Meaning
Statutory administrative rule requires a Chinese taxpayer to pay any disputed tax and late fees before filing an administrative appeal or lawsuit. The provisions of tax collection and administration law article 88 mandate that payment is a mandatory prerequisite to challenging any assessment made by the tax authorities. This restrictive rule stops applying to tax penalties, which can be appealed or litigated without prior payment.
Payment Mandate
Taxpayers must clear their assessed liabilities within the specified timeframe to preserve their right to seek administrative review. Under tax collection and administration law article 88, a factory facing an unexpected tax bill cannot use the court system to delay payment. This creates a heavy cash flow burden for businesses that are subjected to aggressive tax audits or unexpected reclassifications of their imports.
Appeal Bar
Administrative review offices and local courts will dismiss any petition that does not include a payment receipt issued by the tax bureau. In practice, tax collection and administration law article 88 prevents companies from using litigation as a stalling tactic to preserve liquid capital. This means that a business must first deplete its reserves to satisfy the tax bureau before it can argue its case before an independent tribunal.
Practical Consequence
Companies must maintain sufficient liquidity or secure emergency funding to survive an adverse tax assessment while their legal challenges are pending. Because tax collection and administration law article 88 requires full payment first, many small and medium enterprises are forced into bankruptcy before they can prove their innocence in court. Foreign-invested enterprises must implement conservative tax strategies and conduct regular audits to avoid the devastating financial impact of this rule.
This strict legal barrier ensures that the state receives its tax revenue uninterrupted, leaving the burden of long-term recovery entirely on the taxpayer through the slow processes of administrative appeal and subsequent litigation.
