Tax risk management is integrated throughout the whole process of tax administration. It involves the application of risk management theories and methods by tax authorities based on a comprehensive analysis of taxpayers' specific circumstances and tax compliance conditions. This approach targets different types and levels of tax risks associated with taxpayers, withholding agents and other parties involved in tax matters. By efficiently allocating tax management resources and implementing differentiated coping strategies, it aims to prevent and control tax risks, enhance taxpayers' compliance, and promote effective tax administration.

Inspection and investigation refer to the law enforcement activities taken against significant illegal and criminal acts and other high-risk tax-related acts. These activities involve examining, investigating, and dealing with the fulfillment of tax obligations, withholding obligations, and other tax-related matters by taxpayers, withholding agents and other parties. Through measures such as crackdowns and penalties, these activities aim to uphold the dignity of tax laws and promote taxpayers' compliance.

In its early stages, tax risk management primarily relied on manual judgment and work experience, focusing on post-facto handling of single risks, and lacking systematic and scientific risk management methods. With the advancement of information technology, tax authorities began introducing data analysis tools, constructing tax risk indicator models, and progressively establishing comprehensive risk management systems. In recent years, technologies such as big data and AI have been widely adopted, propelling tax risk management into an intelligent phase. This transformation has significantly enhanced the precision and efficiency of risk management, shifting towards early risk identification and proactive resolution while encouraging voluntary taxpayer compliance. Consequently, the proportion of preventive risk management continues to increase.

Tax authorities shall implement targeted risk management for major domestic taxes to identify, analyze, assess, and address potential risks associated with various taxes. Compliant management strategies for different tax types are developed to ensure compliance and reduce tax burdens.

Income tax risk management includes enterprise income tax risk management and individual income tax risk management. Enterprise income tax risk management primarily focuses on key areas such as recognition of income, deduction of cost and expense, pricing for related party transactions, etc. to ensure the authenticity and compliance of enterprise income tax filing. Individual income tax risk management mainly emphasizes the completeness of income reported by individuals, the accuracy of special additional deductions, and the correct application of tax rates and categories to mitigate tax risks arising from taxpayers' concealment or omission of income, erroneous filing of deduction, or misapplication of tax incentives.

VAT risk management primarily focuses on key areas such as VAT filing data, invoice issuance and deduction. It involves in-depth verification of circumstances such as non-compliant input tax deductions and invoices deviating from actual transactions. It also places particular emphasis on risks related to VAT export refunds and VAT credit refunds.

Property tax risk management mainly concerns taxable properties such as real estate, land, and equipment, as well as relevant taxes including real estate tax and urban and township land use tax. It involves the assessment of the value of taxable properties to mitigate tax risks arising from overvaluation or undervaluation, and particularly focuses on issues such as inaccurate property valuation, concealment of property, and abuse of tax incentives.

[Tax Administration Product No.9: Implementing Refined Risk Control Strategies Based on the Characteristics of Tax Types] (to be released in 2027)

For entities of different scales, tax authorities shall develop compliance management strategies separately and implement differentiated and targeted risk management measures.

Large enterprise taxpayers exhibit the characteristics of significant operational scale, complex business structures, and distinct cross-regional operations. Tax authorities shall continuously optimize the "headquarter-to-headquarter" equivalent risk management model, establish tax source monitoring indicators and evaluation rules for large enterprises, and carry out regular monitoring and analysis. By enhancing human-machine integrated analysis and identifying group-wide and industry-specific typical risks, tax authorities shall conduct consolidated, tier-piercing, and chain-based analysis of critical matters such as corporate restructuring, equity transactions, related transactions, transfer pricing, and cross-border transactions within group structures. Adhering to the philosophy of cooperative compliance, tax authorities shall timely provide reminders and guidance for large enterprises and encourage them to operate in accordance with the law, which effectively protects the tax rights and interests of the country (region) and the fair competition order of the market.

Small and medium-sized enterprises (SMEs) are numerous and operationally flexible, yet exhibit significant variations in financial accounting and tax management capabilities. Tax authorities shall prioritize streamlining tax procedures while strengthening the collection and cross-verification of basic information. Leveraging big data analysis, tax authorities shall screen SMEs' invoice issuance, logical consistency of filing data, and eligibility for tax incentives to identify risks such as fraudulent tax filing, invoice non-compliance, and improper claiming of tax benefits. For SMEs identified with risks, tax authorities shall promptly remind them through phone calls, text messages, and online tutorials to help them correct mistakes. Industry-specific risk rectifications are carried out to identify common risk features of the same industry and provide risk guidance for SMEs, so as to elevate overall tax compliance awareness, support SMEs' healthy development, and consolidate the tax base.

Individual taxpayers engage in diverse tax-related scenarios, covering income from wages and salaries, labor remuneration, property transfers, interest, dividends, and bonuses. Tax authorities may integrate information from multiple departments, such as fund flows from financial institutions and real estate transaction records, to develop a comprehensive tax information repository for individuals. By leveraging data analysis, tax authorities may identify anomalies in individual income and deductions, including risks like high-income individuals concealing earnings or filing inaccurate special additional deductions. Enhanced monitoring of high-net-worth individuals is implemented alongside joint supervision with relevant departments to regulate individual taxpayers' behavior and ensure tax equity.

Withholding agents serve as critical bonds in the chain of tax administration. Tax authorities shall strengthen the record management for withholding agents, clearly define the scope of withholding and remitting obligations and responsibilities. Regular policy training shall be carried out to ensure their accurate understanding of withholding policies. Through data cross-verification, tax authorities shall verify whether the withholding filing data align with income paid to taxpayers, so as to mitigate risks of failure to withhold or under-withholding taxes. For withholding agents identified with risks, regulatory talks and reminders shall be carried out to urge them to rectify mistakes. If the mistakes are serious, penalties shall be imposed in accordance with laws and regulations.

Tax intermediaries provide professional tax services to taxpayers, and their conduct impacts tax administration effectiveness. Tax authorities may strengthen practice supervision over tax service institutions and practitioners, by establishing a credit rating system that evaluates them based on service quality and compliance performance. Meanwhile, tax authorities shall monitor the quality of data filed by tax intermediaries, and screen for risk behaviors such as tax evasion facilitated by intermediaries. Regular training for tax intermediaries shall be organized to enhance their technical competence and ethical standards. For tax intermediaries involved in rule violations, tax authorities shall take punitive measures such as alerts and reminders, orders to make rectifications within a time limit, and inclusion in negative credit records so as to purify the tax intermediary market environment, regulate tax-related professional services, and maintain the order of tax administration.

[Tax Administration Product No.10: Formulating Targeted Risk Control Measures Based on Differences in Tax-Related Entities] (September 2025)

Tax authorities shall reasonably allocate tax administration resources and adopt corresponding methods to cope with tax risks at different levels.

Routine tax risk management involves a series of management activities conducted by tax authorities during regular tax administration, including identifying, analyzing, assessing, handling, and evaluating potential tax risks of taxpayers, withholding agents, and other tax administration counterparts. By leveraging big data and other technological methods, tax authorities shall collect various tax-related information from taxpayers, such as tax filing data and invoice usage patterns, in order to identify potential tax risks, assess and prioritize identified risks based on their likelihood of occurrence and impact level, and classify risks into different tiers to implement corresponding response strategies. Through these measures, tax authorities aim to enhance taxpayer compliance, reduce tax revenue loss, and safeguard the stability and security of the national tax revenue.

Tax investigation / audit is generally applied to circumstances with higher risks and suspected tax evasion. Tax authorities may employ multiple investigative approaches, including material analysis, field inspections, interviews with relevant personnel, and third-party verification, to conduct comprehensive examinations of enterprises' tax-related activities, and thoroughly uncover evidence of tax evasion, avoidance, and fraud through meticulous cross-verification of invoice trails, fund flows, and goods movements. During this process, all statutory procedures shall be strictly followed. Where tax evasion by enterprises or individuals are substantiated, tax authorities shall impose stringent penalties in accordance with the law. In addition to the recovery of unpaid taxes and imposition of late payment surcharges, penalties will be imposed, and those involving suspected criminal offenses will be referred to judicial organs. With its formidable deterrent effect, tax investigation/audit combats tax illegality, safeguards tax revenue, and purifies market tax environment.

Criminal investigation focuses on the most severe tax-related crimes. It is the final defensive line against tax risks. When tax investigation/audits reveal that enterprises' or individuals' tax-related activities involve suspected criminal offenses under the criminal law, such as fraudulently issuing VAT special invoices of substantial value or severely fraudulent filing of export tax refund, a criminal investigation procedure is immediately initiated. Tax authorities shall collaborate closely with statutory agencies mandated for such cases (e.g. public security organs). The two parties jointly establish a special task force to consolidate professional resources, share information resources, conduct in-depth tracing of criminal evidence, and identify criminal suspects. Supported by conclusive evidence, criminal liability is pursued according to law. Through rigorous crackdowns on tax crimes, criminal investigation upholds the sanctity of law, safeguards tax administration order, and protects economic security and social stability.

[Tax Administration Product No.11: Adopting Differentiated Response Measures Based on Risk Levels] (to be released in 2029)