New Tax Compliance Credit System for Companies in China
The State Administration of Taxation (SAT) has released the Measures for Credit Management of Tax Payment (hereinafter as the Measures), effective from 1 July 2025, to strengthen tax compliance incentives and enhance fiscal governance.
This policy introduces a nationwide credit scoring system for taxpayers, impacting corporate financial strategies and operational transparency. Our article will provide you with the key points of the Measures policy.
Scope of Application
The Measures apply to corporate taxpayers’ contributors (hereinafter referred to as business entities) who have applied for confirmation of tax information and reporting of identity information, and who are engaged in production and operation.
Individual industrial and commercial households, as well as other types of taxpayer contributors engaged in production and operation, may voluntarily apply for inclusion in the management of the Measures.
Information Collection
The credit information on tax payment collected by tax authorities from business entities mainly includes 1) basic credit information, 2) internal tax information, and 3) external information.
- Basic credit information includes the basic information of the business entity and the credit history of tax and fee payments.
- Internal tax information includes recurring indicator information and non-recurring indicator information. For example, tax declaration information, tax payment information, tax inspection information, and other information.
- External information includes external reference information and external evaluation information. For example, information on good credit records and bad credit records is assessed by relevant departments.
Evaluation Method
The credit evaluation of tax payment takes the form of the Annual Evaluation Index Score and Direct Judgment.
- Annual Evaluation Index Score
The annual evaluation index score is based on the deduction method.
Score 100 If the information of recurrent and non-recurrent indicators of the business entity is complete, the evaluation score starts from 100 points.
Score 93 If the non-recurrent indicators are missing and the information on tax payment is complete in the recurrent indicators, the evaluation score starts from 93 points.
Score 90 If the non-recurring indicators are missing and the information on tax payment is incomplete in the recurring indicators, the evaluation score starts from 90 points.
- Direct Judgment.
The direct judgment applies to newly established business entities or business entities with serious credit violations.
Evaluation Cycle
The evaluation cycle of tax payment credit is one calendar year (i.e., January 1 to December 31). Business entities that have less than one evaluation year before they first handled tax matters with the tax authorities will not participate in the current annual evaluation.
Credit-Based Grading System
Taxpayers will be classified into A, B, M, C, and D grades based on compliance history, payment timeliness, and reporting accuracy.
Annual Evaluation Index Score
| A | More than 90 points | ||||
| B | More than 70 points but less than 90 points | ||||
| M | Newly established business entity or annual evaluation index score over 70 points, but no production and business income in the evaluation year | ||||
| C | More than 40 points but less than 70 points | ||||
| D | Less than 40 points or a serious breach of trust | ||||
Release of Results
In principle, the tax authorities determine the results of the previous year’s tax payment credit evaluation in April each year and provide business entities with self-inquiry services for tax payment credit evaluation information.
The effective time of the tax payment credit evaluation results shall be based on the actual release date.
Application of Results
The tax authorities implement categorized services and management for business entities with different credit levels in accordance with the principle of incentives for creditworthiness and penalties for credit failure.
GRADE A
The Business entities gain benefits: faster refunds, streamlined audits, and priority access to government incentives, such as receiving VAT invoice usage for no more than 3 months at a time and immediate processing of VAT invoice usage adjustment when needed.
GRADE B
The tax authorities provide timely counseling on tax policies and management regulations, and introduce incentives depending on the trend of changes in credit evaluation status.
GRADE M
The tax authorities provide timely counseling on tax policies and management regulations.
GRADE C
The tax authorities will manage strictly in accordance with the law and selectively take corresponding management measures depending on the trend of changes in credit evaluation status.
GRADE D
The tax authorities will include key monitoring objects and take strict management measures in accordance with the law.
Credit Repair and Reassessment
If the business entity has committed a tax payment failure and meets the corresponding conditions for tax payment credit repair, it can be repaired in accordance with the regulations; if there are relevant circumstances stipulated in the Measures, it can apply for reassessment (verification) within the prescribed period.
- Credit Repair
The business entity has no objection to the annual evaluation results made by the tax authorities and makes a commitment when submitting the Application Form for Credit Repair of Tax Payment.
- Credit Re-evaluation
If there are objections to the evaluation results, the business entity must perform a credit reassessment before applying for credit repair.
Note!
After the business entity applies for credit repair, the tax authorities will no longer accept applications for reassessment of the evaluation results for the same year.
If you have any questions, please contact us.
