Due to the existence of the quota system, the phenomenon of coal trading enterprises purchasing goods without invoices from small coal kilns is more common, for this part of the "dry goods" without invoices, coal trading enterprises often obtain invoices from a third party, and the invoices correspond to the goods sold by the third party or sold by the coal trading enterprises to those who don't need invoices. The goods corresponding to the invoices are then sold by the third party itself or sold by the coal trading enterprise to individual households that do not need invoices to recycle funds. For this kind of behavior, from the perspective of the third party is the separation of invoices and goods, while from the perspective of the coal trading enterprise is "according to the fact on behalf of the invoice". In the current judicial interpretations, the "actual invoicing" does not constitute false invoicing, but in practice, there are different characterizations of such behavior by coal trading enterprises. In this article, Huatax will analyze with readers how such behavior should be characterized through a case of suspected false opening by a coal trading enterprise.

I. Brief description of the case

The People's Procuratorate of Fengfeng Mining District of Handan City filed a public prosecution with the People's Court of Fengfeng Mining District of Handan City, Hebei Province, charging the defendant Zhang with the crime of falsely issuing VAT special invoices with the indictment of Feng Procuratorate Public Prosecution and Criminal Prosecution (2018) No. 184.

The Procuratorate alleged that between October 2011 and August 2012, Defendant Zhang Mou (a salesman of Fengfeng Mining District Hengyuan Coal Washing Plant), in order to obtain VAT special invoices, signed a contract with Shanxi Coal Transportation and Marketing Group Changzhi Company Limited (hereinafter referred to as the coal company) in the name of Fengfeng Mining District Hengyuan Coal Washing Plant (hereinafter referred to as the coal company) in order to pay the payment of 1,944,7200 yuan for the goods in the company's name, in collaboration with Liu Mou, Li Mou and Jin Mou. .

The three agreed that Zhang obtained the invoice, while the purchased raw coal was sold separately by Li and Jin. Eventually, Li Mou, Jin Mou will be all of the above raw coal in Changzhi County to cash coal sales to individual households, and for the Fengfeng Mining District Hengyuan Coal Wash Plant falsely opened 8 VAT invoices, price and tax totaled 19307321.84 yuan, of which the tax 2,805,337.35 yuan, the above VAT invoices have been all by the Fengfeng Mining District Hengyuan Coal Wash Plant deduction. Defendant Zhang's behavior constitutes the crime of false VAT invoices.

The court held that: Defendant Zhang Mou violated the national tax management system and illegally purchased VAT invoices with a total value of 19307321.84 yuan, of which the tax amounted to 2805337.35 yuan, and his behavior has constituted the crime of illegally purchasing VAT invoices, and the crime charged by the public prosecution organ could not be substantiated, and he should be convicted and punished for the crime of illegally purchasing VAT invoices. Verdict: Defendant Zhang was sentenced to three years' imprisonment, five years' probation and a fine of 100,000 yuan for the crime of illegally purchasing VAT invoices.

On February 3, 2020, the People's Procuratorate of Fengfeng Mining District, Handan City, Hebei Province, filed a protest with the Intermediate People's Court of Handan City, Hebei Province. It held that: the crime of illegally purchasing VAT invoices is relative to the purchase in accordance with the law, and Zhang's behavior constitutes the crime of falsely issuing VAT invoices. The People's Court of Fengfeng Mining District of Handan Municipality only determined the behavior of Zhangmou's purchase of VAT invoices from Liumou and Limou, and did not determine the behavior of false opening of VAT invoices in collaboration with Liumou and Limou, and convicted and punished Zhangmou for his one-sided purchase by incorrectly applying the legal provisions on illegal purchase of VAT invoices, which is an error in the application of law and should be corrected.

The Intermediate People's Court of Handan City, Hebei Province, issued Criminal Ruling No. 262 (2020) 冀04刑终262, ruling that the original sentence should be quashed and remanded for retrial.

II. Does such behavior belong to "separation of invoices and goods" false invoicing?

(I) The Procuratorate determined that Zhang Mou constituted the crime of false invoicing of VAT special-purpose invoices by allowing the coal company to issue invoices for the coal washery without any real transaction.

The Procuratorate determined that Zhang Mou constitutes the logic of false invoicing: there is a real coal transaction between Li Mou and the coal company, Li Mou belongs to the buyer, to the coal company to buy coal, the coal company should issue invoices to Li Mou. There is no real coal transaction between the coal washing plant and the coal company, in this case, the coal washing plant let the coal company issue invoices for it, resulting in the "separation of votes and goods", and the coal washing plant made deductions, which belongs to letting others falsely issue VAT invoices for themselves, constituting the crime of falsely issuing VAT invoices.

(II) The court found that Zhang's purchase of invoices from Li constituted the crime of illegal purchase of VAT invoices.

The court found that Zhang Mou constituted the logic of illegally purchasing VAT invoices: there was a real coal transaction between Li Mou and the coal company, Li Mou belonged to the buyer and purchased coal from the coal company, and the coal company should have issued invoices to Li Mou. And there is no real coal transaction between the coal washing plant and the coal company, under such circumstances, Zhang Mou purchased from Li Mou the invoice that the coal company should issue to him, i.e., the coal company issued VAT invoices to the coal washing plant, for offset, which belongs to the illegal purchase of VAT invoices and constitutes the crime of illegal purchase of VAT invoices.

(III) The "Separation of Invoices and Goods" in this case should be characterized as tax evasion.

In fact, this case is not the traditional "separation of invoices and goods" type of false invoicing, but a typical tax evasion of off-the-books sales.

The transaction pattern of the coal washing plant (including Zhang Mou), the coal company, Li Mou and Jin Mou was as follows:

1. Zhang obtained the special VAT invoice issued by the coal company for the coal washing plant in accordance with the tax law

According to the aforementioned transaction pattern, the coal washing plant signed a written purchase and sale contract with the coal company in its name, and the coal company, as the seller of the contract, truthfully received the payment and delivered the goods, and according to the relevant provisions of the Provisional Regulations on Value-added Tax (VAT), it should issue VAT invoices to the coal washing plant.

The coal washing plant, as the buyer of the contract, had paid the payment to the coal company and received the goods delivered by the coal company, and had a real purchase and sale business with the coal company, and it obtained the invoice issued by the coal company and carried out offsetting as a legitimate and lawful practice to realize its offsetting rights and interests.

2. The behavior of Zhang Mou, Liu Mou and Li Mou in selling coal privately should be characterized and punished by tax evasion.

According to the aforementioned transaction mode can be seen: coal washing plant in its name with the coal company signed a contract, coal company in accordance with the instructions of the coal washing plant to Liu, Li delivery, and to the coal washing plant to issue a special invoice. The invoicing in this link is in full compliance with the tax law.

In fact, the social harm of this case lies in the behavior of Zhang Mou, Liu Mou, Li Mou private sales of coal, to avoid tax supervision. That is, whether the coal washing plant sales to LiuMou, LiMou, LiuMou, LiMou and sales to other individual households, or by the coal washing plant through LiuMou, LiMou direct sales to individual households, the coal washing plant are not listed in the income for financial accounting and did not issue invoices, tax declarations, is a typical tax evasion behavior. For tax evasion, the tax authorities shall first deal with and penalize the tax evasion, and then determine whether it constitutes the crime of tax evasion on the basis of determining whether the antecedent conditions are met.

In the second typical case (Hubei So-and-so Environmental Engineering Co., Ltd. and Li Mouming Tax Evasion Case) of the "Typical Cases of People's Courts Giving Full Play to Their Trial Functions in Protecting Property Rights and Entrepreneurs' Legitimate Rights and Interests (the Third Batch)," issued by the Supreme People's Court on May 19, 2021, the idea of dealing with tax evasion cases is also made clear: after discovering that an enterprise may have committed tax evasion, the tax authorities shall first have the tax inspection department Tax inspections should be carried out, and the taxpayers should be subject to tax recovery or administrative penalties according to the conclusions of the inspections, and the taxpayers suspected of committing criminal offenses should be referred to the public security organs for investigation. The case was retried by the Hubei Higher People's Court, which reversed the original decision and acquitted the company and the person in charge.

In summary, we believe that the behavior of the coal washing plant belongs to tax evasion, which does not constitute the crime of false invoicing and the crime of illegally purchasing VAT invoices, and should be dealt with by the tax authorities first, and should not be investigated by the public security authorities directly. If the tax authorities transfer the case to the public security authorities for criminal investigation without issuing recovery notices or imposing administrative penalties, it means that the coal washery objectively has no possibility to pay back taxes and late fees and to be subject to administrative penalties, and the tax authorities deprive the coal washery of the right to rectify its tax payment behavior. In addition, Zhang belonged to the coal washing plant's employees, and its business was a performance of duty, and the coal washing plant's behavior should be evaluated legally (including administrative evaluation and criminal evaluation). If the coal washing plant's behavior is only an administrative violation, only the coal washing plant's behavior shall be dealt with administratively. If the coal washing plant's behavior constitutes a criminal offense, then criminal evaluation shall be conducted according to the nature of Zhang's behavior.

III. Coal enterprises should focus on tax compliance and tax risk prevention

Under the policy background of carbon peak, carbon neutrality, and double control of energy consumption, coal enterprises will usher in arduous challenges and also gain rare historical opportunities. While seizing the opportunities, coal enterprises should also pay attention to the tax-related risks in their production and operation. When encountering such cases, coal enterprises should appoint tax lawyers to deal with them in time to avoid undue penalties.

1. Improve the business process and strictly implement it based on the real business

Whether in coal purchase and sale or transportation, coal enterprises should complete the business process, pay attention to the business approval, to avoid the illegal behavior of specific personnel involved in the enterprise. In specific business, focus on the retention of written contracts and other materials, pay attention to whether the contract signatory is an authorized representative of the other company, check whether the contract seal is real, and avoid framework contracts.

2. Improve tax management system and invoice management system

Coal enterprises should establish a perfect management system of value-added tax (VAT) and enterprise income tax (EIT) as well as invoice and voucher management system based on business authenticity.

Establish a tax-related information database of upstream and downstream enterprises, have a comprehensive grasp of the creditworthiness of upstream and downstream enterprises, and actively obtain the invoice data of relevant enterprises to ensure that the transactions with upstream and downstream are real and effective, and the invoice information is accurate.

3. Improve the compliance management system, so that tax compliance runs through the daily operation of the enterprise.

Establish an internal compliance department to ensure that major transactions are reviewed by professionals. Professional lawyers are commissioned to conduct regular training on tax-related risk prevention to strengthen the awareness of operational compliance. Regularly conduct special medical checkups for tax risks, and find and solve them in a timely manner.

4. Emphasize the tax audit procedure to avoid the transformation of administrative liability into criminal liability.

Many of the sources of tax-related criminal cases in coal enterprises are transformed from tax audits. Tax inspection is an important means for tax authorities to investigate and deal with tax violations and to safeguard tax revenue, and it is the frontier where taxpayers face tax-related risks and tax disputes between levy and payment parties break out. The tax audit procedure has set up a quarantine zone for the transformation of tax-related administrative violation cases to tax-related criminal offense cases. Timely and effective response to tax audit procedures can reduce the risk of transformation of tax-related administrative cases into tax-related criminal cases. Enterprises should attach great importance to the response to tax audit, especially when the tax authorities have already made the characterization of the case of false opening and tax fraud, enterprises should be more vigilant, and through the intervention of professional tax lawyers in the audit procedure, actively and effectively communicate with the tax authorities and strive for non-referral to maximize the risk of defusing the risk in the administrative procedure and avoiding the transformation of administrative risk into criminal risk.

5. Properly respond to tax-related criminal investigation to avoid criminal liability

If insufficient attention is paid to the response to tax audits, resulting in unsatisfactory processing results, the case is likely to be transferred to criminal procedures. Once the case proceeds to the criminal procedure, the enterprise can't just sit back and wait for death, it should seize the golden period, timely hire professional tax lawyers to intervene in the response, and utilize the professional knowledge and experience, as well as the latest criminal policy, to strive for the optimal result of not filing a case, not prosecuting and so on, and to avoid assuming the criminal responsibility.