Recently, the Fujian Provincial Tax Bureau of the State Administration of Taxation announced the delivery of the Decision on Tax Treatment of two shipping companies, which determined that there were a large number of falsely invoiced invoices for non-products of refined oils as NVOCCs, which was not in line with the normal NVOCC business model, and thus characterized the invoices of oils obtained by them as falsely invoiced and demanded that the said companies pay back the tax of RMB 16,169,000 yuan and RMB 16,188,000 yuan, respectively, and added a The pattern of the two cases is basically the same. The pattern of the two cases is basically the same, and this article is going to analyze the tax-related risks of the oil invoices obtained by the transportation enterprises as inputs and costs and their coping strategies in the light of one of the cases.

I.Case: NVOCCs obtaining oil invoices characterized as false invoicing

(I) Facts of the case

Company A is a NVOCC, and the main source of profit should be the freight rate difference. from 2018 to 2020, Company A issued 2312 VAT invoices for freight, with an invoice amount of more than RMB 200 million, but only 449 invoices with the name of "freight", with an invoice amount of less than RMB 55 million were obtained by Company A. The remaining invoices were issued by eight upstream petrochemical enterprises, and were characterized as false invoicing. After investigation, during the period from December 2018 to December 2019, the rest of the invoices obtained by Company A were 760 oil invoices issued by eight upstream petrochemical enterprises, with an invoice amount of more than RMB 97 million.There are a number of doubts about the oil invoices obtained by Company A. 

1. Some of the upstream invoicing enterprises of Company A did not have the relevant qualifications and capabilities for the production, processing and storage of refined oil and other hazardous chemicals, and the relevant oil transactions might not have real goods as the basis for the transactions;

2. The relevant shipping contract signed between Company A and the actual carrier did not contain any agreement on offsetting freight charges with oil products, nor did it contain any supplemental agreement. The two parties did not agree on the quantity, quality, storage location and refueling location of the oil products to offset freight, which was not in line with the commercial logic of normal transactions;

3. The item details of the oil invoices obtained by Company A were mostly "raw material oil", "heavy oil" and other refined oil products that could not be directly used for ship engines. During the period of existence, Company A did not obtain any invoices that could be used for the processing of the above mentioned oil products, nor did it obtain the relevant invoices for entrusted processing expenses. No invoices were obtained for the related commissioned processing expenses, and the above oil products did not belong to the refined oil products that could be directly delivered to the actual carrier for use in the corresponding transportation business; Company A claimed that it had offset the freight charges with the actual carrier with the oil products, but the act was not regarded as a sale in accordance with the regulations, and the business mode was not in conformity with the normal non-vessel-owning carrier's business mode.

(II) Processing decision

The tax authorities considered that the upstream enterprises of Company A's oil invoices were abnormal, the business mode of obtaining the oil invoices was inconsistent with the normal NVOCC business mode, and Company A did not have the conditions to use the oil products contained in the invoices, so they characterized the 760 oil invoices obtained by Company A as falsely issued VAT invoices, and required Company A to make input tax reversal for the input invoices of the outsourced oil products obtained by Company A, make up for VAT and other taxes and charges The total amount was more than 16 million yuan, and late payment fees were also imposed.

II.Tax burden pain point of transportation enterprises without means of transportation and the mode of obtaining oil invoices in violation of the law

In practice, there is a general lack of input tax burden pain point for enterprises without means of transportation, and the above cases reflect the business mode of obtaining oil invoices in violation of the law to enhance the deduction.

(I) Tax burden pain point of entrusting actual carriers by transportation enterprises without means of transportation

In the transportation and logistics industry, the transportation service market is dominated by retailers, and large-scale transportation enterprises and professional transportation fleets are scarce on the supply side. In contrast to the large scale of individuals, individual drivers generally have a low awareness of tax payment, and it is impossible for them to take the initiative to report to the tax authorities and pay the relevant individual tax and value-added tax (VAT), as well as to issue VAT invoices on behalf of the tax authorities, so that the transportation enterprises carrying out the business of transportation without means of transportation can subcontract the business to the actual carriers, and then obtain the oil invoices to obtain false enhancement credits. This makes it difficult for transportation enterprises carrying out transportation business without means of transportation to obtain input and cost invoices after subcontracting their transportation business to actual carriers. 

(II) Patterns of illegal acquisition of oil invoices by carriers without means of transportation

1. Diesel oil turned into transportation invoices flowing into the logistics field     

In the petrochemical industry, gas stations, as the main body selling refined oil products to individual drivers at the end of the chain, are able to accumulate a large amount of surplus input invoices by concealing the unbilled income in the event that individual drivers do not need to issue invoices. The transportation enterprises obtain these invoices for gasoline and diesel oil and other refined oil products by paying invoicing fees, and then issue transportation invoices to their downstream units (actual carriers) to realize the effect of changing refined oil invoices into transportation invoices, which is essentially a fraudulent deduction of national VAT tax.

2. legal inflow of other oil invoices into the field of logistics and transportation

As the transportation enterprise itself has no processing capacity, but a large number of purchased and transportation production and operation has nothing to do with the name of liquefied petroleum gas, raw material oil, heavy oil and other non-product oil petrochemical oil products, but also not the direct sale of petrochemical commodities, in the absence of any insurance costs, ship and vehicle maintenance costs, spare parts costs, or the cost of the cost of the amount charged is abnormally low, but the name of the transportation service to the external invoices, to obtain a huge amount of freight revenue, may be suspected of fraudulent deduction of national VAT. Obtaining a huge amount of freight income may be suspected of false invoicing and is highly susceptible to being investigated and punished according to the law due to abnormal transactions.

3. Summary     

The NVOCC model involved in the above case is one in which the NVOCC, as operator of the carriage business, takes over the shipper's business and then outsources it to the actual carrier. Under this mode, the profit made by the transportation enterprise is mainly the freight rate difference. Due to the inability to obtain invoices issued by individual drivers, in order to avoid bearing an excessive amount of value-added tax and to be able to deduct the costs before income tax, the transportation enterprises can only find another way to offset the costs and inputs from the outside. As a result, non-compliant tax irregularities such as after-the-fact recording of waybills, fictitious waybill information, offsetting of freight costs by oil products, and buying and selling of invoices, etc., have also arisen in practice.

III. Main Tax-Related Risks of Falsely Accepting Oil Products Invoice by Transportation Enterprises without Means of Transportation

(I) Tax-related Risks of Transportation Enterprises in Obtaining Oil Products Invoice

1. Tax-related risk of obtaining oil product surplus invoices

As mentioned earlier, in order to solve the problem of tax burden, transportation enterprises often purchase surplus oil invoices through petrochemical enterprises such as gas stations that keep a large number of oil invoices in stock. Although there is real business in the generation of surplus invoices by the upstream enterprises of oil invoices, the oil invoices issued by them to transportation enterprises lack a real business basis. In addition, the transportation enterprise actually neither extracts the goods nor delivers the refined oil products to the actual carrier for use, and the phenomenon of separation of tickets and goods and return of funds in the transaction link is very easy to be audited by the tax authorities, thus triggering the criminal risk of the enterprise letting others falsely open or illegally purchase VAT invoices for itself.

2. Tax-related risk of obtaining other oil invoices

If the transportation enterprise purchases non-product oil, the corresponding oil products can not be directly used to carry out transportation business without processing or commissioned processing, and the corresponding input can not be deducted. Especially when the upstream enterprise of the oil invoice is recognized as a "non-normal" enterprise, and does not have the qualification and ability of production, processing and storage of refined oil products, and the transportation enterprise itself does not have the conditions to use the relevant oil products, the goods involved in the transaction are doubtful whether they really exist and whether they are indeed non-products of refined oil products, and the transportation enterprise may be caught in the risk of false invoicing as a result. For example, after the upstream refining enterprise purchases raw oil to produce refined oil, it completes the sales through private accounts without invoicing, and retains a large amount of non-product oil input inventory on its books, the transportation enterprise purchases "non-product oil" from the refining enterprise, transforms the oil invoice into the transportation invoice, and then illegally fictitiously opens the invoice to the outside world to make profit. The tax authorities, through tax big data audit and comparison, field investigation and other means, will easily find that the input items of the transportation enterprises are mostly non-product oils, while the output items generate a large number of transportation invoices, which will lead to the outbreak of the risk of false invoicing. As the upstream refining and chemical enterprises incurred refined oil production behavior, but did not issue invoices for external sales with the name of refined oil products, the downstream transportation enterprises being investigated may also be implicated in the administrative and criminal risks of their evasion of consumption tax.

As a matter of fact, as early as July 2021, a special mission office issued a "Supervisory Audit Risk Tip" to a provincial tax bureau in the course of an audit, requesting the province to investigate the possible tax-related risks of some transportation enterprises purchasing non-products oils and obtaining invoices for non-products oils and requesting that transportation enterprises that do not take the initiative to rectify the back-tax or are suspected of issuing false invoices to be investigated and dealt with in accordance with the relevant regulations, and a number of transportation enterprises accepting false invoices and The risk of accepting false invoices and obtaining false foreign invoices surfaced during the investigation.

(II) Tax-related risks in the subcontracting of transportation business by transportation enterprises

In August 2017, the State Administration of Taxation issued the Announcement on Tax Exemption Filing for Cross-border Taxable Behavior and Other VAT Issues (SAT Announcement No. 30 of 2017), which clearly stipulates that when a taxpayer, as a carrier, enters into a transportation service contract with a shipper, collects the freight charges and assumes the responsibility of the carrier, and then entrusts the actual carrier to complete all or part of the transportation service, its own purchases and hands over to the If the refined oil products purchased by the actual carrier and delivered to the actual carrier for use in the transportation services entrusted to the actual carrier and the VAT deduction vouchers obtained are in compliance with the current regulations, the input tax credit shall be allowed to be deducted from the output tax. Otherwise, no input tax credit can be made.

1. The cost of refined oil is passed on to individual drivers or shippers

If the transportation enterprise purchases refined oil products, but requires individual drivers or shippers to bear the cost of refined oil products when the corresponding oil products are used in the transportation service, then it belongs to the "secondary sale" of oil products, which can not be deducted from the output of the transportation service, otherwise, the transportation enterprise may be found to be a tax evasion due to the concealment of income.

2. Transportation Enterprises' Offsetting Freight by Oil Products is Not Considered as Sales

According to Article 4 of the Implementing Rules of the Provisional Regulations on Value-added Tax and Article 25 of the Implementing Regulations of the Enterprise Income Tax Law, the agreement between the transportation enterprise and the actual carrier to offset freight charges with oil products belongs to the gratuitous gift of the purchased goods to the actual carrier, and shall be regarded as the sale of goods, and shall be subject to value-added tax and enterprise income tax. If the transportation enterprise and the actual carrier have neither entered into an agreement or supplementary agreement on the details of the quantity, quality and storage of the "offset" oil products, nor declared and paid the corresponding tax on the business, it is not in line with the normal commercial logic. Transportation enterprises not treated as sales may be recognized by the tax authorities as tax evasion, in addition to the payment of taxes and late fees, but also to bear the non-payment or underpayment of tax 50% to 5 times the fine. In addition, there is a huge difference between the freight revenue obtained by the transportation enterprise from the shipper and the freight cost expended to the actual carrier, which is inconsistent with the normal mode of operation of transportation without a means of transportation, and is easily implicated in the risk of false invoicing of the oil products involved.

IV. Response strategies for tax compliance of transportation companies

(I) Examining the main body of the transaction to ensure that the business is real

Transportation enterprises should strictly abide by the bottom line of business truthfulness when obtaining input tickets and cost tickets. Choose suppliers prudently, examine whether they have physical operations, whether there are major tax violations, etc., and ensure that enterprises can obtain legal and valid deduction vouchers, and that the corresponding vouchers are all based on real oil products transactions. As a matter of fact, it is easy for tax authorities to detect whether enterprises have accepted false invoicing by verifying contracts, invoices, funds and upstream and downstream. Enterprises should avoid letting other enterprises issue invoices for them in the absence of real business support or inconsistency with real business.

(II) Retain transaction information to prevent the risk of false invoicing

In oil trading, enterprises should pay attention to the retention and proper storage of original materials such as contracts, cargo right transfer certificates, transportation documents, warehouse receipts and other original materials to support the authenticity of the transaction, and to prevent false invoicing risks triggered by the upstream enterprises that have fled and lost their connections, or have been listed as non-normal enterprises, etc., which will cause unnecessary economic losses to the enterprises.

(III) Evaluating business risks to ensure that invoices are issued and obtained in a compliant manner

Transportation enterprises should closely examine the compliance of business model with shippers and actual carriers, and refuse to issue invoices for shippers in case of risky business such as "back-up" invoices for completed business, obvious signs of tampering in business information and unverifiable identity of individual drivers. For the input and cost issues arising from the subcontracting of transportation business to individual drivers, transportation enterprises should require individual drivers to issue invoices in accordance with the law and obtain deduction vouchers in compliance with the law, so as to avoid being denied the authenticity of the transaction due to the grafting of other subjects in the business chain.

(IV) Fully assess the tax-related risks and properly respond to tax audits

For transactions that have been completed, it is still necessary to carry out tax risk management on a regular or dynamic basis, carry out self-inspection and self-correction of business development, make timely declaration of tax reimbursement, and fully assess the tax risks. If a transaction has been subject to tax audit or public security investigation, the enterprise should actively and appropriately respond to it in order to prevent further expansion of administrative and criminal risks. Specifically, enterprises can dig out the hidden transaction subjects and restore the transaction chain by submitting materials proving the real existence of the business and the flow of funds, and accordingly show that the oil trading goods really exist, the types and quantities of oil products are consistent with the records of the invoices obtained, and that there is no false invoicing in the link of the invoices of the oil products obtained by the enterprises.