Editor's Note: Over the past three years, a number of tax-related cases in the field of flexible labor have been publicly exposed around the world, involving billions of dollars, and many head platforms in the industry have been frequently involved in the criminal vortex of false invoicing and tax evasion. I learned that recently, a province has more than ten flexible labor platform is suspected of false invoicing, the enterprises involved in the case are highly dependent on the financial return, and the characteristics of gangs are obvious. The case involves more than 8,000 invoiced enterprises, the amount of invoicing involved is up to tens of billions of dollars, and the case is currently under further investigation. Against the background of further cleanup of tax depressions and authorized collection modes, the flexible labor industry is in dire need of upgrading and rectifying its original business, and further exploring new profit growth points to grasp the balance between development and compliance. This article will summarize the original model and new business trends, point out the hidden tax risks, and make suggestions for the development of flexible labor platforms.

Ⅰ. The flexible labor industry has ushered in a compliance pain period under strong regulation, and the old business rectification and new business expansion go hand in hand.

In recent years, the flexible labor industry has entered a period of deep adjustment under the double pressure of policy tightening and market iteration. The Proposal on Optimizing the Management of Internet Flexible Labor Entrustment and Promoting the Development of Flexible Labor Platforms in Zhejiang Province by Zhejiang Provincial Tax Bureau of the State Administration of Taxation clearly points out that flexible labor platforms “have tax-related problems such as transforming the nature of personal income of flexibly employed persons, illegally diverting tax sources from other places, and issuing false invoices, etc.,” and emphasizes that It also emphasizes “localization of business” and “penetrating verification of real transactions”. The “Fair Competition Review Regulations” is even more highly dependent on the tax rebates for flexible labor, and unfounded tax incentives and differentiated financial subsidies are explicitly prohibited, so the moat of local tax puddles is accelerating to disintegrate. This is not only the escalation of regulatory logic, but also the inevitable shift of the industry from sloppy expansion to refined compliance, and the unsustainability of the old model is no longer a hidden worry but a reality.

The other side of the industry pain is the opportunity to force enterprises to innovate themselves. At present, the head of the flexible labor platform has taken the lead, on the one hand, comprehensively combing the stock of business, through the correction of contract flow, capital flow and invoice flow, and reconstructing the internal audit structure, to avoid being dragged down by the old model. On the other hand, in order to cope with the shrinking profitability, some flexible labor platforms have expanded new profit growth points around labor scenarios based on their own advantages. However, it is undeniable that, although some of the flexible labor platforms have strengthened their original business processes, the lack of business models and source tickets has not been practically solved, and the upgraded business has touched the tax reefs to varying degrees, and the tax-related risks are still high. At the same time, the new business still lurks the tax risk of false invoicing, and compliance construction is still a topic that the flexible labor industry continues to explore in its development.

Ⅱ.The four original tax risk points are still high, and compliance has become a roadblock to the development of the industry.

The original core business of the flexible labor platform focuses on three major dimensions, one is to open up the information barrier between the temporary and project-based labor demand of enterprises and the flexible employment of individuals, and to serve as an intermediary platform connecting the demand for labor; the second is to provide the so-called tax financing services for high net worth people and new occupational groups, and to reduce the tax burden through the model of “Individual industrial and commercial clusters registration + approved levy + financial return”; the third is to serve as an extension of enterprise cost management to undertake the social security obligations of employees and solve the enterprise's input. The second is to provide the so-called tax financing service for high net worth people and new professional groups, through the mode of “Individual Business Cluster Registration + Approved Levy + Fiscal Rebate”, which reduces the tax burden; and the third is to serve as the outreach of enterprise cost management to undertake the obligation of social security for the employees and to solve the problem of enterprise's input, so as to reduce the cost of employment for SMEs.

(I) Flexible labor platforms are withholding agents for labor compensation, and failure to fulfill their responsibilities will be penalized

In recent years, “failure to withhold and pay the income tax of spiritual workers in accordance with the law” has become a typical scenario of high-frequency mines. Some platforms failed to accurately determine the nature of the income of spiritual workers, mistakenly categorized the income that should be treated as remuneration for labor services as business income, and failed to fulfill the withholding and payment obligations.

In September 2024, a tax bureau issued two notices on withholding and collection matters, which stated that flexible labor platforms should withhold and collect the income of flexible workers from the platforms as “income from remuneration for labor services” and required the flexible labor platforms to do so. According to Article 69 of the Tax Collection and Management Law, the platform has the obligation to withhold and pay the labor remuneration of flexible workers. Although the worker is the first person responsible for paying the tax, the administrative responsibility of the platform is not exempted, and failure to fulfill the obligation to withhold and pay the tax will trigger a fine of 0.5-3 times the amount of the tax.

At the heart of this type of dispute lies the blurring of the line between remuneration for labor and business income. Although the Individual Income Tax Law stipulates that remuneration for labor services must be withheld and paid by the payer, in practice, once the services of the worker involve technical consulting, design services and other areas that are highly overlapping with business income, the platform will easily fall into a misdiagnosis. It is worth noting that the State Administration of Taxation (SAT) has long since explicitly abandoned the mechanical standard of “determining the nature of income in the form of registered individual business”, and instead emphasized the need to penetrate the legal form and judge the business attributes in conjunction with the economic substance. For example, if a spiritual worker is required to strictly abide by the working hours of the platform, accept the assessment and management, and use the tools designated by the platform to provide services, even if he or she is registered as an individual industrial or commercial enterprise, his or her income may still be recognized as remuneration for services due to the existence of a strong “subordinate nature”.

(Ⅱ) “Remuneration planning” through conversion of the nature of income is characterized as tax evasion.

At present, there are still many flexible labor platforms targeting high-net-worth people to launch various “compliant” tax avoidance programs, which once became the main source of income for the spiritual labor platforms. However, no matter how the nature of the change, in fact, can not escape the “tax puddle + conversion of the nature of income + approved levy” of the outdated combination of punches. For example, last October, the tax authorities focused on disclosure of a number of anchor tax evasion cases, the case of Jin Moumou lurks in the shadow of the flexible labor platform. With the State Council to clean up the illegal tax return policy, tax law enforcement and criminal justice convergence mechanism is becoming increasingly close, this method of play can no longer be sustained, “payroll planning” involved in the individual more than facing tax evasion responsibility, in which the flexible labor platform can not be blamed for the matchmaking.

After the introduction of the Judicial Interpretation of the Two Supremes (Legal Interpretation [2024] No. 4), the risk of the related business has become more prominent. The Judicial Interpretation of the Two Supremes makes it clear that “VAT invoices are issued through fictitious transaction subjects for businesses that are not tax-deductible according to law;” this provision shifts the core criterion for judging false invoicing from “the authenticity of the business” to “whether the VAT is fraudulently obtained”. “whether the VAT payment has been fraudulently obtained”. Therefore, if a labor-using enterprise disguises the labor relationship of its employees as a labor service relationship and sends wages on behalf of its employees through the flexible labor platform, such behavior is essentially a deduction of the non-deductible cost of wages and salaries through a fictitious transaction subject, which is in line with the description of the crime of false invoicing in the “Two Supremes Judicial Interpretations”. If it is found that the flexible labor platform has conspiracy or knowledge of this, it will also be involved in the vortex of false invoicing.

(Ⅲ) Flexible labor platforms do not organize their own personnel to provide labor services were found to be false openings

In previous cases of false opening by platform enterprises, it was often “false opening without goods” and “false opening with goods” accompanied by the return of funds, but now the tax and judicial authorities are becoming increasingly stringent in their supervision of platform enterprises, and the business model of the platform has also been included in the scope of consideration. For example, two cases have broken out in Changzhou in which the platform for spiritual workers did not organize its own personnel to provide labor services and was denied the reasonableness of the transaction, and was found to be a false invoicing case.

At present, it seems that some tax authorities still hold the view that the most important function of flexible labor platforms is to summarize supply and demand, and believe that in the case where the employing unit selects and manages the laborers on its own, and has full control over the selection of service personnel, the issuance of tasks and the assessment and settlement of payments, the platform enterprise's intervention in the established labor relationship for the purpose of issuing invoices lacks commercial reasonableness, and there is a serious imbalance between its contractual rights and responsibilities and its actual fulfillment of its function , which only undertakes the invoicing function in the entire chain, thus increasing the possibility of invoices being found to be falsely issued.

(Ⅳ) Flexible labor enterprises failing to verify the authenticity of the labor business are characterized as false invoicing.

One of the dilemmas faced by the current flexible labor platform is that, as a platform enterprise, it is not directly involved in the whole process of the labor business, and the verification of the authenticity of its business relies on the contracts, data, and tax payment certificates and other documents submitted by the labor enterprise; however, it is difficult for the platform to effectively identify the hidden operation of the labor enterprise that conspires with the service provider to falsify the substance of the business, and the platform has been “fraudulently issued invoices” in a number of cases under the double-blindfolding. There are many cases in which the platform has been “cheated” under the double blindfold. In this case, although the platform has no direct subjective intent, the tax authorities will still invoice the time, amount, frequency and other signs of unreasonable, presuming that the platform enterprise has not fulfilled the obligation to audit, belonging to the “knowingly but indulgently” indirect intentional subjective state. Unless there is clear evidence that the flexible labor platform is unaware of this, or that the flexible labor platform has fulfilled its reasonable review obligation, the flexible labor platform is easy to be recognized as aiding and abetting the false invoicing.

III.Flexible labor platforms are actively exploring new businesses, the risk of false issuing is still not eliminated

(I) Utilizing human resources qualification to engage in human resources outsourcing business

1. Human resource outsourcing mode

As the actual provider of services is a natural person, and the natural person lacks invoicing ability and willingness to invoice, resulting in a lack of source tickets for the entire flexible labor industry and a rising tax burden for the entire labor chain. After the introduction of the flexible labor platform, the tax cost of the chain has not disappeared, but has only been transferred from the employing units to the flexible labor platform. In the era of tax depression, the cost of flexible labor enterprises relied on tax rebates to make up for it, but after entering the new era of regulation, the original rebate model is unsustainable, and it is difficult to eliminate the industry's cost problems. Against this background, a part of the flexible labor platforms build real-time settlement systems to avoid the problem of capital refunds, and strictly review and regulate the authenticity of the business, while adding the indigestible tax costs to the service fees to maintain a balance between compliance and profitability.

Another part of HR-qualified Lingong platforms turn to HR outsourcing business, i.e., undertake the transactional work of HR department of the company, such as recruitment, payroll, training, file management and so on. Under this model, employees sign labor/labor contracts directly with the employing units, and the flexible labor platform recruits and manages employees instead of the employing units, but it does not have contractual relationship with the company's employees, and the amount invoiced to the employing units is only the amount of HR services, which does not involve the issue of inputs. In other words, the flexible labor platform will not fall into the quagmire of tax costs under the HR outsourcing model.

2. Tax risks under the human resources outsourcing model

For flexible labor platforms, the advantage of human resource outsourcing model is that the cost problem can be solved, but the risk of false opening still exists. Hwuason Law Firm observes that in practice, many thunderstorm flexible labor platforms are formally in HR outsourcing mode, i.e., they manage the original employees of the employing units and undertake HR functions such as payroll and insurance payment, etc. However, in essence, the invoices issued are those in the mode of flexible labor platforms, i.e., the invoices are not in the amount of the HR outsourcing services but in the amount of HR outsourcing + employees' salaries, which is a mismatch of the mode that caused the invoice to be overbilled.

In addition, inauthentic HR services are also a high risk of false invoicing. Compared with the flexible labor model, the human resources model of the spiritual labor platform needs to assume higher management functions. For example, the spiritual labor platform model only needs to summarize the supply and demand, but the human resources outsourcing needs to be deeply involved in the management of labor, responsible for recruiting, training, and personnel management. In many cases, the employing units organize and manage their own employees and calculate their own salaries, and the flexible labor platform only has the operation of issuing salaries and paying social security on behalf of the employees, which makes the business substance hollow and raises the question of false invoicing.

(Ⅱ) Expanding additional services around employment scenarios

Hwuason Law Firm has observed that some flexible labor platforms have launched additional services such as human resources training and certification services and headhunting services around labor scenarios. For flexible labor platforms, business innovation is a useful move, but such business is often issued under the categories of “consulting services” and “training fees”, which are highly concerned by the tax authorities, and the risk of being subject to tax sampling is higher, and if the enterprises are difficult to provide detailed evidence to prove that the services such as meetings and training are really carried out, the enterprises may not be able to provide the detailed evidence to prove that the services such as meetings and training are really carried out. If the enterprise is difficult to provide detailed evidence to prove that the conference and training services are really carried out, it is easy to be regarded as suspected of false invoicing. In addition, due to the type of business and business qualification of the flexible labor platform, if the flexible labor platform issues invoices under the category of “technical service fee”, it will trigger a tax warning. In practice, we cannot rule out the possibility that some flexible labor platforms will change the packaging of their business and perform false invoicing in the name of consulting or technical services.

Ⅳ. The platform involved in criminal involving a large number of ticketed enterprises, how to cope with and defend the rights of concern

(Ⅰ) Actively organizing business items and confirming business authenticity

In all tax-related cases, business authenticity is the only way out of the defense. The platform needs to do a good job of reviewing the form of information and filing the information beforehand to ensure that the three streams of business are integrated, and call a halt to the business that has obvious doubts in a timely manner. If audited, the invoiced enterprise needs to systematically sort out the cooperation data and collect and organize four types of key evidence: first, the employment contract and service agreement signed with the platform, which clearly agree on the content of the business, pricing and payment method; second, the corresponding vouchers of the business results delivery, which prove that the business really happened; third, the bank transfer records, the third-party payment platform flow and other fund transaction vouchers, which prove that the payment is consistent with the contract; fourth, the payment provided by the platform, which proves that the business is real. Thirdly, bank transfer records, third-party payment platform flow and other financial documents to prove the consistency of payment and contract performance; fourthly, the real-name information of laborers provided by the platform, tax clearance certificates and other auxiliary materials, which together build a closed-loop of “business flow - financial flow - bill flow”.

(Ⅱ) Prove that the expenses are real and reasonable, and strive for no adjustment in enterprise income tax.

The platform is suspected of false opening often triggers the risk of enterprise income tax adjustment. The invoiced enterprise should actively reissue or exchange the invoices, and if it cannot reissue or exchange the invoices, it should, according to Article 14 of the Measures for the Administration of Vouchers for Deduction before Enterprise Income Tax, comprehensively sort out the contracts or agreements of business activities, payment vouchers and other information, and advocate that the relevant costs can be legally deducted before tax. Even if the provisions of Article 14 of the Administrative Measures for Pre-enterprise Income Tax Deduction Vouchers cannot be fully met, the invoiced enterprise can still invoke Article 8 of the Enterprise Income Tax Law that “reasonable expenses actually incurred in connection with the acquisition of income shall be allowed to be deducted”, if the invoiced enterprise is able to prove that the expenses are real and in line with the business routine through other evidence. The enterprise may still invoke the provisions of Article 8 of the Enterprise Income Tax Law that “reasonable expenses actually incurred in connection with the acquisition of income shall be allowed to be deducted”, and prove that the expenses are reasonable in light of the special characteristics of the industry and the fair market price, in order to strive for the room for discretion of the tax authorities, and make no adjustments to the real incurred EIT.

(III) Defending according to the enterprise's situation and striving for optimal results in VAT treatment

VAT reimbursement and penalties are the core battleground for enterprise tax-related risk disposal, and need to be dealt with in different situations. The optimal result is to prove the authenticity of the business, claim that the invoices are compliant and the deductions are legal, and fight against the characterization of false opening according to the State Administration of Taxation Announcement No. 39 of 2014, so as to fight for no need to pay back tax. The second best choice is to refer to the spirit of Document No. 187 of the State Administration of Taxation [2000], and strive for the characterization of “bona fide acquisition”, and only make up the tax without charging late fees and administrative penalties.

(Ⅳ) Utilizing administrative procedures to block the risk and prevent it from evolving into a criminal risk.

For emerging businesses such as flexible labor, the existing tax legal system is not yet fully inclusive of evaluation. Some local public security authorities do not know enough about the nature of the platform and its business model, and may interpret the compliant invoicing behavior as false invoicing and initiate criminal procedures, resulting in damage to the modesty of the criminal law and fairness and justice. For cases in which the tax authorities have initiated administrative procedures to determine false invoicing, the recipient enterprise should promptly hire professionals to intervene to block the connection between the execution of the criminal law and the criminal law, and initiate remedial measures such as hearings and reconsideration, as well as to promote conciliation and mediation. In addition, if there is evidence of negligence on the part of the enterprise, the enterprise may claim that it should be dealt with in accordance with the provisions of the Circular of the State Administration of Taxation on the Handling of Issues Concerning the Acquisition of Fraudulently-Opened VAT Special Purpose Invoices by Taxpayers (Guoshuifa [1997] No. 134), in accordance with the characterization of tax evasion, so as to avoid triggering the criminal risk of fraudulent issuance.

Ⅴ. The flexible labor industry compliance outlook: breaking the industry tax shackles depends on the government and enterprises to work together

Industry transformation has never been easy, the platform needs to build a risk firewall with the shield of compliance and internal control; the policy side of the system innovation as the spear, to clear the industrial chain note blockage.

Flexible labor platforms want to keep the bottom line of compliance, essentially to solve a core problem, that is, how to prove that the labor business is really happening. First of all, the platform needs to abandon the negative role of “only being a settlement channel”, deeply intervene in the business scenario of labor-using enterprises, and establish a standardized compliance system in the process of task dispatch, process tracking, and acceptance of results, etc. For example, record the service trajectory, flow of funds, invoicing and other key nodes with digital tools, and realize the automation of the data. Deposit of evidence and risk warning. Secondly, do a good job of risk isolation, build a perfect post-graded construction of the internal audit mechanism, the qualification of the main body of the transaction and the substance of the business to carry out formal audits, to prevent fraudulent salespersons or customers, be involved in the case of false invoicing.

However, the compliance innovation of the enterprise side can not fundamentally solve the problem, the root cause of the flexible labor platform repeatedly involved in tax cases is the lack of invoices at the source. Therefore, in order to cure the ills of the flexible labor industry, it is necessary to innovate on the policy side. At present, there are some highlights of policy pilots in practice, for example, the pilot project of “Payment as Invoicing” for natural persons in Fujian Province, whereby the odd-job business carried out through government platforms can be invoiced immediately when payment is made, which facilitates the process of invoicing and lowers the threshold for enterprises to obtain compliant invoices. In addition, the “centralized invoicing” for crowdsourcing service scenarios is also a new idea, in which dispersed individual labor services are aggregated and then applied for invoicing on behalf of the platform in a unified manner, which not only reduces the burden of freelancers, but also curb the space for false invoicing through the dynamic spot-check mechanism of the tax authorities. The reverse invoicing policy introduced in the field of renewable resources, which has a similar predicament, can also be used as a reference to further compress the risk of “invoicing” in the intermediate links and systematically solve the problem of invoicing at source.