On 12 October 2026, the Yantai Municipal Tax Bureau announced penalties against Laizhou Batong Financial Management Co., Ltd. for its own tax evasion (RMB 6.2 million) and for designing revenue-splitting structures for 15 manufacturing clients (RMB 34.8 million in underpaid corporate income tax). The firm advised clients to fragment single business operations into multiple small-scale taxpayer entities to exploit the 2.5% preferential rate, while maintaining unified management and shared resources.
Key Takeaways
- Artificial Fragmentation Doctrine: The bureau applied the “substance over form” principle per SAT Circular 2008 No. 1, consolidating the fragmented entities for tax purposes based on unified personnel, premises, accounting, and business decision-making.
- Intermediary as Mastermind: The firm’s founder received a 5-year sentence; the court ruled the revenue-splitting designs constituted “professional criminal activity” under Criminal Law Article 201, given the systematic, for-profit nature across multiple clients.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement