Chinese actress fined US$46 million for tax evasion

Controversial Chinese actress Zheng Shuang has been slapped with a 299-million-yuan (US$46.1 million) penalty for tax evasion, Shanghai's State Taxation Administration said on Friday.

The administration in April launched an investigation into allegations that Zheng had used "yin-yang contracts" – open and secret dual-priced contracts – to help reduce her tax.

These tax dodging agreements first drew attention in 2018 when celebrity actress Fan Bingbing was fined 883 million yuan in unpaid taxes, fines, and penalties for tax-related offences.

After extensive investigation, authorities found that Zheng had failed to file her true taxable income. Her undeclared income was 191 million yuan in 2019-2020, involving a tax evasion of 45.2696 million yuan and another underpayment of 26.5207 million yuan.

Zheng was officially fined a total of 299 million yuan for the recovery of evaded taxes, late payment fees and penalties.

Shanghai tax authorities on Friday revealed some details of their discovery process and the results of an investigation that lasted months.

Zheng was paid 156 million yuan for her role in a 2019 TV series, of which only 48 million yuan was officially declared. She evaded tax of 43.027 million yuan, and other underpaid taxes of 16.1778 million yuan.

She also received income of 35.07 million yuan for other performances and programs, involving tax evasion of 2.2426 million yuan, and underpayments of 10.3429 million yuan.

Zheng made no objections when tax authorities delivered their penalty decisions, saying she would not apply for reassessment or appeal, and had paid all taxes and late fees within the prescribed time limit. Tax authorities are now urging Zheng to pay the final penalty in time under the law.

During their investigation, tax authorities found that Zhang Heng, one of the whistle-blowers in the case, also served as Zheng's agent in the TV series project. He was suspected of masterminding the actress affairs including the 160-million-yuan split contracts and setting up a "cover company."

Zhang was suspected of directly manipulating enforcement of the contracts, as well as pressing for and receiving payments to help Zheng's tax evasion.

The No.1 Inspection Bureau of Shanghai Administration is planning to prosecute Zhang. Authorities have filed separate cases against related enterprises that are suspected of helping Zheng to split the contracts and conceal real earnings to evade taxes.