Using nil-consideration equipment for other purposes by Foreign-invested processing trade enterprises caused customs check

2010-7-2 17:49:11 background:

A processing trade enterprise imported cloth under processing trade. July 2009, the Customs carried out a audit on the company and found that in October 2006, 3 sets of nil-consideration equipment were transferred to adjacent enterprise B for business use.

According to the audit, Customs believe that the company violated customs regulatory requirements and accordingly delivered the audit report to the company. If such a case has been established, the Customs would make an administrative punishment on the Company.

Because the A company is not familiar with the processing trade and customs policies and regulations, they consulted our professional lawyers. After investigation we found:

A processing trade enterprise is established by a Mr. Chen from Hong Kong in May 2003. After several years of business development, the existing plant is not big enough, and therefore a Button Sector was set up in the adjacent building, and managed by his nephew Xiao Chen. The Button Sector was named company B internally. However it has no business administrative registration, and therefore is not an independent legal person.

Based on these facts, lawyers helped the companies draft an audit feedback report, and attach a lot of evidence that the "B Company" is not another independent legal entity, but the company's internal department, and therefore the "diversion use "scenario identified by Customs did not exist.  The customs verified it through investigation and approved the company's report, then no penalty and premium tax was imposed.

2.Lawyer Comments:

According to "Administrative Measures of the Customs of the People’s Republic of China for the Tax Reductions and Exemptions for Imported and Exported Goods" During the customs supervision period, if the applicant needs to use the nil-consideration equipment for other purposes, he should first apply to the customs. After approved by the Customs, the applicant can do that according to the approval.

The "diversion" is defined, including the following ways: (a) applicant transfers the Tax Reductions and Exemptions Goods to others; (b) not in accordance with the intended use, in intended areas; (c) not in accordance with the specific areas and enterprises or for specific purposes using the goods in other cases.

    Our lawyers excluded "diversion" after intensive investigations and provided a professional report to Customs. The report was accepted by the Customs. Our lawyers not only avoided the economic losses, but also avoided possible punishment and downgrade by customs.

Tags: enterprises non-evaluated equipment