Customers often ask, when signing a contract, can the contract terms stipulate the way to bear the tax? Does the tax side recognize such contract terms?
I remember reading a case before (Taizhong and Jiahetai Company, which can be found on the Internet), because the contract stipulates the responsibility of "tax package", the lawsuit went to the Supreme Court, and the final High Court judgment was determined as follows:
Although China's laws and regulations on tax administration clearly stipulate the taxpayer for the collection of various taxes, they do not prohibit the taxpayer from agreeing with the contract counterparty or a third party to pay the tax, that is, there are no mandatory or prohibitive provisions on who actually pays the tax.
It can be seen that the Supreme People's Court recognizes the legal effect of the "tax package clause".
It should be noted here that the Supreme People's Court is judging the case from the perspective of civil law, and there is no problem with this contractual act.
However, the subject of taxation is prescribed by law, and no organization (including tax authorities and localities**) or individuals has the right to change it. The subject of tax liability is contractually agreed, and as long as it does not touch the bottom line of the contract law, it can be freely agreed.
Therefore, in practice, although the tax commission recognizes the validity of the contract, it will generally not recover the tax from the other party as stipulated in the contract, but will recover the tax from the corresponding taxpayer, and then make a claim for breach of contract against the other party.
Recently, an inspection bureau announced a case, and the final result was that the tax was to recover the tax from the party that agreed in the contract.
The course of the case is roughly as follows:
A few years ago, A and B transferred land use rights, with A being the transferor and B being the transferee. At the time of signing the contract, it was agreed that all taxes and fees would be paid by B and had nothing to do with A.
Later, B received a tax [Notice of Correction within a Time Limit], requesting him to fulfill the obligation of withholding and paying individual income tax and pay back the individual income tax that had been withheld and not paid by A, but B had not paid it.
Recently, the tax department made a penalty decision on B: imposing a penalty of double the personal income tax withheld from A.
From the above case, it can be seen that the tax did not seek the taxpayer A as stipulated by the law for recovery, but found the contract party B to recover the tax, why?
According to Article 8 of the Individual Income Tax Law of the People's Republic of China:
For individual income tax, the income earner is the taxpayer, and the unit or individual that pays the income is the withholding agent.
According to Article 9 of the Individual Income Tax Law of the People's Republic of China:
The monthly tax withheld by the withholding agent and the monthly tax payable by the taxpayer shall be paid into the state treasury within the 15th day of the following month and the tax return shall be submitted to the tax authorities.
In this case, B actually acted as a withholding agent. Therefore, B is obliged to withhold and pay individual income tax to A, and then hand it over to the national treasury within the corresponding time.
And according to the contract, B has withheld the individual income tax, but it has not been paid. B is "withheld but not paid", and the individual income tax that A should pay has been deducted by B, so the tax bureau directly pursued it from B.
In this case, I personally feel that the tax also takes into account the actual situation: in the actual transfer of real estate, parking spaces, land, etc., the buyer is basically responsible for the tax. Therefore, in fact, in the process of contract negotiation, the two parties must have considered the corresponding tax situation.
Maybe that's one of the reasons why B was finally levied. List of high-quality authorsThe article is a personal work record and sharing, with different opinions or financial and tax-related issues, welcome to communicate!