Employer Not Paying Tax? How to Check Records & Legal Risk

If you suspect your employer isn't paying tax, check your Individual Income Tax Payment Records at the local tax office. Learn the difference between pre-tax and after-tax salary contracts and your legal exposure under PRC law.

Tags:

• Tax Compliance
• Employer Withholding
• Individual Income Tax
• Pre-Tax vs After-Tax Salary
• PRC Tax Law

We are frequently asked by clients:I suspect my employer is not paying tax on my behalf in accordance with the law — what should I do? Do I have any legal exposure? Here is our response:

1: Obtain your own tax records

This is your legal right. Simply bring your original passport to the local tax service hall (must be the district where your employer is registered) and request your Individual Income Tax Payment Records. This will tell you exactly what has been declared on your behalf.

If it turns out that your employer has indeed failed to pay tax on your behalf in accordance with the law, you are liable to make up the shortfall. Under the PRC Tax Collection and Administration Law, you are the taxpayer — the employer is merely the withholding agent. The key provisions are as follows:

However, whether you can recover the loss from your employer depends on whether your employment contract provides for a "pre-tax" or "after-tax" salary.

A: Pre-Tax Salary

If your contract states that your monthly salary is pre-tax, the tax obligation ultimately belongs to you as the taxpayer. The employer is only the withholding agent — they are responsible for withholding and paying the tax on your behalf, but the ultimate tax liability is yours. If the employer fails to declare correctly, the tax authorities will hold you personally responsible for the shortfall. You may be required to pay the outstanding tax amount plus potential late payment penalties. While you may have a claim against the employer for breach of their withholding obligations, the tax authorities will look to you first to settle the arrears.

B: After-Tax Salary

If your contract expressly provides that your salary is "after-tax" or "net", the situation is different. Legally, the tax obligation remains yours, but the employer has contractually agreed to bear the tax cost on your behalf. If the tax authorities pursue the shortfall with you, you have a valid contractual claim against the employer for any loss you suffer (including the tax difference and penalties).

The employer cannot simply walk away — they have promised to pay you a specific net amount, free of tax, and the failure to properly discharge that obligation is their responsibility.

Note：If you have any suspicion, start by understanding your actual tax records, and then consult a legal professional to understand your options.

Relevant Provisions of the PRC Tax Collection and Administration Law:

Article 69: Where a withholding agent fails to withhold or collect tax that should have been withheld or collected, the tax authorities shall recover the tax from the taxpayer and impose a fine of not less than 50% but not more than three times the tax that should have been withheld or collected on the withholding agent.