After Fan Bingbing's tax evasion, can Zheng Shuang escape this time?
Compiled from: International Finance News, CCTV News
Case review
This year, Zheng Shuang has become the most famous celebrity in the entertainment industry, not only bringing attention to "surrogacy" but also sparking a wave of tax evasion through dual contracts. On April 26, Zhang Heng stated on Weibo that it was Zheng Shuang's lawyer who first "accused me of instigating Zheng Shuang to evade taxes without any evidence, and was rejected by Zheng Shuang," forcing him to "fulfill his duty to report as much as possible" to prove his innocence.
According to chat records he provided with Zheng Shuang, her father Zheng Chenghua, and her mother Liu Yan, Zheng Shuang received a total of 160 million yuan in remuneration for filming "A Chinese Ghost Story" (now renamed "Only Ask About This Life, Love Cangming"), and avoided the "salary cap" by signing "dual contracts," even evading taxes.
It is alleged that Liu Yan ultimately signed an "open contract" with *A Chinese Ghost Story* for a remuneration of 48 million yuan, and then used her nominee company, Shanghai Jingyansha, to sign a "hidden contract" for a capital increase of 112 million yuan.
Sensitive terms such as sky-high remuneration, dual contracts, and tax evasion quickly stirred the market, with Zheng Shuang dominating trending topics for several days, caught in the eye of public opinion.
According to CCTV News reports, in response to recent online reports about performer Zheng Shuang allegedly signing "dual contracts," splitting income to obtain "sky-high remuneration," and evading taxes, the First Inspection Bureau of the Shanghai Tax Service has accepted the case and is conducting investigations in accordance with tax laws and regulations. The Beijing Municipal Radio and Television Bureau has initiated an investigation into the production costs of related dramas and the proportion of actor remuneration.
Tax and broadcasting regulatory authorities will earnestly implement the relevant notices from the Central Propaganda Department, the State Administration of Taxation, and the National Radio and Television Administration, strictly investigate illegal and non-compliant behaviors, resolutely crack down on and rectify issues such as "dual contracts," "sky-high remuneration," and tax evasion, strictly manage TV drama contracts, strictly control TV drama production costs and the proportion of actor remuneration in production costs, and create a favorable environment for the high-quality development of the TV drama industry.
What is a "dual contract"?
The so-called "dual contract" refers to a situation where the parties involved sign two or more contracts with different content for the same matter—one for internal use and one for external use. The external contract does not reflect the true intentions of both parties but is aimed at evading national taxes, among other purposes. The internal contract, which may be written or oral, represents the true intentions of both parties. The "dual contract" is a violation of regulations, and while it may bring "benefits" to the parties, it also entails risks.
In actual transactions, to achieve tax avoidance or other purposes, the parties register with the relevant authorities using one contract, reducing the contract value by underreporting the price or area, thereby lowering the contract subject and paying less tax, known as a "yang contract"; the parties sign another contract as the actual payment amount for the transaction and perform it, known as a "yin contract." The "yin-yang contract" not only causes losses to national tax revenue but also undermines society's confidence in honest business, contract performance, and tax payment, disrupting the market economic order. At the same time, after signing the "yin-yang contract," although some may luckily slip through, such contracts are often unregistered, highly irregular, unclear in terms, or even just verbal agreements, making disputes likely during performance.
[1] The author's perspective
The author believes that the yin-yang contract in this case appears on the surface to comply with the State Administration of Radio and Television's control over artist income, but may actually aim to evade tax payments. According to China's relevant legal provisions on contracts, if a clause artificially reduces the contract subject to deceive administrative authorities, thereby achieving tax reduction, harming national interests, and violating prohibitive regulations of Chinese laws, it should be deemed an invalid contract clause with no effect in determining the rights and obligations of both parties.
Such behavior may even be suspected of violating criminal law, thus incurring criminal liability. According to Article 201 of China's Criminal Law: If a taxpayer uses deceptive or concealing means to make false tax declarations or fails to declare, evading a relatively large amount of tax that accounts for more than 10% of the tax payable, they shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and fined; if the amount is huge and accounts for more than 30% of the tax payable, they shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years, and fined.
According to the fourth paragraph added to Article 201 by the Criminal Law Amendment (VII): If a person commits the act described in the first paragraph, and after the tax authority issues a recovery notice according to law, pays the tax due and the late payment fee, and has received an administrative penalty, they shall not be pursued for criminal liability; however, this does not apply if they have been criminally punished for tax evasion or have received two or more administrative penalties from the tax authority within five years. This incident inevitably reminds us of Fan Bingbing's tax evasion case a few years ago. Although the amount was extremely large, Fan Bingbing still avoided imprisonment. It remains to be seen whether Zheng Shuang will be as lucky this time.
