"If an enterprise has tax risks and cancels them as soon as possible, will the risks also be lost?" The answer to this question was originally clear, "If the enterprise has a criminal risk of being suspected of fraudulent, then even if it is cancelled, the criminal liability of the relevant responsible person has not been eliminated. If there are tax related violations such as tax evasion and underpayment, then the cancellation of the legal entity, like the death of a natural person, should no longer be held accountable."

However, since 2022, there have been many typical cases where tax authorities have filed and investigated cancelled enterprises (suspected of tax evasion, underpayment, etc.) and required their original shareholders, operators, or investors to assume responsibility. For example, the tax authorities require the partners of a partnership to make up for the taxes that have been paid during the existence of the partnership according to "approved collection" instead of "audit collection"; Require the shareholders of a limited liability company to make up for the tax underpaid before the cancellation of the enterprise in accordance with the investment ratio; Require individual business operators to bear responsibility for their tax related violations prior to cancellation with their personal or family property; Requiring the investors of a sole proprietorship enterprise to be responsible for tax related violations during the existence of the enterprise, and so on. So, is it legal for the tax authorities to initiate inspection procedures on cancelled enterprises? The author of this article discusses with you.

1、 Collection of cases of tax authorities filing and inspecting cancelled enterprises this year

This year, there have been many cases where tax authorities have initiated audit procedures on cancelled enterprises. After the completion of the audit, the tax authorities require the original shareholders, operators, or investors of the enterprise to assume the responsibility for making up the tax on behalf of the original enterprise. The excerpts from the document are as follows:

（1） Tax recovery from shareholders of the original limited liability company, case No.: BSSJT [222] No. 2

Excerpt from the document: In view of the cancellation of your company's corporate income tax in 2021, 134453675.77 yuan should be paid to the original shareholders Shao, Chen Shimou, Chen Peimou, Qiu, and Shaomou based on the proportion of shareholder investment.

（2） The case number of tax recovery against the original self-employed industrial and commercial operators: Changshi Erji Office [222] No. 38

Excerpt from the document: Due to the cancellation of your individual business license on September 18, 2019, in accordance with Article 56 of the Civil Code of the People's Republic of China, "The debts of individual businesses shall be borne with personal property; those operated by families shall be borne with family property; those that cannot be distinguished shall be borne with family property", the above-mentioned illegal acts occurred during the operation of your company, The following taxes should be recovered from Cao Moumou, the person in charge.

（3） Tax recovery from shareholders of the original limited liability company, Case No.: QSJSB [2022] No. 622

Extract from the document: Qingdao Tianguiren Market Service Co., Ltd. briefly cancelled its industrial and commercial registration on October 8, 2021. Upon the cancellation, all shareholders signed the "Letter of Commitment for All Investors", promising that "the creditor's rights and debts of the enterprise have been liquidated before applying for cancellation of registration", and "the enterprise does not have outstanding taxes payable, and the liquidation work has been fully completed" All investors shall bear the supplementary taxes and overdue fees payable by Qingdao Tianguiren Market Service Co., Ltd. in accordance with the investment proportion.

（4） Case No.: NSSYJJ [2022] No. 48 for the recovery of taxes from former self-employed business operators

Excerpt from the document: Your business department was registered on May 9, 2020, and was approved for cancellation by the competent authority on January 4, 2021. The reason for cancellation is: dissolution according to law. During the inspection, your business department did not provide any information, and Xie Jin did not come to accept the inquiry. On April 14, 2022, I dialed your business department's contact number again, indicating that the voice prompt number was down According to the provisions of Article 37, paragraph 1, of the "Invoice Management Measures of the People's Republic of China" (Order No. 587 of the State Council), a fine of 110000 yuan will be imposed on your business department for making false invoices.

（5） Case No.: Huai Shui Yi Ji Chu [2022] No. 85, Tax Recovery from Investors of Former Sole Proprietorship Enterprises

Excerpt from the document: On January 20, 2022, the inspectors sent a "Notice on Tax Matters" (Huai Shui Yi Ji Shui Tong [2022] No. 7) to your unit, requesting your unit to submit tax related materials such as cost and expense certification materials for the service project before February 11, 2022. In summary, due to your company's failure to establish accounts and provide complete and accurate tax information, and in 2020, your company's personal income tax collection method has been adjusted to a regular and quota collection method.

Note: The date of filing and inspection by the tax authorities was January 21, 2022, but the sole proprietorship enterprise was cancelled in December 2021.

2、 Basis for the tax authorities to pursue responsibility for the shareholders, operators, and investors of the cancelled enterprise

Based on a study of the full text of the above-mentioned legal documents, the basis for the tax authorities to pursue responsibility for the shareholders, operators, and investors of the cancelled enterprise is as follows:

（1） Basis for recourse against shareholders of a limited liability company

Article 19 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (II) stipulates that "If a shareholder of a limited liability company... fails to go through liquidation according to law and fraudulently obtains the company registration authority to cancel the registration of a legal person by using a false liquidation report, and the creditor claims to bear corresponding liability for compensation for its company's debts, the people's court shall support it in accordance with the provisions of paragraph 2 of Article 20.", "If a company undergoes deregistration without being liquidated in accordance with the law, and a shareholder or a third party undertakes to bear liability for the company's debts when conducting deregistration with the company registration authority, the people's court shall support the claim by creditors to bear corresponding civil liability for their company's debts."

In the cancellation process, the market supervision and management department will require the shareholders of the enterprise to sign a commitment to assume responsibility for the company's debts. If the enterprise fails to complete the cancellation registration procedures in accordance with the law, the shareholders shall be responsible for the company's debts. Based on this commitment, the tax authorities require corporate shareholders to assume responsibility.

（2） Basis for recovery of individual business operators

Article 56 of the Civil Code of the People's Republic of China stipulates that "the debts of individual industrial and commercial households shall be borne with personal property if they are self-employed, with family property if they are self-employed, and with family property if they cannot be distinguished.".

Based on the provisions of this article, the tax authorities require the person in charge of an individual business to bear the value-added tax underpaid during the business period of the individual business, as well as the individual income tax of the person in charge.

（3） Basis for recovery of individual proprietorship enterprise investors

According to Article 2 of the "Sole Proprietorship Enterprise Law", "The term" sole proprietorship enterprise "as used in this Law refers to a business entity established within the territory of China in accordance with this Law, invested by a natural person, whose property is owned by the investor personally, and whose personal property bears unlimited liability for the debts of the enterprise." Article 28 stipulates that:, "After the dissolution of a sole proprietorship enterprise, the original investor shall still be liable to repay the debts of the sole proprietorship enterprise during its existence, but if the creditor fails to make a debt repayment request to the debtor within five years, this liability shall be extinguished." Article 31 stipulates, "If the property of the sole proprietorship enterprise is insufficient to repay the debts, the investor shall repay them with other personal property."
The tax authorities believe that the underpayment of tax due to tax violations during the existence of a sole proprietorship enterprise is equal to the debt of the sole proprietorship enterprise, so even if the sole proprietorship enterprise is cancelled, the tax authorities still have the right to recover its tax.

3、 There is a conflict between the tax authorities' inspection of the registered enterprises and the existing legal provisions

（1） The loss of legal personality is like the death of a natural person, and the cancelled enterprise no longer has the capacity to act

According to Article 59 of the Civil Code of the People's Republic of China, "The capacity for civil rights and civil conduct of a legal person shall arise from the establishment of the legal person and expire upon its termination." Article 72, paragraph 3, stipulates that, "Upon the completion of liquidation and the completion of the cancellation of registration of a legal person, the legal person shall terminate; if it is not necessary to handle the registration of a legal person according to law, the legal person shall terminate upon the completion of liquidation." Article 30 of the Regulations of the People's Republic of China on the Administration of Registration of Market Entities stipulates, "Upon the cancellation of registration by the registration authority, the market entity shall terminate." According to the provisions of Article 30, after the liquidation process of an enterprise as a legal person is completed and the cancellation of registration is completed, the legal person's status.

After an enterprise is cancelled by the registration authority, its legal personality as a corporate entity is completely eliminated, and its legal status as the subject of liability bearing no longer exists, and it should not be punished.

（2） Corporate shareholders, operators, and investors are not eligible tax payers, and their taxation violates mandatory legal provisions

Article 4 of the Law of the People's Republic of China on the Administration of Tax Collection stipulates that "entities and individuals that are obligated to pay taxes under laws and administrative regulations are taxpayers." Article 3 stipulates that, "The initiation and suspension of tax collection, as well as the reduction, exemption, refund, and compensation of tax shall be implemented in accordance with the provisions of the law. If the law authorizes the State Council to make provisions, the provisions of administrative regulations formulated by the State Council shall be implemented. No organ, unit, or individual may, in violation of the provisions of laws and administrative regulations, arbitrarily make decisions on the initiation and suspension of tax collection, as well as on the reduction, exemption, refund, and compensation of tax, and other decisions that contravene tax laws and administrative regulations."

Whether it is the subject of tax obligations and whether tax obligations occur are determined by laws and regulations. The law does not provide that "after the cancellation of an enterprise, the shareholders, operators, and investors shall bear the tax obligations and related administrative responsibilities." If the tax authorities impose taxes on the shareholders, operators, and investors of the enterprise, it is like arbitrarily changing the "subject of tax obligations." This does not comply with the statutory principles of taxation, but also seriously violates the mandatory provisions of the Tax Administration Law.

（3） Taxation on cancelled enterprises is detrimental to the credibility of administrative organs

According to the provisions of the Announcement on the Issuance of the Guidelines for Enterprise Cancellation (Revised in 2021), "Generally, an enterprise that terminates its business activities and exits the market needs to undergo three main processes: resolution of dissolution, liquidation and distribution, and cancellation of registration. Taking a company as an example, in accordance with the Company Law "It is stipulated that before a company officially terminates its withdrawal from the market, it must declare its dissolution in accordance with the law, establish a liquidation team to carry out liquidation, clear up the company's assets, pay taxes, clear up creditor's rights and debts, pay employee salaries, social insurance expenses, etc. After the liquidation of the company is completed, it should prepare a liquidation report, handle the cancellation of company registration, and announce the termination of the company."

In other words, before the cancellation of an enterprise, it has been confirmed by the tax authorities that there are no tax violations, and the tax authorities should be responsible for the confirmed actions. If the tax authority negates the decision it has made in order to pursue tax payment, it will undermine its credibility.

summary

The author believes that if the relevant responsible personnel of the cancelled enterprise are suspected of criminal liability such as fraudulent opening and tax evasion, the tax authorities have the right to transfer the case clues to the public security organ according to law. "If an enterprise completes its cancellation in accordance with legal procedures and has not maliciously defrauded the company registration authority by using false liquidation reports or other means to cancel the registration of a legal person, the tax authority has no right to file a case for and inspect the tax related illegal activities of the cancelled enterprise, nor can it require its original shareholders, operators, and investors to pay taxes on its behalf.".