China tax enforcement entered a more data-led phase across 2025 and into 2026, with national tax authorities publicly exposing more than 560 violation cases. Export rebate fraud, concealed income and false invoicing remained the main enforcement targets, and cases in the electric vehicle, lithium battery and solar sectors were disclosed for the first time.
Recent investigation cases point to a system moving from experience-based checks towards data-driven, full-chain detection, which widens exposure for companies with complex supply chains or cross-border structures. What follows sets out the case categories now drawing attention, the technology behind broader detection, the tightening of international tax cooperation and the audit trends most likely to shape 2026.
Where enforcement is concentrated
Four categories account for most of the exposed cases, and each shows how detection has widened beyond the single enterprise.
Export rebate fraud through full-chain fabrication
Since 2025, joint action by tax, police, customs and foreign exchange authorities has exposed a series of export rebate fraud cases. These follow a consistent closed-loop pattern: shell companies issue false invoices, operators buy export data and forge documents, funds are settled through underground banks and capital is then routed back to the starting point. Tax authorities use big data to flag invoice anomalies such as agricultural prices that deviate from market rates, missing transport invoices and gaps between export volumes and production capacity, then work with customs, banks and freight forwarders to establish the facts. In 2025, eight government departments inspected 76,000 enterprises suspected of false invoicing and evasion, recovering over RMB 10 billion in rebate losses.
Concealed income and false declarations
Evasion methods have moved from off-book operations and private account collections towards more concealed approaches, including public-to-private diversion through third-party payment platforms. The Golden Tax Phase IV system cross-checks data from banks, payment institutions and e-commerce platforms, so patterns such as large private-account receipts or irregular public-to-private transfers can be identified more accurately. Tax incentives, including the research and development super deduction, have also become a focus, as authorities look for cases where conditions were fabricated to claim benefits.
Evasion on high-emission and resource-intensive exports
Tax authorities in Hubei, Hebei, Fujian and Guangdong exposed four consolidated cases involving evasion on exports of high energy consumption, high pollution and resource-intensive goods. Companies avoided tax by declaring taxable goods as exempt, refusing to file or exporting under another party’s name. These cases reflect the use of tax policy to push industrial structures towards greener production, an area likely to stay in focus through 2026.
Cross-border related-party transactions
Cross-border structures drew particular attention over the year. Under Article 45 of the Enterprise Income Tax Law and Article 8 of the Individual Income Tax Law, where a foreign entity in a low-tax jurisdiction is controlled by a Chinese resident and retains profits without a genuine business reason, authorities may treat those profits as distributed and tax them in the current period. In 2025, tax bureaus in Shanghai, Jiangsu, Zhejiang, Guangdong, Shenzhen and Hainan exposed cases of undeclared offshore income, signalling that Common Reporting Standard (CRS) exchange has reached a phase of normalised, targeted regulation. The Shenzhen Tax Bureau, mapping global corporate structures, also found groups holding profits offshore and paying only 10% withholding tax, raising the prospect of individual income tax underpayment.
Full-chain detection under Golden Tax Phase IV
Enforcement no longer stops at a single company’s invoices. Audits now follow the industry chain, the capital chain and the logistics chain together. In rebate cases, for example, customs port entry and exit data, road transport records and freight forwarder bills of lading are all used to test whether transactions are real. The penetration built into Golden Tax Phase IV leaves less room for tactics such as shell entities, buying documents to match invoices and false foreign exchange settlements.
The system connects data in real time across banking, market regulation, social security, customs and foreign exchange. A logical break among a company’s four flows, meaning capital, invoice, logistics and contract flows, triggers automatic alerts. Through 2026, authorities are expected to apply AI models to harder-to-spot risks, for example inferring real production capacity from electricity use and logistics data and comparing it against what a company has declared.
Deeper international tax cooperation
International cooperation is one of the clearest sources of pressure on cross-border structures.
Under the CRS, China now exchanges financial account information automatically with more than 100 countries and regions, making offshore accounts far more visible. During 2025, several local authorities issued offshore income verification notices asking taxpayers to self-review and file supplementary returns, and coverage is expected to widen in 2026 to capital gains and trust structures.
Controlled foreign corporation (CFC) rules sit in both the Enterprise and Individual Income Tax Laws, and the definition of control was updated in 2023 to cover both shareholding and substantive control. Groups holding profits long-term in jurisdictions such as the British Virgin Islands (BVI), the Cayman Islands, Hong Kong or Singapore without a genuine business reason face the risk of tax on deemed distributions.
Transfer pricing scrutiny is tightening in parallel, with a focus on intangible assets, intra-group service fees and financing arrangements. On the global minimum tax, China has taken part in the OECD two-pillar framework, and a top-up tax for large multinational groups may follow, which is relevant for foreign-invested enterprises assessing the effect on their Chinese subsidiaries.
Where audits are heading next
Several trends point to where disputes are likely to arise over the coming year:
- Since October 2025, internet platform enterprises report operator identity and income data quarterly, reducing information gaps and making concealed income and fake-order activity easier to detect.
- Less-scrutinised taxes such as property tax, water resource tax and environmental protection tax are appearing in more cases, prompting companies to review their full taxable scope.
- The Value-Added Tax Law takes effect in 2026, and the move between old and new rules may create disputes over the timing of tax obligations and prepayment methods.
- Qualifications for incentives, including high and new technology enterprise status, small and micro enterprise relief and Western Region Development benefits, face closer full-lifecycle review, with filing documentation and metrics under more consistent checks.
- The 2026 National Tax Work Conference set out plans to deepen upgraded audits of major cases, with higher-level bureaus handling them directly to limit local interference.
- Authorities have signalled a clearer line between bona fide errors and deliberate violations, with room for self-correction before an audit begins.
Conclusion
Across 2025 and 2026, China’s tax administration has moved decisively towards a data-driven model. From export rebate fraud and violations in the electric vehicle, battery and solar sectors to concealed income and cross-border profit shifting, authorities have combined big data, AI and international information exchange to widen their reach across tax categories, supply chains and borders. For foreign-invested and large domestic companies, that shift makes the treatment of incentives, related-party pricing and offshore structures far more visible than before.
Companies weighing their exposure in this environment can benefit from specialist advice on structure, transfer pricing documentation and cross-border profit arrangements. Speak to an Acclime tax adviser to review your position and agree a clear next step.
