Meaning
Legal liability shifts to the transferor when the primary withholding agent fails to remit taxes due on an equity disposal. Article 8 secondary exposure ensures that the State Taxation Administration can recover funds from the seller of the assets. This provision applies specifically to indirect transfers where the purchaser did not withhold the required amount at the time of payment.
Liability Shift
The obligation to pay the tax remains with the seller even if the buyer is the party designated to collect it. Under article 8 secondary exposure, the tax bureau issues a demand to the transferor to settle the debt within a seven day period once the primary withholding failure is identified.
Recovery Mechanism
Enforcement priority initially focuses on the transferee who held the funds. If that party is unreachable or refuses to comply, article 8 secondary exposure allows the authority to pursue the transferor directly through administrative orders or legal proceedings. The seller must then settle the liability to avoid further penalties.
Enforcement Priority
Administrative records track the identity of both parties to prevent the loss of tax revenue in offshore transactions. Once the transferor pays the tax, the liability under article 8 secondary exposure is cleared.
