In recent years, the petrochemical enterprises to change the invoice suspected of false billing criminal cases continue to break out across the country, the judicial processing and refereeing results around the world are different, and the practical world is very controversial. The core of the dispute is whether changing the invoice name of "heavy oil", "crude oil", "residual oil" and other types of component oils to "fuel oil" and then using it to offset consumption tax constitutes a violation of the law. After the invoice name of "heavy oil", "crude oil", "residual oil" and other types of component oils was changed to "fuel oil", the act of using the invoice name for false offsetting of consumption tax constituted a tax evasion crime or a false VAT invoice crime. The core of solving this controversial issue is to clarify the essential difference between the crime of false invoicing and the crime of tax evasion. The author starts from a case of a petrochemical enterprise in Hainan Province that changed its invoices.                        

I. Brief description of the case

(I) Facts of the case

In August 2021, the Inspection Bureau of Hainan Provincial Taxation Bureau served the Decision on Tax Treatment and Decision on Tax Administrative Penalty to a petrochemical enterprise in Hainan Province (hereinafter referred to as "the enterprise" or "the petrochemical enterprise") by way of public notice, stating that Zhang was the actual controller of the enterprise, and Zhang utilized the enterprise to conspire with a number of companies to allow the upstream enterprises to falsely open accounts with the name of goods without goods and circulating funds. As the actual controller of the enterprise, Zhang made use of the enterprise to conspire with a number of companies to falsely issue VAT invoices with the names of asphalt, heavy oil, MTBE, carbon penta, xylene, etc. (non-consumption tax taxable products) to the upstream enterprises by means of empty transfer of goods without goods and revolving funds, etc., and then changed the names of the goods and falsely issued VAT invoices with the names of fuel oil, naphtha, etc. (consumption taxable products) to the downstream enterprises. special invoices for fuel oil, naphtha, etc. (consumption taxable products) to downstream enterprises. The above acts were not declared and paid in accordance with the law, and were recognized as tax evasion by the tax authorities, who decided to recover the consumption tax, urban maintenance and construction tax, education surcharge and local education surcharge totaling RMB320 million, impose late payment fees and a fine of RMB153 million, and transfer the case to the judicial authorities for handling.

(II) Focus of dispute - whether the case is characterized as false opening or tax evasion?

The Public Prosecution held that Zhang, as the actual controller of a petrochemical enterprise, contacted all of its business and should be responsible for all of the criminal acts of a petrochemical enterprise, and referred the case for prosecution on the basis that Zhang was suspected of the crime of falsely issuing VAT special invoices.

The defense of the enterprise proposed that 1) the criminal subject of the case should be a petrochemical enterprise, Zhang only introduced business for the enterprise, the business is a petrochemical enterprise and the other party to sign a purchase and sale contract, the transfer of goods right to confirm, receive payment and issue invoices, collect profits, Zhang is not the enterprise's legal representative, the enterprise to obtain the profits are not at Zhang's disposal; 2) a petrochemical enterprise has a real transaction behavior, there is no signing a false contracts, subjectively does not have the purpose of evading or cheating state taxes, objectively a petrochemical enterprise's behavior of changing invoices is suspected of tax evasion, and does not constitute the crime of falsely issuing VAT invoices.

(III) Court Decision - Defendant Zhang Mou committed the crime of tax evasion and was sentenced to six years' imprisonment.

The court held that the crime of false VAT invoicing should be based on the defendant's subjective purpose of fraudulently offsetting the state tax and objectively causing the loss of the state VAT tax as a necessary condition. Although the criminal law adopts a simple description of the crime of false VAT invoices, the requirement that the perpetrator subjectively has the purpose of cheating the state tax to constitute this crime is more in line with the spirit of the legislation and the principle of appropriateness of crime and punishment. Therefore, the court ruled that the defendant Zhang committed the crime of tax evasion and sentenced him to six years' imprisonment.

II. the three major defense strategies of the suspected false opening of the petrochemical variable ticket

At present, the characterization of the act of evasion of consumption tax for petrochemical invoice change, there are still big differences, and it is impossible to achieve a unified characterization, unified referee and sentencing standards. The main reason is that some places are not accurate enough in grasping the behavioral mode and transaction purpose of the transaction; the determination of whether there is a real goods transaction for the variable invoice enterprise is too simple, without taking into account the specificity of the variable invoice transaction; and the statutory constituent elements of the crime of issuing VAT invoices are not accurate enough, which leads to the mischaracterization of the behavior of the variable invoice enterprise's evasion of consumption tax as the false issuance of VAT invoices in some places. special invoices. This article is intended to propose the defense strategies for tax evasion for reference in respect of the above common confusing situations in judicial practice.

(I) Behavioral Mode and Transaction Purpose of Variable Ticket Transaction is to Evade Consumption Tax, Not Value-added Tax (VAT)

The basic pattern of petrochemical "change ticket" behavior is: if a refinery with real production capacity purchases raw material oil and other consumption tax non-taxable consumer goods, and sells consumption tax tax taxable consumer goods such as refined oil, due to the change of the name of its input and output invoices, it must pay the corresponding consumption tax. In order to evade the consumption tax, the refinery will contact the so-called "variable invoice" enterprise, "variable invoice" enterprise does not have the actual production capacity, is only responsible for accepting raw material oil and other input invoices, changed to the sales invoice of refined oil products, and then issued to the refinery, in this way, the refinery's input, In this way, the refinery's input and output invoices are all for consumption tax and other consumption taxable consumer goods such as refined oil, which belongs to the continuous production of taxable refined oil, and can be deducted or refunded consumption tax. The behavior of "changing invoices" of the enterprise will not directly cause the loss of VAT. VAT belongs to turnover tax and out-of-the-money tax, and in the chain of goods purchase and sale transactions, as long as there is the source of goods and the goods start to enter into the purchase and sale transactions, all the links will obtain or issue VAT invoices according to the quantity and amount of the goods contained in the contract and declare to the tax authorities to pay the VAT according to the facts. As long as the source of goods exists and the goods start to enter into the purchase and sale transaction, each link will obtain or issue VAT invoices according to the quantity and amount of goods contained in the contract, and declare the payment of VAT to the tax authorities accordingly and offset the inputs in accordance with the law, and the whole transaction will not cause the loss of the national VAT directly, so the purpose of the transaction of change of invoices does not lie in the false offset of VAT.

However, the enterprise's behavior of "changing invoices" has evaded a large amount of consumption tax payment. Since consumption tax is levied on the production, entrusted processing and import of taxable consumer goods within the territory of our country, the upstream enterprise issues VAT special invoices for non-finished oil products while the downstream enterprise, i.e., the production enterprise and the trade enterprise, changes the name of the goods to finished oil products and issues taxable consumer goods invoices, and then issues taxable consumer goods invoices for finished oil products. The downstream enterprises, i.e. production enterprises and trading enterprises, change the name of the goods into refined oil invoices and issue invoices for refined oil for taxable consumer goods. The trading companies or processing enterprises take advantage of the loopholes in tax collection and management to evade the payment of consumption tax, and such behavior results in a substantial loss of the national consumption tax.

(II) Due to its special characteristics, the transaction of change of invoices cannot be simply recognized as the false invoicing crime of "no real goods transaction".

The goods in the case of change of invoice are generally crude oil, asphalt or other semi-finished oil. The goods are transported directly from the location of the enterprise at the initial end of the transaction or the place where the oil products are stored to the refining enterprise for production and processing or blending; the oil purchase and sale contract proves that the purchase and sale parties have reached the purchase and sale agreement with the real intention, and the legal relationship of the purchase and sale contract is established, which conforms to the provisions of China's Civil Code; the raw material in and out of the warehouse list and the confirmation list, weighing list, the transfer of the goods right, the bill of sale, and the bank's electronic bill of lading. Evidentiary materials are used to prove the transfer of the right of goods; the bank electronic bill of return proves that there is a real flow of funds in the transaction; the VAT invoice proves that the VAT invoice obtained and issued by both the purchaser and the seller is in line with the real quantity of the goods as well as the amount of the VAT invoice; the transportation invoice proves that there is a real flow of the goods and that the goods are ultimately lifted by the petroleum refining enterprise; the bookkeeping voucher proves that the enterprise enters into the accounts based on the real transaction situation, and that there is no There was no falsification of the transaction documents.

In the aforementioned case, the public prosecution alleged that the "circular funds to go", "no goods empty transfer" of the fact that the determination needs to be supported by sufficient evidence. It is not possible to mechanically and roughly mix the petrochemical trade with the traditional trade and commerce, and determine that the perpetrator has no real goods transaction, thus arriving at the simple result of constituting the crime of false VAT invoicing.   

(III) "Causing loss of consumption tax" is not a legal element of the crime of false VAT invoicing.

Both the practical and theoretical circles believe that the crime of fraudulent issuance of VAT invoices requires the perpetrator to have the purpose of "obtaining tax by deception", and the "obtaining tax by deception" here should be distinguished from the crime of tax evasion, which is the "evasion of payment of tax", to avoid confusion between this crime and the other. This "cheating of taxes" should be distinguished from the "evasion of payment of taxes" in the crime of tax evasion, so as to avoid confusion between this crime and other crimes. The essence of the harm of sales under a different name is that the refining enterprise evades its consumption tax obligation by concealing its production and processing of refined oil products. If the judicial authorities are able to find out that the enterprises that specifically implement the change of tickets and ticket laundering conspire with the refining enterprises to change tickets in order to evade the consumption tax of the production link, they should further investigate and find out the amount of consumption tax evaded from the downstream enterprises of the transaction chain, so as to determine the specific amount of the loss of the national consumption tax. It should be noted that the facts of this case can only prove that the subjective purpose of helping other enterprises to evade payment of tax exists, but not the purpose of cheating tax, which is the key to our insistence that the enterprises changing the invoices can not be punished for the crime of false VAT invoicing. To sum up, "causing loss of consumption tax" can only prove that the perpetrator may have the purpose of "tax evasion", but cannot prove that the perpetrator has the purpose of "tax cheating", and does not have the legal elements for the establishment of the crime of false invoicing of value-added tax. It does not have the legal elements of the crime of false VAT invoicing.

III. Prevention and Response to the Criminal Risks of False Invoice Issuance by Changing Vouchers

In the case of variable invoice, the risk of criminal liability has begun to extend from the middle link of the transaction chain to the source enterprise and the petroleum refining enterprise of the purchasing terminal, in which the risk of false invoicing and the risk of loss of consumption tax is greater for the petroleum refining enterprise, the petroleum refining enterprise should have a clear understanding of its own possible criminal and tax-related risks, and should do a good job in advance in response to the risk.         

(I) Establishing a sound compliance management system to minimize risks at the front end

Conditional petrochemical enterprises should set up internal compliance legal department or external tax compliance consultants, so that major transactions are reviewed by legal professionals. They should also conduct regular training on tax-related criminal risk prevention for business, financial departments and administrative management to strengthen the awareness of operational compliance. Especially when selecting suppliers, the basic situation of the suppliers should be fully examined, and key verification should be made on whether the suppliers have entity operation and whether there are major tax violations, etc., so as to ensure that the enterprises can obtain legal and valid VAT invoices in actual transaction behavior, and to avoid unnecessary economic losses caused by the upstream enterprises fleeing (losing connection), or even lead to the risk of false invoicing.

(II) Retaining transaction materials to prove the authenticity of the transaction

Judicial organs will often be "no flow of goods in the middle of the transaction", "circular transactions", "the contract is controlled by a party" and other reasons to determine that the transaction is not real, and ultimately from the "fictitious transactions". "Fictitious transactions" to make the conclusion that constitutes "false opening". The authenticity of the transaction or the existence of real goods throughout the transaction is a key legal fact in the characterization of fictitious transactions. In the case of sales under a different name, the goods are directly withdrawn from the source enterprise by the terminal refining enterprise, taking into account the transportation cost and other issues, the intermediate trading enterprise does not have the flow of goods in the course of the transaction, but the right to the goods is legally transferred in the transaction again and again. Both intermediate trading enterprises and petroleum refining enterprises should keep evidence and materials such as purchase and sales contracts, VAT invoices, warehousing lists, weighing lists, transportation invoices, sales lists, bookkeeping vouchers and other evidence to prove the authenticity of the transactions.

(III) Actively responding to tax-related legal procedures to avoid falling into administrative and criminal risks

At present, the judicial authorities across the country have correctly changed the trend of investigating and handling cases of petrochemical enterprises changing their invoices and the logic of accusation, and many judicial authorities have begun to realize that such cases have not resulted in the loss of VAT tax in essence, but mainly to help refining and chemical enterprises to hide their production behaviors to evade the excise tax, so some judicial authorities have begun to prosecute and hold the persons involved in the case criminally liable for the crime of evasion of tax. The author suggests that petroleum refining enterprises that are facing the risk of criminal liability for false invoicing should especially enhance their risk awareness, raise the level of attention, and actively demand professional support and defense in order to maximize the protection of their legitimate rights and interests in the face of tax audits or investigations by judicial authorities.