A waterproof system Co. v. City Local Taxation Bureau Tax Bureau

Questions:

1Hybrid sales behavior, to how to levy tax?

2What is the prerequisite, the approved levy taxes?

The case:A waterproof system of the company is a foreign investment enterprise, its business scope is: manufacturing, sales of high polymer waterproof material; undertake waterproof construction engineering. In 2005 the "sign and an automobile company engineering contract", the plaintiff is a contractor bearing steel structure roofing insulation systems engineering. Contract: a waterproof system as the contractor contracting package materials, the contract price for the 19800000 yuan, of which produced materials amounted to 8292810 yuan, 11507190 yuan for the construction of labor. In November 24, 2005, the local tax bureau from the car companies charge according to the plaintiff waterproof system progress payment and billing application, the plaintiff issued "the people's Republic of China general tax payment book", requires the plaintiff to the defendant in December 15 days before the payment of business tax 345215.7 yuan, 46028.76 yuan of personal income tax. The State Administration of Taxation of the plaintiff's registered the company issued a certificate in 2005 November 30 to the defendant, the plaintiff is the main content for an automobile company is building waterproof insulation engineering, sales of waterproof material and waterproof engineering construction labor contract, belongs to the act of VAT sales mix, should receive waterproof materials, waterproof engineering and construction labor income in institutions where the competent State Taxation Bureau in conjunction with the payment of value-added tax, not to collect sales tax. The plaintiff has in the time limit of the tax to the treasury. Since then, the defendant to the plaintiff refuses to accept the specific administrative acts of the tax organs at a higher level, in 2006 January 4, the administrative reconsideration, the reconsideration organ in March of the same year, make an administrative reconsideration decision to maintain the defendant of administrative behavior. The plaintiff refuses to accept the reconsideration decision, bring a suit to the court in April of the same year, request the court to revoke the defendant to make decision and return the already levied tax.

   The Plaintiff alleged that: 1, in accordance with the provisions ofthe [2002]117 document, the plaintiff need not pay business tax, and the tax authorities where the plaintiff has certified that the plaintiff's behavior belongs to hybrid sales behavior, should pay value-added tax; 2, the defendant to the plaintiff according to 4 ‰ tax levy personal income tax in violation of relevant the provisions of the law, the plaintiff has in its place to pay personal income tax, no need in the project site to pay personal income tax.

The defendant argued that the plaintiff has: 1, the construction industry qualification certificate, business license the business scope includes undertake waterproof construction engineering and related technology consulting services, and to the construction industry enterprise identity engineering contract signed. According to the relevant provisions of tax laws, tax collection scope should be in accordance with the construction industry in the "other works" projects have been assessed business tax. As the main raw material for the project consumed does not belong to the self-produced goods listed in document 117, so do not apply the relevant provisions of the document. It should be in accordance with the "provisions on the implementation of the Interim Regulations on business tax of the people's Republic of China Rules" in article eighteenth, the plaintiff has the project full levy business tax. 2, the plaintiff argues that the defendant to levy personal income tax in violation of the provisions of the relevant laws, this is no reason.

    The court held that: "specified in the first paragraph of article fifth of the people's Republic of China tax collection and management law", "the State Council in charge of the Department in charge of tax levy management. The State Administration of Taxation and Local Taxation Bureau shall be in accordance with local tax collection and management scope as prescribed by the State Council separately collection management." The tax bureau as the national tax authority in the administrative area of tax collection in accordance with the law, therefore the defendants made lattice.

"Provisions of Article 1 of the Interim Regulations of the people's Republic of China" business tax, "the provisions of the labor regulations in the territory of the people's Republic of China (hereinafter referred to as the taxable services), the transfer of intangible assets or the sale of immovable estate units and individuals, for the taxpayers of the business tax (hereinafter referred to as the taxpayer), should be in accordance with the payment of business tax regulations." In this case, the plaintiff made construction companies building waterproof engineering qualification certificate in January 8, 2004, and to the construction enterprises to participate in the bidding activities of automobile company successfully won the bid. The plaintiff is a construction enterprise in the engineering location related business activities should pay business tax. "Regulations" provisions of the first paragraph eighteenth of the implementation of the Interim Regulations on business tax of the people's Republic of China, "taxpayers engaged in the construction, repair, decoration engineering work, no matter how settlement with each other, the turnover shall include the project with raw materials and other supplies and power price." The general contractor to provide the taxable labor services in the construction sector, shall be made in accordance with its construction project payment in full to levy business tax. Consider the plaintiff, the plaintiff's behavior in line with "the State Administration of Taxation on taxpayers selling self-produced goods provide value-added tax services and provide construction notice tax imposing circulation service" (Guoshuifa No. [2002]117) first "whoever does not also meet the above conditions, all income obtained by taxpayers of value added tax, not levy sales tax", therefore, the plaintiff need not pay business tax. This house believes that, for the premise of the rules is the raw materials for the project is self-produced goods, mainly raw materials used by the project does not belong to the self-produced goods, the paper cited thus, this case is not applicable document [2002]117 document of this provision. About whether the plaintiff in the case of hybrid sales behavior and behavior of the local State Taxation Bureau in 2005 November 30, the certificate, proof of plaintiff's behavior is hybrid sales behavior, need not pay business tax issues.

   This house believes that, "the taxpayer sells behavior whether to belong to hybrid sales behavior, owned by the State Administration of taxation collection agencies to determine," because of this case is the collection of business tax, and business tax collection is by the business tax to the tax authorities to levy occurred, therefore, whether it is hybrid sales behavior, should also be by the business tax to the tax authorities to define, namely the accused to define. Fifth the provisions of the second paragraph, "a sales activity that involves both taxable services and goods, to hybrid sales behavior. Mixed sales activities engaged in the production of goods, wholesale or retail business, enterprise unit and individual operator, is regarded as a sale of goods, no business tax is levied; mixed sales activities of other units and individuals, as the provision of taxable services, shall levy business tax." In accordance with the above provisions, the definition of whether an action is the premise of hybrid sales behavior is "action of a sale" involves both taxable services and goods, to be a mixed sales activity, and in this case, the plaintiff and car companies signed contracts for the contract, the plaintiff to provide construction services contract, is not a simple sales behavior, therefore, the above-mentioned hybrid sales behavior does not apply to this case.

   "Notice of the State Administration of Taxation issued" Interim Measures on the construction and installation industry of personal income tax collection management > "(Guoshuifa No. [1996]127) documents prescribed in article eighth," construction of the personal income tax, the tax withholding agents withhold and the taxpayer to declare and pay the." The provisions of article ninth, "work units and individuals to install industry project construction is the personal income tax withholding agent, shall withhold the individual income taxes payable on income to individuals." The provisions of article eleventh, "units in the installation project construction in different places, should be in the project where the withholding of personal income tax. But the income distribution in the unit, and can apply to the competent tax authorities to provide complete, accurate accounting records and accounting vouchers, upon approval of the competent tax authorities where the unit is located, to the personal income tax withholding." According to the above provisions, the plaintiff to the defendant paying their staff's personal income tax is the legal obligation, the defendant has the right to levy personal income tax to the plaintiff. The documents prescribed in article sixth, "units and individuals engaged in construction and installation industry shall set up accounting books, a sound financial system, accurate, and complete accounting. To not set up accounting books, or the units and individuals can not accurately, accounting, tax authorities according to the scale of the project, the project contract (agreement) schedule, price and project completion, verify its taxable income and tax payable, according to tax. Specific to the approved way above the county (including county-level tax authorities to formulate)." According to the above provisions, the collection of personal income tax on construction engineering staff should first review the unit accounting books, are levied according to the accounting books, not only in the accounting books or although accounting books, but not complete, accurate to personal income in the case of the project in accordance with the total levy 4 ‰ of the personal income tax. But in this case, the defendant did not review the accounting books, also did not inform the plaintiff to provide the accounting books, the defendant has no evidence that the plaintiff is accounting is not sound units, but directly to the plaintiff to verification collection way to levy 4 ‰ of the personal income tax, which is illegal, it shall be revoked, and shall the plaintiff to make the collection of personal income tax act.

Case analysis:

  First, the tax authority to the company of individual income tax legal?

   At present, a prominent phenomenon is the engineering construction industry one works, many projects are assigned to several different construction qualification units or self-employed to undertake specific construction tasks, hire temporary workers scattered in the construction process. These temporary workers often have no formal labor contract is signed with the construction unit, construction units of the official register of employees do not have this kind of construction personnel records, business books have not paid the accounting records for this type of personnel. Cost and efficiency of tax based on reason, besides routine supervision of this kind of implicit labor groups of taxable income to the tax authorities of the basic free. Therefore, for plugging loopholes collection, "notice" issued by the State Administration of Taxation on Interim Measures "construction of personal income tax collection management > stated in all the tax authorities can according to a certain proportion of income levy approved by the engineering staff of the personal income tax. But attention is required, the tax authorities in the approved levy personal income tax, must comply with the law and relevant requirements imposed. "The people's Republic of China on tax collection and administration"The provisions of article thirty-fifth:"The taxpayer has one of the following cases, the tax authorities shall have the right to assess the amount of tax payable: (a) in accordance with the provisions of laws, administrative rules and regulations can not set up an account book; (two) in accordance with the provisions of laws, administrative rules and regulations shall set up account books but not set; (three) good at self destruction account book or refuses to provide tax data; (four) is arranged the books, but messy accounts or the information on costs, income vouchers and expense vouchers are incomplete, it is difficult to audit; (five) occurrence of tax obligation, not for tax return within the prescribed time limit, the tax authority shall order the deadline for filing, fails to declare the tax basis of the taxpayer; (six) the declaration is obviously on the low side, and without proper justification." If the taxpayer to audit the income tax of enterprises, and according to the verification of account books vouchers inspection, can identify the sound accounting system, accounting is accurate, the tax authorities must be carried out in accordance with the law of Taxation on audit of accounts, according to the enterprise for employees paid by the amount of "income from wages and salaries" item collection of personal income tax. If the certified enterprises participating in the construction personnel are registered in the official staff, and the enterprise has on employee wage withholding individual income tax to the taxpayer, then the verification collection of individual income tax, will inevitably lead to double taxation of construction personnel income. In this case, the tax authorities will be incorrect for external construction units according to the total collection of engineering staff of personal income tax is.

  Two, whether the company for the taxpayers of the business tax?

   The plaintiff think, company sales of waterproof material and construction and installation services, the act belongs to the mixed sales, in accordance with the provisions ofthe [2002]117 document, should all project funds to pay the value-added tax collection. The reason is not established, the plaintiff in error to reference the laws and regulations, to bring a suit in a passive. Document [2002]117 document on the "self-produced goods" detail "lists, self-produced goods refers to : (a) metal structure: including the activities of the board, the steel structure housing, steel products, metal frame and other products; (two) aluminum alloy doors and windows; (three) (glass curtain wall; four) machinery equipment, electronic communications equipment; (other provisions of the State Administration of Taxation five)." (Note: 2006 issued the "State Administration of Taxation on taxpayers selling self-produced waterproof building material and also provides construction notice tax imposing circulation service" (Guoshuifa No. [2006]80 paper) was the waterproof material are also included in the scope of self-produced goods). The control lists of goods is not in the list, waterproof material. Therefore, this means ofthe [2002]117 article does not apply to the acts of the plaintiff. But the plaintiff cited legal basis error does not mean that the administrative act the defendant's right. In fact, the plaintiff's behavior should be based primarily on the value-added tax levied from "the implementation of the Interim Regulations of the people's Republic of China value added tax rules" provisions of article fifth, "if a sale involving both goods and non VAT taxable services, for the hybrid sales behavior. Engaged in the production of goods, wholesale or retail enterprises, enterprise units and individual industrial and commercial households hybrid sales behavior, is regarded as a sale of goods, and shall pay VAT; mixed sales activities of other units and individuals, as sales of non VAT taxable services, not to pay value-added tax. The taxpayer sells behavior whether to belong to hybrid sales behavior, determined by the State Administration of Taxation and tax authorities. The first paragraph of this article refers to engaging in production, wholesale or retail business, enterprise unit and individual operator, including production, wholesale or retail goods mainly engaged in, and also engaged in non taxable services enterprises, enterprise unit and individual operator." From the business perspective, which belongs to the production, wholesale or retail engaged in goods mainly, and concurrently non taxable services enterprises. If the plaintiff's behavior belongs to hybrid sales behavior, should pay value added tax.

   According to the court, "in this case is the collection of business tax, and business tax collection is by the business tax to the tax authorities to define the occurrence." The author thinks, the court's judgment because in a circular argument. The dispute between the parties is the behavior to be sales tax or value-added tax, the court is actually put the cart before the horse, will demonstrate target as the starting point of this argument. The court to the two sides signed the construction contract is negative should belong to the mixed sales, this view is untenable. Because the judge hybrid sales behavior not simply on the basis of the name of the contract, but according to the contract contents to judge. The plaintiff does not only provide the construction and installation services, the contract price is not only labor, which also contains the value produced materials provided by the plaintiff part. According to "the implementation of the provisions of the Interim Regulations of the people's Republic of China value added tax rules" in article eighth, the plaintiff will be self-produced goods used for construction projects, in line with the "characteristics of self-produced goods for non taxable services", should be regarded as sales processing. The plaintiff will self-produced goods for construction has constituted the "sale of goods" behavior. In addition, according to "the implementation of the provisions of the Interim Regulations on business tax of the people's Republic of China Rules" in article fifth, "the taxpayer sells behavior whether to belong to hybrid sales behavior, determined by the State Administration of Taxation and tax authorities." "Notice of the State Administration of Taxation on the tax, resource tax regulations" the competent tax authorities, tax authorities "name issue" (Guoshuifa No. [1994]232) regulations:"...... Three, "the people's Republic of China Interim Regulations on business tax" rules for the implementation of article fifth, article sixth referred to in the State Administration of Taxation, the tax authority, the State Administration of taxation is at or above the county level (including the county level) the national tax bureau." Therefore, the taxpayer sells behavior whether to belong to the recognition authority hybrid sales behavior belongs to the State Administration of Taxation and the Non Local Taxation bureau.

   In this case, the State Administration of taxation authority in the locality where the plaintiff has the plaintiff identified as acts of hybrid sales behavior and issued by the relevant proof. Effectiveness of the court to review the evidence in the law, should be three elements around the evidence of the "authenticity, relevance, legitimacy" review. To prove that the plaintiff to provide tax department of the original (authenticity), directly affects the behavior of tax related qualitative (correlation), and the provisions of the tax law issued by relevant authorities (validity), the evidence is evidence of effectiveness. But the court only review the legality of the evidence form, but also the legitimacy of administrative confirmation behavior of substantive examination, finally by the judicial administrative organs to overthrow the professional judgment. The author thinks, because the administrative act is not the administrative behavior, the substantive examination conducted by the court, has gone beyond the scope of judicial review proper, in violation of the principle of judicial discretion. The administrative litigation law fifth established a basic principle of administrative litigation: the people's Court concerning the trial of administrative cases, to review the legality of concrete administrative behavior. This provision also clarifies the object of judicial review of the court is the specific administrative act is legal. With the specific administrative act of military issues, is not in the court's examination scope. So, the legitimacy of whether the court can other administrative acts on the outside of the specific administrative act of the review? Therefore, the administrative procedure law does not make clear. But from the relevant provisions of the administrative procedure law, the legitimacy of the court only review the specific administrative act, if not the sued specific towns a legality of, is not in the scope of judicial review of the court. To clarify this issue, the specific provisions of the administrative procedure law in the judicial interpretation of the subsequent introduction in the formulation, the total in a specific administrative act with "the two words" [1].

   The 2009 revised "Regulations" the implementation of the Interim Regulations on business tax of the people's Republic of China shall cancel the hybrid sales behavior rules of determining organ clause. The rules for the seventh article: "the following hybrid sales behavior of the taxpayer, shall be accounted for separately taxable labor turnover and sales of the goods, to pay business tax on the amount of taxable services, goods sales do not pay business tax; not separate accounting, by the competent tax authorities to assess the amount of taxable services: (a) providing building services and sales of self-produced goods; (two) other circumstances as prescribed by the State Administration of Taxation, the Ministry of finance." At the same time "Interim Regulations of the people's Republic of China value added tax rules for the implementation of" sixth also provides that: "the hybrid sales behavior of the taxpayer, shall separately calculate the sales of the goods and non VAT taxable labor turnover, and the calculation of the value-added tax according to the sales of goods sales, non VAT taxable labor turnover do not pay VAT; not separate accounting, approved by the competent tax authorities of the sales of the goods: (a) the sale of self-produced goods and provide labor services in the construction sector behavior; (two) other circumstances as prescribed by the State Administration of Taxation, the Ministry of finance." From the provisions of view, the above rules actually change the provisions ofthe [2002]117 number in this paper have not been accounted for separately conduct full collection of value-added tax, the sales of goods sales authorized rights granted by the State Tax Bureau, and the amount of taxable services authorized the right to grant a collection of Local Taxation Bureau Building services business tax. Obviously, the project price total fixed, the existing provisions not only for the taxpayers' tax avoidance operation space, and will become even more acute than the tax authorities in the payable tax amount of the dispute, "the competent tax authorities" meaning should be clear.

Note [1]: Gan Wen: "the judicial interpretation on the evidence in Administrative Litigation -- reason, view and problem", China legal press 2003 edition, page 138th.