Recently, seventeen energy companies in Shanxi Province have been investigated for allegedly falsely issuing VAT invoices, with a cumulative total of about 1.8 billion yuan of falsely issued VAT sales invoices to the outside world, and were confirmed to be on the run (out of contact) after inspection by the tax authorities. The tax authorities have issued a Decision on Tax Treatment and transferred them to the judicial authorities in accordance with the law. This matter may trigger a large-scale investigation of hundreds of invoiced enterprises, and the potential administrative risk and criminal risk will be transformed into reality. Then, after the competent tax authority of the invoiced enterprise receives the "Letter of Tax Violation Case Co-inspection" to start the inspection procedure or the public security authority receives the criminal case, how should the invoiced enterprise deal with it?

I. Points of Response to Tax Audit of Invoice-receiving Enterprises

According to the provisions of the Tax Collection and Administration Law, Provisions on Procedures for Handling Tax Audit Cases and Measures for the Administration of Invoice Co-inspection in Tax Violation Cases (for Trial Implementation), after the invoices issued by the upstream enterprises are recognized as false invoices by the tax authorities, the tax authorities in charge of the upstream enterprises will send a Letter of Co-inspection in Tax Violation Cases to the tax authorities in charge of the downstream enterprises. Upon receipt of the Letter of Concurrence in Tax Violation Cases, the competent tax authority of the downstream enterprise shall, according to the request for concurrent investigation, investigate the case in accordance with the statutory authority and procedures, and reply to the letter in accordance with the requirements and deadline. It can be seen that once the upstream invoicing enterprise is recognized as false invoicing by the tax authority, the tax risk will not only be limited to the upstream invoicing enterprise itself, but also implicate the downstream invoiced enterprises in the same chain, so that they will face tax audits. So, what are the countermeasures for the implicated invoiced enterprises?

(I) The Notice of Proven False Invoicing is actionable when it affects the entity rights of the invoiced enterprise

According to the Measures for Administration of Invoice Co-inspection in Tax Violation Cases (for Trial Implementation), if the commissioning party of the invoice co-inspection issues the Notice of Proven False Invoicing, the commissioning party shall file a case for inspection. From this, it can be seen that the competent tax authority of the downstream recipient enterprise shall initiate the procedures of filing, inspection, collection of evidence and verification of evidence after receiving the Notice of Proven False Invoicing, and the Notice of Proven False Invoicing which has not been subject to the aforesaid statutory procedures can only be used as a clue to the unlawful information of the auditing filing.

It can be seen that the "Notice of Proven False Openings" is the material for the coordination and investigation among tax authorities in the handling of false openings by tax authorities, which belongs to the internal instruments of tax authorities. In the absence of taxpayers to serve, nor the taxpayer entity rights and obligations, generally does not have actionable, but in practice, part of the tax case to "confirmed false opening notice" as the basis for requiring enterprises to bear the administrative responsibility to pay back taxes, late fees, etc., at this point, the "confirmed false opening notice" "put into practice externally, and the actual impact of the rights and obligations of the relative ", "confirmed false invoicing notice" directly on the rights and obligations of the invoiced enterprise has an impact, and its effect also exceeds the scope of the internal organs, the internal administrative behavior will be a change in the legal nature of the legal nature of the change into a reviewable or justiciable administrative action, belongs to the scope of the administrative reconsideration or administrative litigation scope of the case.

(II) The invoicing enterprise has confirmed the false invoicing, the invoiced enterprise is not always dealt with according to the false invoicing

After the upstream invoicing enterprise has been recognized as false invoicing, the downstream invoiced enterprise is not necessarily false invoicing, the downstream invoiced enterprise obtains the invoice is usually characterized by the following circumstances:

1.The invoice obtained by the invoiced enterprise is a compliant invoice with normal input tax deduction

According to the provisions of the Announcement of the State Administration of Taxation on Relevant Issues Concerning Taxpayers' External Issuance of Special VAT Invoices (Guo Shui Fa [2014] No. 39), taxpayers evade tax by inflating VAT input tax amount, but the external issuance of VAT invoices that simultaneously meet the following circumstances does not belong to the external false issuance of VAT invoices: firstly, the taxpayer has sold goods to the taxpayers of the invoiced enterprise, or has provided VAT taxable labor services, or has provided VAT taxable labor services, or has provided VAT taxable labor services, and has not necessarily falsely invoiced the downstream enterprise. First, the taxpayer has sold goods, or provided VAT taxable labor or taxable services to the taxpayer; second, the taxpayer has collected the payment for the goods sold, taxable labor or taxable services provided, or has obtained the vouchers for the sales payment from the taxpayer; third, the contents of the VAT invoice issued by the taxpayer to the taxpayer in accordance with the regulations are in conformity with the goods sold, taxable labor or taxable services provided and the VAT invoice is legally obtained by the taxpayer; third, the VAT invoice is not a false invoice. The special invoice is legally obtained by the taxpayer and issued in its own name. The VAT invoice obtained by the recipient enterprise taxpayer can be used as VAT deduction voucher to offset input tax.

Such processing situation shall prove that there is a real transaction of goods, and the tax deduction by the invoiced enterprise will not cause the loss of national tax.

2. The recipient enterprise constitutes a bona fide acquisition and cannot deduct input tax, but it is not subject to fines and late payment fees.

According to the Circular of the State Administration of Taxation on the Handling of Issues Concerning Taxpayers' Goodwill Acquisition of Fraudulently Issued VAT Special Purpose Invoices (Guo Shui Fa [2000] No. 187), the following legal requirements must be met to constitute the "goodwill acquisition of fraudulently issued VAT special purpose invoices": firstly, there is a real transaction between the purchaser and the seller; secondly, the seller uses the invoices from the province (autonomous region) in which it is located. Secondly, the seller uses the special invoice of the province (autonomous regions, municipalities directly under the central government and municipalities with separate plans) in which the seller is located; thirdly, the name of the seller, the seal, the quantity of goods, the amount of goods and the amount of tax stated in the special invoice are all in line with the actual situation; and fourthly, there is no evidence showing that the buyer knows that the special invoice provided by the seller is obtained by illegal means. The recipient enterprise taxpayer in good faith to obtain the fraudulent VAT invoices often can not be deducted to carry out the tax amount, has been deducted to do the input tax amount transferred out of the processing.

To summarize, in order to constitute a bona fide acquisition by the invoiced enterprise, it is necessary to prove that there is a real transaction between the purchaser and the seller, the seller is using the special invoice of the province, the information specified in the invoice is in line with the actual situation, and there is no evidence to show that the purchaser is aware that the special invoice provided by the seller is obtained by illegal means, then the invoiced enterprise will not be punished for tax evasion or fraudulent export tax rebate, and the relevant provisions of late payment fees and fines will not be applied. If the company knows that the special invoice provided by the seller is obtained by illegal means, the invoiced enterprise will not be punished for tax evasion or fraudulent export tax refund, and the relevant regulations on late payment and penalty will not be applied.

3. Enterprises receiving invoices constitute tax evasion and are penalized by the tax bureau by recovering tax and late payment fees

According to the provisions of the Circular of the State Administration of Taxation on the Handling of Issues Concerning Taxpayers Obtaining Fraudulently Issued VAT Special Invoices (GuoShuiFa [1997] No. 134), i. If the invoiced enterprise makes use of other people's fraudulently issued special invoices and declares to the tax authorities to set off the tax for tax evasion, the tax shall be recovered in accordance with the "Law of the People's Republic of China on Taxation Levy and Administration" and the relevant provisions and the tax evaded shall be imposed at an amount of not more than five times the amount of the tax evaded. ii. If the input tax is greater than the output tax, the amount of input tax retained shall also be reduced. If a fraudulent export tax refund is carried out by utilizing falsely issued special invoices, the tax shall be recovered in accordance with the law and a fine of up to five times of the amount of the fraudulent tax shall be imposed.

When the invoicing enterprise is recognized by the tax bureau as false invoicing and the invoice obtained by the invoiced enterprise is recognized by the tax bureau as tax evasion, it not only has to pay back the tax and fine, but also may be criminally pursued if the circumstances are serious. Therefore, the invoiced enterprise should at least submit relevant business materials and information to the tax authority from the aspects of transaction authenticity and subjective goodwill. In particular, the Administrative Penalty Law makes it clear that no administrative penalty shall be imposed if the party concerned has sufficient evidence to prove that there is no subjective fault. In this context, the invoiced enterprise should actively prove that it does not have the intention of accepting false invoices.

II. how the invoiced enterprise criminal defense

According to "on the public security organs to handle economic crime cases of a number of provisions of" Article 15 of the provisions: the public security organs to accept the suspected economic crime clues of the report, charges, reports, voluntary surrender, should be immediately reviewed, and within seven days to decide whether or not to file a case; major, difficult, complex clues, the approval of the person in charge of the public security organs at or above the county level, the review of the case can be extended to 30 days; particularly significant, difficult, complex or cross-regional clues, approved by the person in charge of the public security organs at the next higher level, the time limit for filing and reviewing the case can be extended to another thirty days.

It can be seen from the above, when the upstream enterprises are referred to the judicial organs by the tax authorities according to law, the upstream judicial organs will pass the clues to the downstream, and the downstream judicial organs will start the investigation procedure according to the clues according to the law, perhaps taking into account the complexity of the case, the scope of the case, and whether it is difficult and other circumstances, the time limit for the establishment of the case may be different, but the investigation procedure is the mandatory procedure. Once the judiciary intervenes, the enterprise will directly face the tax-related criminal liability, improper handling of the risk of direct outbreaks, difficult to undo. So, what are the countermeasures for downstream invoiced enterprises?

(I) Enterprises should actively cooperate in the public security investigation stage to avoid the aggravation of criminal risks

According to the Criminal Procedure Law and the Provisions on the Procedures for Handling Criminal Cases by Public Security Organs, the public security organs shall withdraw the case if they find that the crime is significantly less serious and less harmful, and do not consider it to be a crime; and the case shall be withdrawn if it finds that the criminal suspect should not be held criminally liable, and the case shall be withdrawn if the public security organs have already filed the case.
From this it can be seen that the public security organs, in the process of opening a case for investigation, shall comprehensively and objectively collect evidence and materials, retrieve evidence and materials of the suspect's guilt or innocence, or of the guilt or innocence of the suspect, and examine and verify the authenticity, legality and probative value of the evidence and materials collected and retrieved. If the facts of the crime are considered to be significantly minor and not harmful enough to be considered a crime, or if the suspect is not required to be held criminally liable, the public security organ is authorized to make a decision to withdraw the case.

In the process of investigation by the public security authorities, the enterprises involved in the case should promptly appoint tax lawyers to intervene, through combing business transaction materials, meeting with suspects, etc. to write professional opinions, and communicate with the public security authorities, and strive for the development of the case in a favorable direction.

(II) The prosecutor's office to review the prosecution stage is the golden stage of the enterprise's effective defense

According to the provisions of the Criminal Procedure Law: the circumstances are significantly less serious, less harmful, not considered a crime, the procuratorate can make a statutory decision not to prosecute; for crimes of minor circumstances, in accordance with the provisions of the criminal law does not require sentencing or exemption from punishment, the people's procuratorate can make a discretionary decision not to prosecute; for the supplementary investigation of the case, the people's procuratorate still believe that there is insufficient evidence, does not meet the conditions for prosecution, the people's procuratorate can make insufficient evidence to prosecute. The people's procuratorate may make a decision not to prosecute for lack of evidence.

It can be seen, the prosecutor's office to review the prosecution stage is also a major focus of the defense of tax-related criminal cases. In the review and prosecution stage, lawyers can see the complete evidence, make accurate judgment, draft professional defense views, and formulate comprehensive defense strategy. At this stage, lawyers can strive for the prosecutor's office to make a decision not to prosecute by carrying out a number of tasks as follows:

1. Communicate with the prosecutor and express professional opinions;

2. Applying for a review hearing on the necessity of detention in accordance with the law;

3. according to the law to apply for the initiation of compliance with the non-prosecution program.

(III) Appropriate defense strategies should be adopted at the court trial stage

According to the Supreme People's Court's Notice on Issues Relating to the Conviction and Sentencing Criteria for Fraudulently Issuing VAT Special Purpose Invoices (Law [2018] No. 226), if the amount of tax fraudulently issued is more than 50,000 yuan, it shall be sentenced to fixed-term imprisonment of less than three years or custodial service; if the amount of tax is more than 500,000 yuan, it shall be sentenced to fixed-term imprisonment of three years to less than ten years; and if the amount of tax is more than 2,500,000 yuan, it shall be sentenced to fixed-term imprisonment of ten years to more than ten years or life imprisonment.

However, this does not mean that a tax amount of 2.5 million yuan or more will necessarily be sentenced to more than ten years of imprisonment. In addition to the innocent defense strategies such as dependent operation and truthful billing, which do not have the subjective purpose of cheating national tax and have not caused the consequences of loss of national tax, downstream invoiced enterprises that do engage in false invoicing due to irregularities in their operation can also obtain leniency through self-reporting, payment of additional tax, and pleading guilty and accepting penalties.

All in all, once the upstream invoicing enterprise is recognized as false invoicing, the downstream invoiced enterprise will face tax audit and criminal investigation, which will bring the risk of administrative and criminal liability for false invoicing. For the larger the enterprise, the result of being recognized as false invoicing is more difficult to bear, which can be millions or tens of millions of input tax transfer, tax reimbursement, late payment fees and fines, and even be transferred to the public security to pursue criminal liability, therefore, when facing this problem, taxpayers should seek professional help in a timely manner, in order to strive for a better qualification in the tax procedures, and block the transformation of the tax violations into criminal cases. Even if the taxpayer has already entered the criminal justice process, he/she should appoint a tax lawyer to formulate a reasonable defense strategy according to the circumstances of the case.