Editor's Note: In the current judicial practice, resources recycling industry, coal, non-ferrous metals and other bulk trade enterprises often due to the business chain is too long, not actually involved in the transportation of goods and other leading to the authenticity of the goods doubt, network freight, flexible labor and other platform type of enterprises due to the business operation is not standardized, the business process is not a solid existence of the possibility of being found to be false opening, and these industry enterprises due to the lack of invoices of the source, often relying on the financial rebate to conduct business. Under the background of the current strict investigation of tax rebates, the mode of this type of enterprises based on financial rebates for external business, issuing invoices is more likely to be questioned, and there are local judicial authorities believe that the enterprise will be financial rebates as a tool for profit-making by fraudulent invoicing, and will be the purchase and sale of enterprises to the crime of fraudulent invoicing for investigation, and the relevant enterprises, persons in charge, and financial and business personnel are facing serious risks of criminal liability. Relying on the financial return business model means a greater risk of false opening? How can the relevant enterprises effectively prevent the risk of being characterized as false opening and requesting the return of financial rebates? This article will further analyze.

I. A number of cases have determined that enterprises have utilized financial rebates for external false openings.

In the past investment promotion practice and the cases constituting false openings, most of the enterprises conducting business through financial rebates are enterprises in industries with insufficient source invoices such as resources recycling industry and flexible labor, etc. Based on the principle of VAT ring deduction, the financial rebates are one of the methods for these enterprises to suppress the tax burden and solve the shortages of input items. For this business model, in practice, it is easy to arouse the suspicion of using fiscal rebate to make profit by false invoicing - for example, the profit of the trading enterprises applying fiscal rebate basically comes from the difference between the fiscal rebate and the “trade price difference” and the full payment of output VAT, which is not the same as the actual purchasing and selling of single-item invoices. If the profit of a trading enterprise applying fiscal rebate basically comes from the difference between the fiscal rebate obtained and the “trade price difference” and the full payment of output VAT, there is a lack of substantial correlation between the unit price and quantity of its actual purchases and sales, and coupled with the fact that the trading enterprise does not participate in the actual transportation and the non-standardization of the business operation, it is very easy to generate the suspicion of the enterprise's no real business and the use of fiscal rebate as a tool for the issuance of external VAT invoice. According to our past agency experience and practical observation, for the business model relying on financial rebate, there are differences in the operation mode of individual cases and the understanding of the business by the judicial authorities, which will lead to different treatment results:

In the case of a recycling enterprise suspected of the crime of false invoicing of VAT, the recycling enterprise involved in the case set up individual recycling stations at the front-end, forming the business model of “retail households-individual recycling stations-recycling enterprises-waste-using enterprises”, of which, the individual recycling stations provided the recycling enterprises with the necessary information to the recycling enterprises. In the case of the crime of special VAT invoices, the individual recycling stations issued special VAT invoices to the recycling enterprises on behalf of the recycling enterprises, and enjoyed the VAT, surtax and personal income tax rebates from the local government, while the recycling enterprises themselves also enjoyed the financial rebates from the local government. The public security organs alleged that the individual recycling stations took advantage of the financial rebate policy given by the local government, and falsely issued VAT special invoices to the outside world without the occurrence of actual business with a total of nearly 7 billion yuan in price and tax, and the tax amount was more than 200 million yuan. At the stage of reviewing and prosecuting, the Procuratorate recognized the opinion of the lawyers that the business carried out by individual recycling stations and recycling enterprises enjoying the financial rebate had real goods transactions and was not recognized as false invoicing.

And in some cases, there are judicial organs that enterprises relying on financial rebates issue VAT invoices to the downstream, and obtain financial rebates after paying full taxes, resulting in the loss of national taxes and constituting the crime of false invoicing. For example, in the case of false VAT invoices issued by a renewable resources recycling enterprise, the court held that “although Company A (the recycling enterprise enjoying fiscal rebate) as the issuer of the invoices paid 100% of the tax to the tax authorities, 48% of the tax was transformed into fiscal expenditure through government preferences, and the actual tax revenue of the state was only 52%, while Company D, as the payee of the invoices, made 100% of the tax offset, resulting in a 48% loss of state tax revenue.” The court finally concluded that Company A utilized the preferential policy of tax rebate and incentives of local government, violated the national regulations on the management of VAT invoices, and falsely issued VAT invoices for others without any real transaction, resulting in a loss of more than 7 million yuan in national tax revenue, and the two directly responsible persons were found to constitute the crime of falsely issuing VAT invoices and were sentenced to 11 years of imprisonment.

In practice, even some judicial authorities determined that the behavior of enterprises obtaining financial rewards after false invoicing constituted the crime of fraud. For example, in the case of false VAT invoices issued by a non-ferrous metal trading enterprise, the court held that the enterprise involved in the case had falsely issued VAT invoices to the downstream without any actual business, with a tax amount of more than RMB 10 million, and cheated the support funds of the management committee of RMB 3 million, and the person in charge of the enterprise had the purpose of illegal appropriation. The person in charge of the enterprise was with the purpose of illegal appropriation, utilizing the false business with the downstream enterprise to make false tax declaration to the tax authority, the amount was particularly huge, and finally sentenced to 18 years of imprisonment for the crime of false VAT invoices combined with the crime of fraud.

As can be seen from the above case, the enterprise applies the financial rebate to do business how to characterize particularly sensitive, such as coupled with the trade chain is too long, not involved in the actual transportation of goods, did not assume the function of carrying out business and other unfavorable determinations, the enterprise is facing a greater risk of false invoicing. Moreover, some of the judiciary fell into the enterprise to enjoy the financial rebate caused by the loss of national tax prejudice, that the enterprise will be the financial rebate as the capital of false billing, external invoicing fees for profit. With the implementation of the Fair Competition Review Regulations on August 1, and the gradual cleanup of past financial rebates and subsidy policies in various places, there have been cases where some places have filed criminal cases of false invoicing for the purpose of recovering financial rebates, so that the enterprises concerned are not only facing the risk of recovering financial rebates, but also their own and the relevant responsible persons may be facing the accusation of criminal offenses.

II. Does relying on financial rebates to carry out business imply a greater risk of false opening?

Renewable resources, coal, non-ferrous metals and other bulk commodity trading enterprises and network freight, flexible labor and other platform enterprises widely exist relying on the financial return business model, there are two main reasons, one is that the local government in order to promote the recycling economy, bulk trade, platform type of emerging industries and other industries, to give the local enterprises related to the landing of the financial rebate, financial subsidies, industrial support funds, etc. preferential policies to attract enterprises to invest in the local; second, renewable resources, network freight and other industries have a shortage of source invoices, through the financial rebate, the risk of false opening. and other preferential policies to attract enterprises to invest locally; secondly, enterprises in the resources recycling industry, network freight transport and other industries have the problem of shortage of invoices at source, and the fiscal return policy can effectively reduce the tax burden of issuing invoices to the downstream for full tax payment. For example, in the resources recycling industry, because the source of supply of waste is not invoiced, the recycling enterprises use the fiscal rebate to suppress their own tax burden, while the network freight, flexible labor and other platform enterprises are also directly docked to the source of scattered service or labor providers, and are unable to obtain VAT invoices for input deduction and pre-tax deduction of income tax, and can effectively alleviate the pressure on their tax burden by means of obtaining the fiscal rebate. From the viewpoint of the motive for the formation of the above business model relying on fiscal refund, the government has the objective demand of attracting investments and promoting industrial agglomeration, and the enterprises also need fiscal refund to suppress the tax burden due to the specificity of the industry, and the existence of this model has its reasonableness and necessity.

As mentioned above, some judicial organs to the bulk trade enterprise trade chain is long, the intermediate body is not involved in the actual transportation of goods or platform type of enterprises did not undertake the actual business functions of the business operation, denying the reasonableness of the existence of enterprises, that enterprises enjoy the financial rebate is to false open, financial rebate is the enterprise false open profit-making capital and tools. We believe that enjoying the financial rebate does not mean that there must be false opening, between the financial rebate and false opening, on the surface of the enterprise based on the invoice issued to confirm income, payment of taxes to obtain the financial rebate, but invoices issued legally or not behind the essence of the business to determine whether the authenticity of the authenticity of the business, the judgment of the authenticity of the business, it is necessary to return to the industry's particularities and operating practices, understanding the business chain set up the rationality and necessity. The judgment of business authenticity needs to return to the industry specificity and operation practice to understand the rationality and necessity of business chain setting. If the enterprise has real business, business process compliance, then its invoicing behavior should not be recognized false opening, then talk about the legitimacy of the financial return policy, if the financial return policy in violation of laws and regulations, the local government requires the enterprise to pay back a certain legal basis; if the enterprise and the local government to enter into a cooperation agreement or the government minutes, documents and other compliance, the enterprise should obtain the agreed upon Financial return, the local government has no right to require enterprises to return.

It is noteworthy that, recently, the second trial of the case of a network freight company suspected of the crime of false VAT invoices was changed to the crime of illegal sale of VAT invoices, and the court held that, “the behavior of a network freight company deviated from the original intention of the state to develop network freight, and it was in the name of operating network freight, and in practice, it was illegal to sell VAT invoices ... ...A network freight company on the one hand receives the invoicing fee of the invoiced enterprise, on the one hand, and obtains rebate subsidies from the government, but does not engage in the formal network freight operation, and the interests obtained are illegal interests, and the invoiced enterprise pays the invoicing fee of about 5.3% of the total amount of price and tax and declares to deduct 9% of the value-added tax (VAT), and a network freight company pays the 9% of the value-added tax, but then obtains the government rebate subsidies. Although a network freight company paid 9% VAT, it later obtained government rebate subsidies, and more than 100 million yuan of tax remained unpaid after the crime was discovered, resulting in the loss of national tax”, and finally sentenced the actual controller to 10 years of imprisonment for the crime of illegally selling VAT special invoices.

If the amount of tax on the face of the illegally sold VAT invoices is more than five million yuan, or if the number of invoices is more than 500 and the amount of tax on the face of the invoice is more than three million yuan, the amount is huge, and the relevant responsible persons are facing the penalty of more than ten years' fixed-term imprisonment or life imprisonment. As a matter of fact, whether the enterprises relying on financial rebates are recognized as the crime of false VAT issuance or the crime of illegal sale of VAT invoices, they should return to the judgment of the authenticity of the business itself, and should not be preconceived to think that “the enterprises' obtaining of financial rebates has caused the loss of national tax” when they characterize the business of the enterprises. “The enterprise used the financial refund as capital to make profit by issuing false VAT invoices to the outside world”. Enterprises that issue invoices to the outside world and obtain fiscal refunds on the basis of reasonable and truthful business and compliant processes shall not be recognized as having committed the crime of falsely issuing VAT invoices or the crime of illegally selling VAT invoices.

III. How to prevent tax-related risks for enterprises applying financial rebates?

As mentioned above, real business is the prerequisite for enterprises to issue invoices and enjoy financial rebates, therefore, enterprises should take business authenticity as the first priority and issue invoices based on actual business occurrence. Business authenticity needs to be proved by perfect and smooth business operation and complete and coherent transaction information. Take commodity trade as an example, it should be based on rationalizing the functions of each subject in the trade chain, clarifying its rights and obligations, and at the same time be determined in the contract. For the delivery of goods, assumption of risk, payment, invoicing, liability for breach of contract, etc., it should be clearly agreed and the corresponding materials and documents for each operation should be retained to support the authenticity of the business and the reasonableness of the business operation.

Against the background of the current joint fight against tax-related crimes and the strict investigation of tax rebates, enterprises need to carefully analyze the applicable financial rebate policies in addition to further solidifying their own business. For enterprises that intend to enjoy financial rebates, they need to focus on verifying the legitimacy of the policy and assessing the feasibility of the policy and the risk of payment. Enterprises that have already enjoyed financial rebates need to “look back”, check the risks of applying the policy, pay attention to the latest regulatory developments, and adjust their business models in a timely manner, while also reviewing whether they have fulfilled their obligations under the agreement, such as whether the financial rebates they have obtained have been used in the agreed areas or projects, so as to avoid legal risks arising from the inappropriate use of the financial rebates.