly summarize the facts of the violation in the “Voluntary Disclosure Content” column.

(2) The account books and certificates should be sorted out, and accompanying materials should be provided to verify the disclosed content, ensuring that the information is objective, true, and effective.

Q: Under what circumstances can’t the policy of voluntary disclosure be applied?

A: If import and export enterprises or units voluntarily report in writing to the customs their violation of customs supervision regulations and accept customs processing, the customs can determine that the relevant enterprises or units have voluntarily disclosed. However, the following situations are excluded:

(1) Customs had already obtained evidence of illegal conduct before the report;

(2) Customs had already notified the person being inspected before the report;

(3) The reported content is seriously untrue or conceals other illegal behavior.

Moreover, if import and export enterprises or units voluntarily disclose the same tax-related violation again to the customs, the relevant provisions of Notice No. 54 shall not be applicable.

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