Invoice is an important document to prove the real occurrence of economic activities. For the purchaser of goods or services, invoice is the statutory pre-tax deduction document for enterprise income tax, and VAT special invoice is the basis for VAT input deduction. Under the business forms of flexible employment and individual transportation, individuals, as providers of goods or services, usually need to apply to the tax bureau for issuing invoices on behalf of others in order to obtain invoices that meet the requirements of the purchasers and to ensure the smooth development of the transactions. In practice, due to the large number of invoices, the tax authorities will not review the application for invoicing in a substantive and comprehensive manner, which has given rise to illegal phenomena such as invoicing for fictitious business, and there are many risks for both the individuals applying for invoicing and the enterprises receiving the invoices. This paper takes the conditions of individual application for invoicing as an entry point, and further analyzes five common tax-related risks of invoicing for reference.

I. Circumstances under which individuals may apply for issuing VAT invoices on behalf of others

(I) Individuals Applying for Generic VAT Invoice Issuance on Behalf of Individuals

According to the Circular of the Department of Goods and Labor Tax of the State Administration of Taxation on Doing a Good Job of Publicizing and Counseling Related Work on the Use of VAT Invoices (Taxation General Goods Bent Letter 〔2017〕 No. 127 ), "Individuals who are in one of the following situations can apply to the tax authorities for issuing VAT ordinary invoices on behalf of them: ..... .4. units and individuals who are not required to apply for tax registration according to law, temporarily obtain income and need to issue ordinary VAT invoices." That is to say, individuals who are not required to apply for tax registration can apply to the tax bureau for issuing VAT ordinary invoices on behalf of them when they have VAT taxable behaviors. The ordinary VAT invoice issued by an individual can be used as the voucher information for the pre-tax deduction of enterprise income tax of the party receiving the invoice.

(II) Individuals applying for issuance of special VAT invoices on behalf of taxpayers

1. Individual industrial and commercial households belonging to small-scale taxpayers can issue VAT special invoices on their own.

Article 5 of the Announcement on Matters Relating to the Management of VAT Invoices and Other Matters (State Administration of Taxation Announcement No. 33 of 2019, hereinafter referred to as "Document No. 33") stipulates that small-sized taxpayers of value-added tax (except for other individuals) may voluntarily use the VAT invoice management system to issue their own VAT invoices in the event of the occurrence of value-added taxable behaviors and the need for issuance of VAT invoices. Before the promulgation and implementation of Circular 33 Before the promulgation and implementation of Circular 33, there were many restrictions on small-scale taxpayers' invoicing, such as the industry and the scope of invoicing, etc., and Circular 33 explicitly grants small-scale taxpayers (except other individuals) the right to issue VAT special invoices on their own.

2. Circumstances under which natural persons can apply for issuing VAT special invoices on behalf of taxpayers

Existing policies and regulations have made restrictive provisions for natural persons to apply for issuing VAT invoices on behalf of taxpayers, as shown in the table below. At present, natural persons can apply for issuing VAT invoices on behalf of taxpayers to the tax bureau only under the following three circumstances:

(III) Process and Materials for Individuals to Apply for Issuing VAT Invoices on Behalf of Individuals

Article 16 of the Measures for the Administration of Invoices stipulates that units and individuals who need to use invoices temporarily may apply directly to the tax authorities in the place of operation for issuing invoices on behalf of them with written proofs of purchasing and selling commodities, providing or accepting services as well as engaging in other business activities, and proof of the identity of the person who handles the invoices. If the tax should be paid in accordance with the provisions of tax laws and administrative regulations, the tax authorities shall collect the tax first and then issue the invoice. The Announcement on the Process for Taxpayers to Apply for VAT Invoice Issuance on Behalf of Taxpayers (State Administration of Taxation Announcement No. 59 of 2016, hereinafter referred to as Document No. 59) stipulates the procedures for applying for invoices on behalf of taxpayers in terms of process and further simplifies the materials required for individuals to apply for invoices on behalf of taxpayers, including the "Declaration of Payment of Taxes on Behalf of VAT Invoice Issuance" (hereinafter referred to as "the Declaration (hereinafter referred to as the "Declaration Form"), identity documents and copies of natural persons (for other taxpayers applying for invoicing, they shall submit the business license or tax registration certificate with unified social credit code or the organization code certificate), and the identity documents and copies of the person in charge of the application. The information required to be filled in the Declaration Form includes the name and taxpayer identification number of the purchaser, the basic information of the seller (name, taxpayer identification number/ID number, address, telephone number and bank account information), and the information of the goods or taxable services (name, specification, quantity, unit price, sales excluding tax, levy rate and tax amount, etc.), etc. Circular No. 59 standardized the process of applying for issuance of VAT invoices by individuals and the materials required, and changed the form of reviewing and approving individual applications for issuance of VAT invoices. Required materials, formally reviewing the taxable business of individuals and no longer requiring the provision of information such as purchase and sales contracts and bank water, etc. However, in practice, the tax authorities in some areas will still carry out substantive review when handling the business of issuing VAT invoices on behalf of individuals, especially for the application of invoices of larger amount, and will require the issuer to provide relevant materials proving the economic activities.

II. Common Tax Risks of Invoicing

Risk 1: The recipient enterprise let the individual for their own false invoicing, be held criminally liable for false invoicing

Case: Xu Moumou in the operation of Shanghai A, B, C Co., Ltd. period, in the company and on behalf of the issuer of no real business, to pay fees entrusted to Ye Moumou, Yu Moumou, Hu Moumou (has been sentenced) and others to provide guidance and generation of invoices, with Ye Moumou and others to produce false contracts, and in the contract to avoid the "labor" and other words, in this way To transform personal labor income into business income and thus reduce tax payment. Ye Moumou and others will be the contract, on behalf of the issuer of identity information and other materials summarized and submitted to the tax authorities for invoicing. It was verified that Defendant Xu Moumou, through the above method, allowed others to falsely issue 23 ordinary VAT invoices for his company, with a total of RMB 68,470,000 in price and tax, which had been credited to offset the cost. The court found that the defendant Xu Moumou committed the crime of false invoicing and sentenced him to one year and nine months' imprisonment, suspended for one year and nine months, and imposed a fine of RMB100,000 yuan.

In this case, Xu Moumou and his accomplices made false contracts, used natural persons to issue ordinary VAT invoices on behalf of the company he operated, and obtained vouchers for pre-tax deduction of enterprise income tax to falsely list expenses and offset costs. Xu Moumou's behavior of fictitious business and using natural persons to issue invoices for his company constitutes the crime of falsely issuing other VAT invoices.

In practice, some of the recipient enterprises think that the invoices issued by individuals are obtained from the tax authorities and endorsed by the tax authorities, and the invoices can be used as the vouchers for pre-tax deduction of enterprise tax. However, the invoices obtained from the tax authorities can only show that the source of invoices is real, but it does not mean that the business operation must be real, and the VAT invoices issued by the tax authorities on behalf of the enterprises may also be inconsistent with the real transaction in terms of the name and other information on the face of the invoices. Therefore, the invoices obtained by the recipient enterprises from individuals should correspond to the actual business to avoid the suspicion of false invoicing, which may lead to criminal risks.

Risk 2: Risk of false invoicing by using entrusted levy to falsify transaction invoices in lieu of invoices

Case: In June 2018, Wang Moumou borrowed the qualification of A Property Management Company Limited and signed a commissioned tax collection and invoicing agreement with the Tax Bureau, and then successively set up B Building Materials Sales Company Limited and C Company Limited for the convenience of the flow of funds for the purpose of false invoicing, and together with Hou Moumou, he utilized the qualification of A Company for the purpose of collection and invoicing and took the way of making remarks on the illegally obtained personal information of the citizens, and exceeded the invoicing of A Company. Ltd. and together with Hou Moumou used the qualification of Company A for levy and issuance of invoices on behalf of Company A, adopted the way of making remarks on illegally obtained citizens' personal information, exceeded the scope of Company A's issuance of invoices on behalf of Company A, and falsely issued VAT invoices on behalf of Company A in the name of Company A in the absence of real transactions of goods and taxable services by forging false transactions and transferring funds in the mode of empty transferring funds, and collected "invoicing fee" at the rate of 4-5% of invoice value. Wang Moumou falsely issued VAT invoices in the total amount of RMB 199,164,700.26, made an illegal profit of RMB 2,070,442.44, and caused a loss of RMB 5,030,064.57 in national tax revenue; Hou Moumou falsely issued VAT invoices in the total amount of RMB 193,823,808.69, made an illegal profit of RMB 1,436,179.70, and caused a loss of RMB 4,771,205.39 in national tax revenue. 205.39 Yuan.

Because the tax bureau and company A signed the entrusted tax collection and invoicing agreement requires that the object of collection and invoicing can only be the natural person's temporary business behavior, Wang Moumou for the convenience of issuing false invoices, authorized others to collect citizens' identity card information, and successively to an identity card of RMB 1,200 yuan and each invoice of 1.2 million yuan to get RMB 700 yuan to pay for the sale of other people's identity information for a total of more than 170,000 yuan. The price paid to others for the sale of identity information totaled more than 17 million yuan.

Entrusted levy refers to a way that the tax authority entrusts enterprises in writing to exercise the right to levy taxes, and the entrusted enterprises, in accordance with the requirements of the levy certificate issued by the tax authority, levy and collect scattered taxes from taxpayers in the name of the tax authority, and enterprises with the qualification of entrusted levy usually issue VAT invoices on behalf of the tax authority. According to the Announcement of the State Administration of Taxation on the Issuance of Administrative Measures for Entrusted Collection (Announcement of the State Administration of Taxation No. 24 of 2013), theoretically, except for taxes legally withheld and collected, all other taxes can be collected by way of entrusted collection. In practice, the more common situations include entrusting the collection of individual industrial and commercial households' value-added tax and individual income tax, individual rental housing property tax, individual ship vehicle and vessel tax and other sporadic and scattered tax sources.

In this case, the invoiced enterprises include construction companies, building materials companies and technology companies, all of which belong to industries with high labor costs and high demand for invoices. In recent years, with the rise of the flexible labor model, many flexible labor platforms have signed entrusted levy agreements with tax authorities to collect personal income tax on behalf of individual households under the platform. However, some of the flexible labor platforms have adopted the approach of Company A in this case, forged the identity information of natural persons, and falsely issued VAT invoices to enterprises in need in the name of collecting personal tax and invoicing on behalf of them. Entrusted levy has become a tool to disguise false invoicing activities. Both the invoiced enterprises and the flexible labor platforms should pay full attention to the invoice compliance risk and focus on the authenticity of the transactions taking place to avoid being recognized as false invoicing.

Risk 3: Natural person's application for invoicing involves a variety of taxes and fees, and there is a risk that the invoiced party will fail to withhold and pay personal tax in accordance with the law.

The application for invoicing by a natural person involves the payment of multiple taxes, some of which need to be paid when applying for invoicing, while others are withheld by the entity paying the income. Taking the application for labor invoice as an example, the taxes that a natural person needs to pay include value-added tax (VAT), urban construction tax (UCT) and surcharge, and personal income tax (PIT).

1.Value-added Tax (VAT)

A natural person who provides labor services is required to pay value-added tax (VAT) at a rate of 1% when applying for the issuance of labor service invoices. According to the Announcement of the Ministry of Finance and the State Administration of Taxation on Clarifying the Policies of Reducing or Exempting Value-added Tax and Other Policies for Small-scale Taxpayers of Value-added Tax ("Announcement of the Ministry of Finance and the State Administration of Taxation No. 1 of 2023"), from January 1, 2023 to December 31, 2023, the VAT shall be levied at a reduced rate of 1% on the taxable sales income of small-scale taxpayers of value-added tax ("SST") where the taxable sales income of the SST is subject to a taxable sales income at a taxable sales income of 3%. In respect of the starting point, according to the Circular of the Ministry of Finance and the State Administration of Taxation on Comprehensively Pushing Forward the Pilot Project of Changing Business Tax to Value-added Tax (Cai Shui [2016] No. 36), individuals are exempted from value-added tax ("VAT") if the sales of their taxable acts do not reach the VAT starting point; and if they do reach the starting point, they shall be fully calculated and pay VAT.

2. Urban Maintenance and Construction Tax

Urban maintenance and construction tax, as an additional tax to VAT, is levied when paying VAT. The urban maintenance and construction tax is calculated on the basis of the actual VAT paid when natural persons issue labor invoices on behalf of them. According to the "Announcement of the Ministry of Finance and the State Administration of Taxation on the Further Implementation of the Policy of Reducing and Exempting Six Taxes and Two Fees for Small and Micro Enterprises" (Announcement of the Ministry of Finance and the State Administration of Taxation No. 10 of 2022), VAT small-scale taxpayers, small and micro enterprises and individual industrial and commercial households can be exempted from the tax at 50 percent of the VAT rate. Small-scale VAT taxpayers, small micro-profit enterprises and individual industrial and commercial households are entitled to a reduction of urban land use tax within the range of 50% of the tax amount.

3. Education surcharge and local education surcharge

Education surcharges and local education surcharges are also treated as additional taxes on VAT, and the actual VAT paid is used as the tax basis when natural persons issue labor invoices on behalf of taxpayers. According to the Circular on Expanding the Scope of Exemption of the Relevant Government Funds (Cai Shui [2016] No. 12), monthly sales or turnover not exceeding 100,000 yuan for those who are taxable on a monthly basis (and not exceeding 300,000 yuan for those who are taxable quarterly) are exempted from tax for taxpayers who are taxable on a quarterly basis. ) payers are exempted from education surcharges and local education surcharges. That is, monthly sales amounting to less than 100,000 yuan are exempted from taxation, more than 100,000 yuan of the same city maintenance and construction can enjoy a maximum of 50% reduction.

4. Personal Income Tax

If a natural person taxpayer obtains income from remuneration for labor, remuneration from manuscripts, or royalties and needs to issue an invoice on behalf of the taxpayer, the individual income tax will no longer be levied in the invoicing process, and the withholding agent will withhold and pay (or withhold and pay on behalf of the taxpayer) in accordance with the "Administrative Measures for Withholding and Payment Declaration of Individual Income Tax (Trial)" (Announcement of the State Administration of Taxation No. 61 of 2018), and handle the full and full withholding and payment declaration. According to the provisions of the Tax Collection and Administration Law, "If the withholding agent should withhold but does not withhold, or should collect but does not collect the tax, the tax authorities shall recover the tax from the taxpayer, and the withholding agent shall be subject to a fine of not less than 50% and not more than three times of the amount of the tax that should be withheld but does not withhold, or that should be collected but does not collect". Therefore, the invoice recipient should withhold and pay the personal tax on behalf of the taxpayer in a timely manner to avoid the risk of being fined for failing to fulfill the withholding obligation in full and in a timely manner.

Risk 4: Risk of converting the nature of income in the invoicing process to avoid payment of individual income tax

As mentioned above, the individual invoicing, the invoiced party needs to withhold and pay personal income tax for the taxpayer, in practice, there are cases such as Risk 1 case of operation, individuals in the application for invoicing, in the contract to avoid the "labor" and other words, the individual labor income will be converted to business income, reduce the applicable tax rate. Combating the tax avoidance behavior of converting the nature of income has been the focus of tax collection and management in the field of personal income tax in recent years. When applying for invoicing, attention should be paid to the content of the invoicing corresponding to the services provided and in line with the real business situation, so as to avoid the risk of false invoicing and tax evasion due to the inconsistency of the nature of the income.

Risk 5: Risk of not being able to issue invoices due to non-compliance with the place of issuance

Article 22 of the Provisional Regulations on Value-added Tax stipulates the place of payment of value-added tax (VAT), in which a non-fixed businessman who sells goods or taxable services shall declare tax to the competent tax authority of the place of sale or the place of occurrence of the services; and if he fails to declare tax to the competent tax authority of the place of sale or the place of occurrence of the services, he shall be required to pay tax by the competent tax authority of the place where he has his organization or place of residence. In recent years, some regional tax authorities have strengthened the supervision of foreign invoicing, such as if the buyer and seller are not local taxpayers, the tax authorities will restrict taxpayers from applying for invoicing online, and further examine the authenticity and legitimacy of the invoices issued on behalf of the taxpayer. Therefore, individuals applying for invoicing should comply with the provisions of the tax law and apply for invoicing at the competent tax authorities of the place where the goods are sold, the place where the services are provided or the place where the labor is performed, so as to avoid the risk of not being able to apply for invoicing due to the wrong place of invoicing or of being recovered by the competent tax authorities of the place where they reside.