This cross-border business owner was arrested for tax fraud involving 40 million RMB!

Recently, a Chinese entrepreneur was extradited from Spain to Italy and immediately arrested upon arrival. According to reports, Italian judicial authorities identified this Chinese entrepreneur as the de facto controller of a multinational e-commerce group. He was arrested in connection with a case involving up to €5 million (approximately RMB 40 million), accused of orchestrating bankruptcies and evading taxes. Case Details It is understood that the arrested Chinese entrepreneur has long been active in Gorgonzola, Milan Province, Italy. He controls a multinational e-commerce group operating across multiple European countries—including Spain, the Netherlands, Germany, and the UK. Although others nominally serve as company legal representatives, prosecutors contend that this Chinese man is the true decision-maker operating behind the scenes. According to investigations by Italian authorities, his arrest stems from a systematic pattern of violations: cycling shell companies, transferring funds, and staging fake bankruptcies—designed to evade value-added tax (VAT) payments and channel corporate funds through underground channels. This ultimately led to the “bankruptcy” of multiple affiliated companies, resulting in massive fiscal losses. Specifically, Italy’s Financial Police stated: “Throughout the investigation period, the team led by this Chinese entrepreneur continuously established and dissolved companies while relocating employees, warehouses, and operational departments.” “They focused exclusively on e-commerce—selling products such as blenders, vacuum cleaners, and air fryers via online platforms—yet failed to pay VAT or any other taxes.” “Whenever problems arose, the company would simply declare bankruptcy—that was how this Chinese e-commerce tycoon ran his business.” “To track him down, police deployed a cross-referencing network targeting the databases of these companies—on average, each of his companies operated for no more than 24 months, with annual turnover around €30 million.” Notably, Italian authorities had already launched their investigation back in 2024. In 2025, an investigative judge at the Monza Court issued a personal preventive measure against him. However, because he was residing in Spain at the time, the measure could not be enforced. It was only in 2026—after extradition pursuant to a European Arrest Warrant—that he was lawfully detained pending trial.

An entrepreneur falls victim to tax evasion charges: From administrative dispute to criminal offense—just one word separates them: 'Delay'.

By Shu Shengxiang, Tax Attorney Just days ago, I concluded the second-instance trial of a tax evasion case—and the experience left me deeply unsettled. I couldn’t help but share it with you. It’s an exceptionally typical case—one so emblematic that it should serve as a stark warning to all private entrepreneurs: A seasoned entrepreneur who has operated in the industry for over twenty years, generating local employment and export revenue, stands merely one word away from a tax evasion conviction: 'Delay'. My client is the owner of a bamboo-products export enterprise in Anhui Province. The company was established locally in 2004 and grew into a provincial-level leading enterprise in forestry industrialization—operating genuinely and continuously for over two decades. When the pandemic struck in 2020, export operations ground to a halt. To survive, the enterprise temporarily pivoted to producing and selling mechanized charcoal domestically. First, the company was unfamiliar with the tax policies applicable to mechanized charcoal; second, most domestic buyers were individual traders who did not require invoices—so this portion of income was not timely declared or taxed. No one anticipated that this emergency pandemic response measure would later become the trigger for criminal tax evasion charges. The original target of the tax audit was the company’s export tax rebates—but after extensive scrutiny, no irregularities were found. The auditors then shifted focus, alleging that my client concealed domestic sales revenue from mechanized charcoal during the three pandemic years and thereby evaded taxes. Upon our involvement at the first-instance stage, we quickly uncovered numerous glaring inconsistencies in the case. First, the audit procedure itself: Initiated in 2020, it dragged on until 2023 before issuing its handling decision—lasting over three years, far exceeding the statutory time limit stipulated in the 'Regulations on Procedures for Handling Tax Audit Cases'. Its procedural illegality is self-evident. Second, the core determination of the 'tax evasion amount' is riddled with flaws: In calculating VAT, no lawful separation of price and tax was conducted—artificially inflating the tax amount. Moreover, the enterprise still held substantial input VAT credits; even if full declaration had been made, no actual tax payment would have been required—thus eliminating any realistic motive for tax evasion. As for corporate income tax, the assessment was even more absurd: The enterprise reported massive consecutive losses on its books throughout the pandemic years, yet the tax authority ignored this objective reality and arbitrarily imposed a deemed profit margin of 8%, artificially 'creating' over RMB 240,000 in corporate income tax liability. From a legal perspective, tax assessment is inherently a presumptive taxation mechanism—permissible only as a remedial measure for tax collection, never as direct evidence for establishing criminal tax evasion. Nor can it retroactively impute to taxpayers the 'foreknowledge' of subsequently assessed tax amounts—let alone infer criminal intent to evade those very amounts. We presented each of these professional arguments thoroughly during the second-instance hearing, and the presiding judge gave them serious attention—the hearing itself was exceptionally comprehensive. Yet, after the hearing concluded, the judge privately asked me a question that left a lasting impression: 'Attorney Shu, given all these issues in the case, why didn’t your client file for administrative reconsideration at the outset? Why didn’t he challenge the administrative penalty decision in court? Why didn’t he engage counsel during the procuratorate phase to seek non-prosecution? Why wait until the first-instance trial to assert innocence?'

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