一、法律风险案例 Legal Risk Case
1.案例介绍 Case Introduction
October 26, 2009, A Investment Company assigned 100% shares of B Real Estate Company and 79.12 million Yuan claims on it by auction through United Equity Exchange, which were bought and held by a Holding (Group) Limited Company with 182 million Yuan ultimately. The auction above was confirmed by the United Equity Exchange and the share change formalities have been completed with Industry and Commerce Authorities.
On November 18, 2009, C tax office of Local Taxation Bureau issued “Notice of Fixed Date Correction” ( XX, hereinafter referred to as “the notice”)to A Investment Company, and ordered A Investment Company to declare the land value-added tax (about 32 million Yuan) with C tax office according to the " Provisional Regulations of the People's Republic of China on " and "Reply to the Issue of Imposing Land Value-added Tax in Assigning Real Estate in the Name of Share Transfer " (Guo Shui Han  No. 687)before November 28, 2009 because the main form of the share is the land use rights.
An Investment Company organized relevant experts to conduct demonstration that the notice of C tax office lacks legal ground. An Investment Company filed administrative reconsideration to the higher authority on November 27, 2009, but was rejected. Therefore A Investment Company institutes an administrative lawsuit to the local court. Through mediation by the court, the notice was revoked by its superior tax authorities and an investment company withdrew the lawsuit.
2.案例分析 Case Analysis
1) involved a large amount of LAT (32 million Yuan);
2) found the notice issued by C tax office had no legal basis through full argument by expert group;
3) Took effective measures within time limit for administrative reconsideration and administrative litigation.
二、预控风险的建议 Recommendations on Risk Prevention
In order to pre-control the real estate project investment risk, after the discussion of Group Security and Legal Department, Group Planning and Operation Department, Finance Department and Juntai Law Firm, the suggestion of pre-control risks is as followed:
Paying attention to the valid time limit to apply for administrative reconsideration or bring an administrative lawsuit:
1) Administrative reconsideration: in principle, the administrative relative person who refuses to accept administrative actions may apply for administrative reconsideration within 60 days. (See Article 9 of the Administrative Reconsideration Law)
2) Administrative litigation: in principle, the administrative relative person who refuses to accept the reconsideration decision may bring an administrative lawsuit within 15 days; the administrative relative person who refuses to accept administrative actions may bring an administrative lawsuit within 3 months. (See Article 38& Article 39 of the Administrative Reconsideration Law)
3) Valid period: when the specific administrative actions made ??by Tax Bureau infringe lawful rights and interests of enterprises, relevant authorities and courts will accept and hear a case on if the administrative reconsideration or administrative litigation were brought within valid period.
Sufficient legal demonstration in the application for administrative reconsideration or administrative litigation:
When applying for administrative reconsideration or bringing an administrative lawsuit, it is necessary to organize staffs from legal, finance, operation and other departments, counsels and experts to conduct demonstration, and listen to opinions from all sides in order to make sure legal basis sufficient and relevant procedures rigorous. It has played a positive role through the following demonstration:
The document (Guo Shui Han  687) cannot be considered as legal basis for levying LAT on A Investment Companies
"Reply to the Issue of Imposing Land Value-added Tax in Assigning Real Estate in the Name of Share Transfer " (Guo Shui Han  No. 687) is the identification of a specific event and belongs to specific administrative action which has no universal binding and cannot be considered as legal basis for levy LAT on A Investment Company. Levying LAT only applies to the "Provisional Regulations of the People's Republic of China on ".
Levying land value-added tax in share transfer will result in double taxation.
Because the land use rights of the project have not been assigned and still belong to B Real Estate Company, the tax authorities will levy land value-added tax on B Real Estate Companies when it sells commercial residential building. If levying land value-added tax on A Investment Company, it will result in double taxation regarding to the same matter.
Selecting the appropriate method to transfer shares
The pure share transfer can avoid the payment of not only business tax and land value-added tax, but also deed tax.
Dare to use protect their lawful rights and interests with legal means
In practice, the tax bureau tends to levy land value-added tax on such transfer behavior in order to increase their tax sources. In this case, enterprises should take timely measures to fight it out, even apply for an administrative reconsideration or bring an administrative lawsuit to safeguard their own lawful rights and interests.