China's road transportation business has prospered with the development of the national unified market, and the long-distance transportation of bulk commodities across the region has provided the basis for enterprises to develop business for a broader market. However, the prosperity of the road transportation business has not changed the pattern of the industry, which is dominated by individual drivers, and a large number of subcontracting of the transportation business has brought uncontrollable risks, and the problem of non-invoicing by individual drivers has always been troubling transportation companies and network freight platforms, which are located in the middle of the chain, so that the tax risk of the transportation industry is severe. In recent years, network freight platforms have been mined, transportation companies have been mined, and a large number of invoiced parties have been implicated, with huge amounts of money and wide implications. In view of this, we analyze the sources of tax-related risks of the four parties from the perspectives of network freight platforms, transportation companies, individual drivers, and shippers, and put forward the key points of tax compliance for readers' reference in business compliance.

Ⅰ.The Root Cause of High Tax-Related Risks in the Road Transportation Industry

At present, China's road transportation industry still maintains the basic pattern of a large number of natural persons and self-employed drivers as the main actual carriers. The main reason for this phenomenon is that the profits of transportation services are thin, the number of businesses and sources are not fixed, and the transportation enterprises are greatly influenced by the market, which makes them unwilling and unable to operate their own large fleets. When the volume of business undertaken by a transportation company exceeds that of its own fleet, it subcontracts the business to individual drivers, which avoids the obligation to withhold personal taxes and social security payments.

However, many individual drivers have little tax awareness and no incentive to take the initiative to declare and pay the relevant personal tax and VAT to the tax authorities and issue VAT invoices on their behalf. However, as a consignor of goods, the lack of invoices means that there is a lack of cost deduction vouchers for its freight expenses, and no VAT input can be deducted at the same time. Therefore, it will ask the transportation enterprise to issue a 9% special invoice for transportation services. Caught in the middle of the chain, the transportation enterprise has output and no input, and thus bears huge VAT and income tax costs, and the tax cost is even higher than its profit.

In order to solve the tax burden problem, transportation enterprises can only look for ways to offset costs and inputs from other than individual drivers, and thus have to purchase invoices or apply for financial rebates on the basic model mentioned above, which may easily lead to the risk of false invoicing. Once the risk of false invoicing breaks out, it may involve multiple types of subjects such as network freight platforms, transportation enterprises, individual drivers and shippers.

Ⅱ. Analysis of Tax-Related Risk Factors and Tax Compliance of Network Freight Platforms

(Ⅰ) Common false opening risks of network freight transportation platforms

According to the Interim Measures for the Administration of Road Cargo Transportation Operation on Network Platforms (Jiaotong Transportation Regulation [2019] No. 12) jointly issued by the Ministry of Transport and the State Administration of Taxation, network freight transportation platform refers to a new type of road cargo transportation mode relying on an internet platform, where the operator signs a transportation contract with the shipper in the capacity of a carrier, and then entrusts the actual carrier to complete the transportation service. As the platform needs to assume the responsibility of the carrier, its identity, status and responsibility are fundamentally different from intermediary services. The shipper chooses the network freight platform, also in view of the fact that compared with the 6% invoice for intermediary services, the network freight platform can issue a 9% transportation VAT invoice. Under this basic model, tax-related risks arise around VAT input and cost deduction issues. The basic model is shown below:

Risk 1: "Backdating" invoices for completed operations

Some shippers, in the course of their business, neglect compliance management, directly establish a contracting relationship with individual drivers, who complete the transportation business and pay the freight. After the discovery of individual drivers can not be invoiced, under the pressure of the tax burden, the shipper will be altered, tampered with the transport documents and information, and then let the individual driver to register on the platform, and then falsely complete a contracting business, through the platform to the individual driver after the second payment of freight to the individual driver to obtain the invoice issued by the platform, and then let the individual driver to return to the second payment of the freight. In this way, as the invoice is made up later, the authenticity of the business is doubtful; the behavior of the driver to return the freight, the formation of funds back to the platform's invoicing behavior, it is very easy to be characterized as false opening.

In practice, some platforms are negligent in management and review, and even shippers uploaded transportation information showing that the business is carried out at a time later than the time of registration of the individual driver, later than the time when the consignor and the consignee enter into a contract on the platform; or an individual driver at the same time two businesses located in different areas; some shippers can not contact the individual driver, so that their own employees to pretend to be a driver to register and obtain invoices. ...... In this way, the authenticity of the business is even more doubtful and the possibility of being characterized as false invoicing is extremely high.

Risk 2: Invoicing for transportation companies instead of shippers

In practice, we have observed that in addition to shippers establishing cooperative relationships with platforms, there are also a large number of traditional logistics and transportation enterprises establishing cooperation with platforms and obtaining invoices. Most of these transportation enterprises are due to the subcontracting of the carrier business to individual drivers, which gives rise to both input and cost issues, and thus they have to obtain a compliant invoice through the platform. The basic model is shown below. In this chain, tax and public security case officers often ask the question: why does the transportation enterprise need to add a network freight platform when it can carry out a transportation service in its entirety with the shipper itself? The commercial reasonableness of the transaction is denied, which in turn denies the authenticity of the transaction, arguing that the purpose of the transaction is to obtain an invoice.

Risk 3: Payment technology is not in place, not real-time settlement of payments caused by the risk of reflows

The return of funds is an important basis for judging whether there is false invoicing in practice. Since individual drivers have many businesses and need to conduct business across regions, they mostly require real-time settlement of freight. With the convenience of electronic payment, some network freight platforms have been able to realize the implementation of payment of freight through cell phone software. However, according to our understanding some network freight platform due to technical reasons, not able to realize this operation, but wait for a batch of transportation business is completed after the unified settlement. Among them, there is the possibility of backflow, namely:

1. due to the lag in platform settlement, individual drivers ask the consignor to pay the freight first. After the platform settles the payment, the freight will be returned, resulting in a "consignor - platform - driver - consignor" flow of funds. The money flow back from "shipper-platform-driver-shipper" occurs.

2. After paying the freight first, some consignors cannot contact the drivers after they leave, so they have to let the platform call the freight back to their own employees' cards, resulting in the return flow of funds from "consignor - platform - consignor's employees". There is a "consignor - platform - consignor's employee" backflow.

(Ⅲ) Tax Compliance Points of Network Freight Transportation Platforms

The tax risks of network freight transportation platforms are concentrated in false invoicing, and the core problem of false VAT invoicing lies in the authenticity of the business. Since transportation belongs to the service industry, unlike the sale of goods, which can be evidenced by real goods, the service is eliminated after completion, and the authenticity of the service can only be corroborated by testimonials and some evidential information. This requires that the network freight platform must closely examine the information provided by the consignor and the carrier and do a good job of retaining it, and do a good job of reviewing the form of work in order to prove their subjective goodwill. For risky business, all do not invoice:

1. the business has obviously occurred to complete, invoicing is a back-up;

2. business information there are obvious signs of tampering;

3. Where the true identity of the driver is in doubt and cannot be verified;

In terms of circumventing the return of funds, it should be verified with the consignor whether it exists in the case of deposit return and advance payment of freight, and if it exists, the information should be well retained in order to explain its reasonableness, for example, to allow the driver to issue a certificate of return of deposit and advance payment, and to ensure that it can be contacted for clarification of the situation and so on. However, it should be noted that some tax authorities will be more stringent treatment of the return of funds, may not be able to completely exclude the risk of back taxes, but the existence of real transportation services, and the "three streams of consistency", you can avoid the criminal risk of fraudulent invoicing.

Ⅲ. Common Tax-Related Risks of Transportation Enterprises and Their Compliance Points

(Ⅰ) Common Risks of Transportation Enterprises

The tax-related risks of transportation enterprises, such as tax evasion and false invoicing, are rooted in their subcontracting and subcontracting of transportation business to individual drivers, whereas the compliance cost is relatively low if the business is carried out by their own fleet. On the premise that individual drivers do not file tax returns and issue invoices, transportation companies are required to issue 9% transportation invoices, resulting in input and cost issues.

Risk 4: Letting others falsely issue input invoices for themselves for refined oil, toll fees, etc.

In order to solve the problem of lack of inputs and costs for the carrier (i.e., the contractor) in transportation without means of transportation, Article 2 of the Announcement of the State Administration of Taxation on VAT Issues such as Tax-Exempt Filing of Cross-Border Taxable Behavior (Announcement of the State Administration of Taxation No. 30 of 2017) stipulates that a taxpayer who enters into a contract of transportation services with the shipper in the capacity of a carrier and later commissions the transportation to the actual carrier can deduct The taxpayer can deduct the refined oil products and the tolls paid for roads, bridges and gates "procured by itself and handed over to the actual carrier for use".

Some transportation companies, after subcontracting services, purchased rich oil invoices in the name of the above provision in order to obtain input tickets. In fact, they did not actually withdraw the goods or deliver them to individual drivers for use, which belongs to letting others falsely or illegally purchase VAT invoices for themselves.

Risk 5: Deposits and advances form the return of funds

With the lengthening of the transportation service transaction chain, there is a lack of sufficient mutual trust between shippers, carriers (contracting parties) and individual drivers (contracting parties), and the deposit serves this purpose. Generally, the deposit paid by the shipper to the individual driver is not required to be returned and will be offset against the freight charges. However, after the network freight platform or other invoicing enterprises intervene in the chain, since the actual party paying freight is not the shipper, the problem of returning the deposit arises, which eventually shows the phenomenon of money back. The deposit can also be justified because of its small amount. Advance freight behavior, as mentioned above, because the amount of funds consistent thus forming a complete reflux, it is very sensitive.

Risk 6: Failure to exercise due diligence in reviewing invoices issued on behalf of a person who is not a truthful representative

The Research Office of the Supreme People's Court's Reply to the Opinion on How to Determine the Nature of the Behavior of Implementing Business Activities in the Name of the Company and Allowing the Company to Falsely Issue VAT Special Invoice for Itself (Law Research [2015] No. 58) and the Supreme Court's Typical Case of "The Case of Zhang Mouqiang's Falsely Issuing VAT Special Invoice". and the Supreme Court's typical case "Zhang Mouqiang's Case of VAT Special Invoice" have clearly expressed the view that "truthful issuance" does not fall into the category of false invoicing. However, in practice, the court has a more stringent determination of what is truthful issuance.

For example, in the (2020) Lu 03 criminal final 10 judgment, the defense for the transport enterprises involved in other transport enterprises to carry out business on behalf of invoicing behavior, put forward the existence of real transactions, invoices are invoiced on behalf of the law does not constitute a false invoicing of the defense reasons. The court held that the so-called truthful invoicing, invoicing must be consistent with the number and amount of business. However, the appellant (i.e., the invoicing party transportation enterprises) did not verify the need to invoice the real existence of the transportation business, should be invoiced at the request of the party "arbitrarily invoiced", does not belong to the truthful invoicing.

Risk 7: Tax evasion risk of transportation enterprises not declaring taxes

The risk of false invoicing arises with the shipper's demand for VAT invoices. However, if the shipper does not ask for invoices, for example, if the shipper is a small or micro enterprise enjoying approved levy or a natural person, the transportation enterprise has no pressure to issue invoices. After undertaking the business, the transportation enterprise transfers the transportation business to individual drivers to complete the transportation, does not issue invoices for shippers, and evades income tax and VAT through off-the-books operation, etc., with the risk of tax evasion.

(Ⅱ) Tax compliance points for transportation enterprises

Since the transportation enterprise is different from the network freight platform with the policy of collecting taxes and issuing invoices on behalf of shippers, its so-called "issuing" invoices is essentially false invoicing in violation of the Measures for the Administration of Invoices, and it is bound to face administrative penalties and payment of back taxes at the level of tax administration. At the same time, due to the practice of the court for the "truthful billing" and "dependence" has always been more strict in the determination of the caliber, for no strict audit of the authenticity of the business on the invoicing behavior, the probability of finding that the false billing is greater. Therefore, transportation enterprises should first avoid the high-risk behavior such as opening.

For the lack of input tickets, cost tickets for transportation companies, we believe that first of all, we should adhere to the bottom line of business authenticity, to obtain invoices must correspond to the real business, otherwise there is bound to be a very high risk of false invoicing. However, for businesses with real transportation services, it is also necessary to do a good job of tax compliance in the business model. For example, at this stage, transportation enterprises can obtain invoices by adding network freight platforms to the chain, but pay attention to the following issues:

1. transportation enterprises and individual drivers should join the platform first, and then rely on the platform to invoice the business;

2. avoid direct settlement of freight charges between transportation enterprises and individual drivers, always go through the platform process;

3. if there is a deposit collection, should retain the basis for the collection of the deposit, the basis for the return of the deposit, and in the relevant bills indicate the identity of the driver, vehicle information, contact information; and so on.

If the transportation enterprise needs to obtain the invoice of refined oil products and road toll invoice, etc. from the individual driver, it should realize the form of relevant invoices issued to it and ensure its authenticity.

Ⅳ. Analysis of Tax-Related Risks and Compliance Paths for Individual Drivers and Shippers

(Ⅰ) Analysis of the Risks of Individual Drivers and Consignors

Risk 8: Tax Evasion Risks of Individual Drivers

The State Administration of Taxation (SAT) has issued a series of regulations on invoicing in order to urge individual drivers to go to the tax authorities for invoicing. Among them, the Announcement of the State Administration of Taxation on Matters Relating to the Implementation of Preferential Income Tax Policies for Supporting the Development of Small and Micro-profit Enterprises and Individual Entrepreneurs (Announcement of the State Administration of Taxation No. 8 of 2021) even abolished the pre-collection of individual income tax when issuing invoices on behalf of the freight transportation industry. However, individual drivers are still reluctant to truthfully declare the payment of VAT and personal income tax and do not have the incentive to issue invoices on their own behalf. With the tightening of China's individual income tax regulation and the maturity of individual remittance practice, there have been many cases in which natural persons have been penalized for failing to fulfill their individual tax obligations in accordance with the law. Therefore, there is always the risk of tax evasion by individual drivers, which may break out and face tax reimbursement and penalties at any time.

Risk 9: Risk of accepting false invoices by shippers

VAT special invoices form a unique deduction chain due to its ring of deduction, and the risk of false invoicing is transmitted with that chain. First, the Announcement of the State Administration of Taxation on the Management of Abnormal VAT Deduction Vouchers and Other Relevant Matters (SAT Announcement No. 38 of 2019) provides that if a taxpayer's "input tax amount of abnormal vouchers in the current period accumulatively accounts for 70% or more of the input tax amount of all VAT special invoices in the same period", the invoices issued are also The invoices issued by the taxpayer will also be categorized as abnormal vouchers. This will lead to the problem of input tax of the upstream invoicing party, which will also involve the downstream invoiced party. What is even more worrying is that if the invoicing party, such as network freight platforms and transportation enterprises, is found to have the possibility of false invoicing, such as the return of funds, the invoices obtained by shippers as the invoiced party shall not be deductible, and there is even the administrative and criminal risk of accepting false invoicing.

(Ⅱ) Compliance path for individual drivers

For the individual driver's compliance, this paper argues that the individual driver's motivation for tax evasion also lies in the low profitability of freight transportation, and the individual driver needs to actively bargain with the transportation enterprises and shippers, who share the tax burden of the individual driver. At the same time, to change this situation is not the driver alone, shippers and transport enterprises should also realize the importance of tax compliance, the tax cost will be taken into account in the bargaining, in order to gradually improve the environment of the industry as a whole, and to do a good job of compliance from the beginning of the chain.

(Ⅲ) Tax Compliance Points for Shippers

With respect to the compliance of the consignor, this article believes that the consignor should strengthen the background investigation and qualification audit of the transportation enterprise, ensure that the invoice, business, invoicing party, and funds "four streams of unity", and adhere to the bottom line of authenticity of the transaction. If the invoicing party's input problem does occur, actively communicate with the tax authorities to claim the legitimacy of their own invoices and subjective goodwill, in order to reduce losses.