The Risks of Tax Evasion via Low-Priced Contracts

Tax evasion is illegal, and agents who facilitate it are breaking the law. Both sellers and buyers risk being reported. If caught by the tax authority, penalties are swift and certain.

Underreporting the property price so that the buyer covers all the taxes actually works against the buyer's interests. The seller can exploit this to breach the contract in bad faith. Because tax evasion is itself illegal, neither party can force the other to break the law based on their private agreement. When push comes to shove, the legal duty to pay taxes becomes an airtight defense for the breaching party. You can avoid this problem with one simple clause in the contract: "The buyer will cover all transfer taxes, up to a maximum of X yuan; any excess shall be paid by the seller."