Because most of the cases of false VAT invoices are accompanied by the phenomenon of fund return, the tax authorities pay special attention to the flow of funds when dealing with this type of cases, but does it necessarily belong to false invoicing as long as there is the apparent behavior of fund return? If it is really difficult for enterprises to obtain input invoices, how should they respond? In the situation of the tax authorities to crack down on the case of false invoicing, how should enterprises carry out risk prevention?

I. Introduction of the case: a company was recognized by the tax authorities as false invoicing due to the return of funds

(I) The enterprise obtained an invoice of a service department, offsetting VAT input and listed before income tax

Dongguan D Company Limited was established in November 2015, the legal representative is Cheng Mou, since August 2016, registered with the tax authorities as a general taxpayer of VAT. 2019 and 2020, Dongguan D Company Limited obtained 26 VAT invoices from the Service Department of X in Mirror Lake District, the total amount of which was RMB 2,369,632.47, the total tax amount was RMB 63,060.33 Yuan, and the total value tax amounted to RMB2,432,692.80. Dongguan D Co., Ltd. booked and carried forward the 26 VAT invoices to cost successively in FY2019 and FY2020, and declared tax deduction of RMB63,060.33 at a district tax sub-bureau of a municipal tax bureau of the State Administration of Taxation.

(II) Tax Audit Determination of False Invoicing on the Basis of Return of Funds

Through account screening, fund flow and other clues, the Tax Sub-bureau of Certain Municipal Tax Bureau of the State Administration of Taxation found that Dongguan D Co., Ltd. transferred funds through the public account and then flowed back to the Company through several related accounts. Accordingly, the tax authorities determined that Dongguan D Co., Ltd. had obtained the above 26 invoices as fictitious invoices, which were not allowed to be offset against input tax and were not allowed to be used as legal documents for pre-tax EIT, and made a Notice of Confirmed Fictitious Invoices on February 24, 2022.

(III) Lack of input invoices by enterprises and establishment of individual households with false invoices

Through investigation, the tax authorities found that the so-called Jinghu District X Service Department was an individual business, which was set up by the employees of D Ltd. The original, D Ltd. lack of input invoices, only through the employees to set up an individual business, the form of false invoices to obtain input invoices. There is no real transaction of goods between Dongguan D Co., Ltd. and X Service Department of Mirror Lake District.

(IV) The enterprise paid back taxes and late payment fees and received administrative tax penalties.

Upon receipt of the Notice of Proven False Invoicing, Dongguan D Co., Ltd. made two remedial measures: as the first step, Dongguan D Co., Ltd. made a transfer of input tax amount of RMB63,060.33 on May 9, 2022, made up for the payment of the corresponding late fees, and paid the corresponding urban maintenance and construction tax as well as the late fees on the same day, and made up for the payment of the corresponding surcharges on education fees and surcharges on local education; as the second step, Dongguan D Co. May 10, 2022, filed adjustments to the annual enterprise income tax return for the year 2019 and the annual enterprise income tax return for the year 2020, respectively, and did not incur the tax payable as the adjusted amount was still a loss. The final tax penalty decision in this case was to impose a fine of fifty percent on Dongguan D Company Limited for the underpayment of value-added tax and urban maintenance and construction tax caused by the acceptance of 26 fraudulent VAT invoices from the X Service Department of the Mirror Lake District, with a total fine of RMB33,106.68.

(V) Summary: Does the return of funds necessarily constitute false invoicing? How should enterprises respond to the lack of input invoices?

In practice, the tax authorities generally found that the enterprise involved in the case was inconsistent with the four flows, i.e., the flow of bills, contracts, funds and goods, during the process of tracing back the flow of funds, and then came to the conclusion that the enterprise did not have any real transaction but obtained the VAT invoices. In addition, under the promotion of Golden Tax Phase IV, the four departments of tax police, customs and bank jointly handle cases, and the bank can timely push the abnormal clues of suspected fund reflux to the tax department, so that it is very easy for the tax department to retrieve the evidence of fund reflux, which leads to the phenomenon of unusually sharp fund reflux when the tax authority handles the case, so what are the substantive elements for the tax authority to recognize false invoicing? Enterprises in the difficult to obtain input invoices, and how to deal with it?

II. the substantive elements of the act of false opening

(I) Absence of real transaction behavior is the substantive element of false invoicing.

When the tax authority determines whether the enterprise has the illegal and criminal act of issuing false VAT invoices, it shall focus on whether the real transaction behavior occurs. That is, whether the transaction funds are real, whether the transaction goods are real, whether there is a corresponding contract, financial transaction documents, receipt and delivery confirmation, transportation documents and so on to be corroborated, the amount of bank water, receipt and payment application form, receipt and payment records and so on whether the amount of the right, whether to receive and pay false invoicing fees and so on. In addition, to determine whether the enterprise has a real transaction should also be screened from the complete transaction chain, avoid cutting the transaction chain, from a transaction one-sided, isolated judgment.

(II) the return of funds is not a substantial element of the enterprise false openings

In the current active economic activities, there are a variety of reverse capital payment phenomenon occurs, such as electronic trading platforms in the return of refund behavior, such as because of default occurs in the reverse payment, such as the deposit return reverse payment, etc., according to this, the capital flow back can not be mechanized understanding. Based on this, since the flow of funds presents a variety of different situations, it cannot be roughly recognized as a substantive element of false VAT invoices.

III. Tax Response of Enterprises Having Difficulty in Obtaining Input Invoice

In practice, it is true that some enterprises have difficulties in obtaining input invoices, such as the waste materials industry, construction industry, sand and gravel industry, etc., due to their upstream suppliers are mostly retailers, which leads to the difficulty in obtaining input invoices; and then, for example, accounting firms and advertising companies providing advertising and marketing, consulting and planning, etc., when providing these services, the audience is also very decentralized, and there will be the trouble of difficulty in obtaining input invoices. Once the input invoice is insufficient, it will lead to excessive pressure on the tax burden of the enterprise. Here we introduce several compliant solutions to make up for the insufficiency of the input invoice.

(I) Tax response during company establishment

From the point of view of regional tax burden difference, the company can choose to set up in the tax-preferential zones. Sometimes, in order to attract investment, attract enterprises to drive local economic development and promote the improvement of local employment environment, local governments will set up some preferential zones to exempt all or part of the tax payable by the enterprises, or give back a certain percentage of the tax payable by the enterprises to reduce the tax burden of the enterprises to attract the enterprises to set up in the zones.

(II) Tax response during the operation of the company

Finding tax authorities to issue invoices on behalf of the company: Nowadays, China's tax authorities support issuing invoices on behalf of the company for the convenience of collection and management. At the windows of tax service halls around the country, it is sufficient to submit tax returns and other necessary information, declare and pay taxes and fees, and receive invoices.

Subcontracting the company's business. If a part of the company's business is difficult to obtain input invoices for the company, and for the company's non-core business, it will lead to the company's tax costs are too high, the company can choose to subcontract this part of the company, through the contractor to the enterprise to issue invoices, as a way to alleviate the problem of lack of tickets for the enterprise itself.

IV Legal Risk Prevention and Response in the Case of False Opening

(I) Risk prevention of false invoicing in the administrative stage

When the tax authorities believe that the enterprise has the problem of suspected false VAT invoicing, they will notify the enterprise to carry out tax inspection. At this time, it can be divided into two stages with the Decision on Tax Treatment and Decision on Tax Administrative Punishment as the demarcation point.

Before the tax authorities have not yet made the Decision Letter on Tax Treatment and Decision Letter on Tax Administrative Penalty, it means that the case is being inspected and no final and definitive opinion has been obtained. At this time, in addition to cooperating with the inspection activities of the tax authorities, the taxpayers also have the following risk points to pay attention to:

First, the enterprise needs to make an objective statement of facts. If there is a real transaction, the enterprise should focus on submitting supporting materials that can prove that it is a real transaction, including but not limited to contracts, financial correspondence, confirmation of receipt and shipment, transportation documents, bank water, application for receipt and payment, records of receipt and payment, and matching invoices to support the authenticity of the transaction. If the transaction has not yet occurred, the enterprise should submit the corresponding evidence, whether it belongs to the special circumstances that can be invoiced first, for example, in practice, many enterprises in order to ensure that the smooth transaction of goods or to avoid the price risk, often use the "invoicing first, after the payment" of the transaction, which also leads to the value-added tax invoice has been issued, but the transaction has not yet begun. This will also lead to the situation that the VAT invoice has been issued, but the transaction has not yet started.

Second, prepare tax guarantee in advance. If the tax authority tends to recognize that the enterprise has falsely issued VAT invoices and does not accept the statement of the enterprise, then prepare the tax guarantee in advance, so as to prevent the tax authority from adopting the following tax preservation measures: notify the taxpayer's account bank or other financial institutions in writing to freeze the amount of the taxpayer's deposits which is equal to the amount of taxes payable; and seize the taxpayer's commodities, goods or other properties which are equal to the value of the taxes payable. other properties.

After the tax authorities have made the Decision on Tax Processing and Decision on Tax Administrative Penalty, if there is any objection to the content of the decision, the administrative reconsideration procedure should be initiated in a timely manner. At this time, it is necessary to pay attention to the "two front" procedure, that is, before filing a reconsideration of the processing decision, you need to pay the tax, late fees, if you are unable to pay, according to the State Administration of Taxation "Tax Guarantee Trial Measures", to provide tax guarantees, fill out the guarantee instrument, and then attached to the guaranteed copy of the property information.

(II) Response to the risk of fraudulent issuance at the criminal stage

In the case of public security organs involved, the parties involved in the case will be summoned by the public security organs, at this time, attention should be paid to: first of all, truthfully answer the questions of the investigators, do not make false statements; secondly, carefully check the transcripts, if you find inconsistent with their own descriptions or places that may give rise to ambiguities, should be investigating authorities to timely explanation, corrected to be consistent with the statement of the content of their own without ambiguities; last but not least, should appoint a professional lawyer to intervene as soon as possible. Finally, the most important point, should be as soon as possible to appoint a professional lawyer to intervene, preferably in the public security organs to the procuratorate to approve the arrest before the lawyer to defend from a professional, favorable point of view.

In the stage of review and prosecution, the defender can complete the following preparatory work by reading the file: firstly, comprehensively grasp the case materials, collect the evidence, from which screening, looking for the loopholes in the prosecution's evidence system; secondly, the defender can formulate the optimal plan for the taxpayers to choose according to the materials of the case for the taxpayers who are in deep trouble, give the taxpayers practical and effective suggestions, and give the prediction and evaluation of the case direction, and strive for the optimal result for the taxpayers within the legal framework; finally, the defender can appoint professional lawyers to participate as soon as possible. Finally, the defender can apply for access to evidence to build a system of evidence for mitigation or acquittal.