SMEs are waiting for recovery, tax compliance should not be ignored

After three years of epidemic, China's economy has shown a faster recovery trend since this year. According to the data recently released by Wang Jun, Director General of the General Administration of Taxation, the sales revenue of enterprises in the first quarter of this year has increased by 4.7% year-on-year, of which the purchase amount in March has increased by 14.1% year-on-year, and the sale of enterprises has also had a higher growth. It can be said that a large number of small, medium and micro enterprises are in the process of recovery in the "post epidemic" era and will usher in a phase of rapid development as the economy picks up, with an increase in the number of businesses, increased performance, and sufficient corporate capital flow. ......

（Director Wang Jun shows the growth trend of sales revenue of national enterprises）

However, under the situation of rapid development, there are hidden worries. Because small and medium-sized enterprises usually lack strict internal control mechanism and compliance system, ignoring tax compliance, they are easy to fall into the risk of false opening and tax evasion. In practice, many small and medium-sized enterprises with good momentum of development have been subject to tax inspection, administrative penalties and even criminal sanctions. In view of this, this paper summarizes and inventories the common tax risks in the management and operation of small and medium-sized enterprises, in order to clear mines for investors and responsible persons, and help the healthy development of enterprises.

Risks of Shareholders and Legal Person

According to the Company Law and the relevant provisions of the Civil Code, the company and its "boss" that is, the investor or the actual controller of the legal personality independence, so the investor's capital contribution has been transformed into the property of the company, even if the shareholders or the person in charge of the company can not be arbitrarily used. In practice, there are some companies from individual business or sole proprietorship enterprises, the person in charge of the enterprise is used to the company's assets as their own assets at will, this behavior may lead to the loss of the company's responsibility for the division of functions, and at the same time, according to the relevant provisions of the deemed distribution of dividends and bonuses to recover the shareholders of the personal income tax.

Risk 1, the company's tax arrears have nothing to do with shareholders? Shareholders whose capital contributions are not paid in full or are mixed up with the company's property or are investigated for joint and several liabilities

It should be pointed out first that, unlike a corporate legal person that enjoys limited liability, an individual entrepreneur and a sole proprietor have legal consistency with the investor (operator), which is also the reason why individual households and sole proprietors are subject to personal tax rather than enterprise income tax. However, corporate entities are not always able to isolate the liability for tax arrears. If the shareholders of a company have not paid all of their contributions, they may be held jointly and severally liable by the tax authorities for bearing the company's tax arrears within the scope of unpaid contributions.

In the operation of MSMEs, the person in charge of the company may have the concept that "the company is mine, and the company's property is mine", and thus dispose of the company's funds as he or she pleases. If the investor of the company fails to strictly distinguish between the company's property and his/her personal property, he/she may be "pierced through the company's veil" due to the mixed personality, and thus be held jointly and severally liable for the company's tax debts.

Relevant case: after a number of enterprises were tax audited, legal persons, real controllers, executives bear the responsibility of tax reimbursement.

https://mp.weixin.qq.com/s/RJGt4g31X5QlFOJmKVklNA

Legal basis:

Paragraph 2 of Article 22 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (II): "Where the property of a company is insufficient to satisfy its debts, and the creditors claim that the unpaid shareholders, as well as the other shareholders or promoters at the time of the establishment of the company are jointly and severally liable for the debts of the company to the extent of the unpaid contributions, the people's court shall, in accordance with the law, support the claim. support."

Paragraph 3 of Article 20 of the Company Law: "A shareholder of a company who abuses the independent status of the company as a legal person and the limited liability of the shareholders, evades debts and seriously jeopardizes the interests of the creditors of the company shall be jointly and severally liable for the debts of the company."

Article 10 of the Circular of the Supreme People's Court on the Issuance of the <Proceedings of the Working Conference on Civil and Commercial Trials of the National Courts> (Law [2019] No. 254):"[Personality Mixing] To determine whether or not there is a mixing of the personality of the company and the personality of the shareholders, the most fundamental criterion for judging the situation is whether or not the company has an independent meaning and independent property, and the most important manifestation of this is whether or not the company's property is mixed up with the property of the shareholders Whether the property of the company and the property of the shareholders are mixed and indistinguishable. In determining whether it constitutes a mixing of personalities, the following factors should be taken into consideration:

(1) The shareholders use the company's funds or property without compensation and do not make financial records;

(2) The shareholder uses the company's funds to repay the shareholder's debts, or makes the company's funds available for gratuitous use by an affiliated company without making financial records;

(3) The books of the company and the books of the shareholders are not separated, making it impossible to distinguish between the property of the company and the property of the shareholders;

(4) Failure to distinguish between the shareholders' own earnings and the company's profits, resulting in unclear interests between the two parties;

(5) The property of the company is recorded in the name of the shareholders, and is possessed and used by the shareholders;

(6) Other cases of mixed personality."

Risk two, the boss's expenditure is reimbursed by the enterprise? Long-term borrowing, consumer spending or personal tax problems

In the development process of MSMEs, some shareholders and legal representatives may hold the concept that "I am the enterprise, so my consumption should be reimbursed by the enterprise". However, under the tax law, expenses not related to the production and operation of the enterprise cannot be deducted from the cost, and the funds and reimbursements paid to the shareholders need to be regarded as dividends and bonuses for the purpose of personal income tax. In fact, not only the reimbursement of consumer expenses, but also the purchase of houses or other properties, long-term borrowing across a fiscal year, etc., all have personal tax risks, and the enterprise should withhold and pay personal tax on behalf of the tax.

If the enterprise is investigated by the tax authorities for the above behaviors, the enterprise will be liable for personal income tax withholding and payment obligations and fail to withhold and pay in accordance with the law, and thus will be required to recover the corresponding personal income tax and be fined 0.5~3 times of the amount of personal income tax in accordance with Article 69 of the Law of Taxation Levy and Administration.

Relevant Case: An enterprise reimbursed its shareholders 87,000 RMB for expenses incurred on the purchase of cigarettes and alcohol and failed to withhold and pay the individual income tax on dividends and bonuses, and was fined 50%.

Legal Basis:

Circular of the Ministry of Finance and the State Administration of Taxation on Regulating the Administration of Individual Income Tax Collection for Individual Investors (Cai Shui [2003] No. 158):

Article 1: "Individual investors of enterprises other than sole proprietorships and partnerships, who use the funds of the enterprise to pay for themselves, their family members and their related persons for consumer expenses not related to the production and operation of the enterprise, as well as for the purchase of automobiles, housing and other property expenses, shall be regarded as dividend distributions from the enterprise to the individual investor, and shall be subject to the items of interest, dividend and bonus income. The dividend distribution is considered as dividend distribution by the enterprise to individual investors and is subject to individual income tax under the item of "Interest, Dividend and Bonus Income".

The above expenditures of enterprises are not allowed to be deducted before income tax."

Article 2: "If an individual investor borrows money from an investment enterprise (other than a sole proprietorship or partnership) during the taxable year and neither returns it nor uses it for the production and operation of the enterprise at the end of the taxable year, the unreturned money may be regarded as dividend distribution from the enterprise to the individual investor and be taxed as personal income tax under the item of "interest, dividend and bonus income". interest, dividend and bonus income' items for the purpose of levying individual income tax."

Reply of the Ministry of Finance and the State Administration of Taxation on the Issue of Individual Income Tax on the Purchase of Houses or Other Properties by Enterprises for Individuals (Cai Shui [2008] No. 83)

Article 1: "According to the relevant provisions of the Individual Income Tax Law of the People's Republic of China and the Circular of the Ministry of Finance and the State Administration of Taxation on the Regulation of the Administration of the Collection of Individual Income Tax for Individual Investors (Cai Shui [2003] No. 158), a house or other property in conformity with the following circumstances, irrespective of whether or not the owner has delivered the property for use by the enterprise free of charge or in return for a fee, shall be in essence The enterprise has made distribution in kind to individuals, and individual income tax shall be levied in accordance with the law.

(I) The enterprise has financed the purchase of houses and other properties and registered the ownership as the investor's individual, the investor's family members or other personnel of the enterprise;

(II) An enterprise borrows money from an individual investor, a member of the investor's family or other persons of the enterprise for the purchase of houses and other property, registers the ownership as the investor, a member of the investor's family or other persons of the enterprise, and does not return the borrowed money after the end of the year in which it was borrowed."

Risk three, equity transfer tax is too high? Yin-Yang Contract Tax Evasion Has Been Hard to Escape the Eye of Tax Law

Micro, small and medium enterprises in the process of business equity adjustments and changes is also very common, in the process of equity transactions and transfers of personal income tax is a barrier that can not be bypassed, so some equity transfers between the two sides tried to pay less personal income tax by forging a fake equity transfer contract to the tax authorities to declare and privately enter into a separate contract with a high amount of transactions. In practice, not a few cases of yin and yang contracts were eventually uncovered and prosecuted for various reasons. In some cases, due to the existence of civil disputes between the two parties of the equity transfer, the real contract was disclosed in the process of civil litigation, which was discovered by the tax authorities; there are also some cases that were reported to the tax authorities by outsiders, which led to tax audits. In short, the risk of this type of behavior is extremely high, and according to the provisions of Article 63 of the Tax Collection and Management Law, yin and yang contract is a typical false declaration, constituting tax evasion, will face tax evasion of administrative responsibility and even tax evasion of up to seven years of criminal responsibility, can be said to be extremely high risk.

Relevant case: entering into a yin and yang contract to transfer equity, due to civil litigation was found by the tax bureau, recovery of tax 60000 yuan

https://mp.weixin.qq.com/s/TAkmgPp2xCFi338GB9yQog

Legal basis:

Article 63 of the Law on Administration of Tax Collection: A taxpayer who forges, alters, conceals or destroys without authorization account books and bookkeeping vouchers, or overstates expenditures or omits or understates revenues in account books, or refuses to make a declaration after being notified to do so by the tax authorities or makes a false tax declaration, and fails to pay or underpays the tax due, is guilty of tax evasion. If a taxpayer evades tax, the tax authorities shall recover the unpaid or underpaid tax, late payment fees, and impose a fine of not less than fifty percent and not more than five times the unpaid or underpaid tax; if a crime is constituted, the taxpayer shall be held criminally liable in accordance with the law.

Risk 4. Enterprises have the risk of outbreak of tax problems left over from history, and the innocence of current legal representatives and nominal legal representatives is listed as the main body of major tax violations and dishonesty.

Micro, small and medium-sized enterprises (MSMEs), due to the high risks involved in their development, change their legal representatives more frequently, or even have a "titular" legal representative. In such cases, during the reign of the current or titular legal representative, the enterprise's past tax risks explode, such as the invoice business of several years ago, or suspected of false invoicing and other forms of crime. At this time, although the current or titular legal representative does not constitute a crime and is not liable because he or she was not responsible for the business at that time, according to the State Administration of Taxation's "Measures for the Administration of Publication of Information on Subjects of Significant Tax Violations and Breaches of Trust", he or she will be listed as a subject of the violation and breach of trust along with the enterprise until the court's criminal judgment confirms that the person in charge of the business involved in the case is not the said legal representative, and he or she will not be able to hold a criminal judgment in effect until he or she has been convicted. judgment to change - by this time, several years may have passed, causing great inconvenience to the legal representative.

Legal basis:

Article 12 of the Measures for the Administration of Publication of Information on Subjects of Major Tax Violations and Defaults (Order No. 54 of the State Administration of Taxation): "The tax authorities shall publicize the basic information of the subject of default to the society in accordance with the provisions of Paragraph 1, Subparagraph 1 of Article 11 of these Measures. If the defaulting subject is a legal person or other organization, it shall publish its name, unified social credit code (taxpayer identification number), registered address, and the name, gender and identity document number (with year, month and day of birth omitted) of its legal representative, person in charge, or person actually responsible for the violation as determined by an effective decision of a people's court; if the defaulting subject is a natural person, it shall publish its name, gender, identity document number (with year, month and day of birth omitted). Documentation number (omitting the year, month and day of birth).

Where the actual responsible person, as determined by an effective decision of the people's court, is inconsistent with the legal representative or person in charge at the time of the violation, the tax authorities will only publish the information of the actual responsible person to the society, unless there is evidence proving that the legal representative or the person in charge has been involved in the case."

Financial Accounts Chapter

With the continuous upgrading of the gold tax system and the continuous development of the tax big data system, a large number of tax risks will be screened out through the bank flow, which will become the fuse of the outbreak of tax risks in small and medium-sized enterprises.

Risk 5. Huge amount of running water is fast in and out of the natural person's account, triggering the characteristics of tax evasion in off-account operation, which is easy to be frozen.

Previously, we received inquiries from a number of natural persons and individual businessmen who operate recycling and trading of renewable resources, and through their communication, we learned that due to the use of their personal bank accounts for a long time to engage in a large number of recycling and distribution of renewable resources, they would irregularly pay a large amount of money to the outside world, and then there is a sum or a number of sums of money through the enterprise's public account to pay into their own personal accounts, which were eventually frozen by the banking system after the early warning The account needs to be appealed before it can continue to be used.

In the context of full cooperation between the bank and the tax system, if some enterprises have off-the-books operations, frequent payments of huge amounts of funds, large amounts of funds with the public account, thus triggering the bank's early warning system to push the relevant risks to the tax authorities to investigate and deal with, so as to detect tax evasion offenses.

Risk six, the return of funds will inevitably trigger the risk of false opening early warning, tax and bank linkage risk dramatically increased

So far, the return of funds is still one of the most significant risk characteristics in judging false invoicing. The underlying logic is: false invoicing because there is no real goods transactions or services, the buyer, although the public to the public to pay the full amount of the price, but inevitably through a variety of ways to claim the funds back. With the soundness of tax, banking big data, a sum of money in the banking system, no matter how the flow, no matter how many pens split, through how many people's accounts, as long as the final formation of the return of the "closed loop", will trigger the early warning - of course, this is the practice of some of the Of course, this is also the practice of some of the prepayment and deposit return will also trigger the reason of false opening warning. Enterprises should be wary of closing the loop on the return of large sums of money and try to avoid such transactions. If they have no choice but to form a closed loop, such as deposits and advances, they should have all the information about the transaction available to justify the reasonableness of the return and the authenticity of the transaction.

Business Model Risk

So far this year, according to Big Data on Taxation, there has been a pleasing increase in business purchases and sales in the first quarter alone, indicating that the nationwide trade in the purchase and sale of commodities and goods is recovering. With buying and selling, it involves the issuance and receipt of invoices, especially VAT invoices. In practice, some SMEs are tempted by benefits and participate in the purchase and sale of commodities that they are not familiar with, especially in the trade of "no goods in sight" and only transferring goods right certificates, where the risk of false invoicing is extremely high. In addition, just for performance and neglected the background investigation of suppliers, also become one of the causes of the risk of non-compliance invoices.

Risk seven, bulk commodities, "pallet", "over the ticket" can not be cost-free, "no goods" trade business is easy to get involved in the false invoicing

Bulk commodities such as steel scrap, non-ferrous metals, petrochemical products and other trade, goods transportation, warehousing costs are extremely high, and therefore in practice will be taken to the transfer of the right to carry out trade in the form of certificates. In practice, we have noticed that some cases, that is, certain small and medium-sized enterprises that do not participate in the trade of bulk commodities, in the friends and relatives or salesman's introduction, sales promotion, to join the identity of the "pallet" in the trade of a particular commodity, that is, the upstream enterprises can obviously sell directly to the downstream enterprises, but in the form of In other words, the upstream enterprise can obviously sell to the downstream enterprise directly, but in the name of "advancing capital" or the like, it is necessary to insert another enterprise, thus prolonging the trade chain. For example, in a number of cases involving the trade in refined oil products, upstream enterprises used SMEs to realize the act of "over-invoicing", or through technical means SMEs falsely increased the inventory of refined oil products, so as to make use of the enterprises to issue invoices for refined oil products to evade consumption tax. After the outbreak of the case, the utilized MSMEs will be burdened with heavy consumption tax liabilities, and at the same time face the criminal risk of false VAT invoices.

This situation also exists in the business of steel scrap. That is, the upstream enterprise from the retailer to buy scrap steel, looking for a third-party invoicing company on behalf of the invoice, the acquisition of scrap steel, in order to isolate the risk of profit and loss enterprises will be in the process of acquiring scrap steel and then join an enterprise to participate in the purchase and sale of the chain, the company "no capital, no profit," only need to walk around the funds to open invoices, transfer the paper voucher, you can get a fixed profit. Can get a fixed profit. However, the risk lies in the fact that once the upstream enterprise is characterized as false invoicing due to the existence of the situation of separation of goods and tickets, the company inserted into the "firewall", and needs to bear all the taxes on the input items, and even face administrative and criminal responsibility.

Related Case: Using Hacking Technology to Inflate Inventory of Refined Oil Products, Real Transactions, Consistent Invoices and Goods, Still Sentenced

https://mp.weixin.qq.com/s/cG2G1Bh6n9_tBazWLHk2yg

Risk 8: Help friends and relatives "invoicing" to make money? No matter special invoices, general invoices have criminal risk

In the development of business operations, the person in charge of small and medium-sized enterprises have absolute control over the enterprise, the enterprise's financial or accounting does not have independence. These people usually have little understanding of the tax law, because of some friends and relatives of the introduction and the implementation of the behavior of false openings. Enterprises need to be reminded that if a false VAT invoice is issued, depending on the use of the invoice, it may be a crime of fraudulent export tax refund or false VAT invoice. Even if the invoices are ordinary invoices, now there are other invoices to be regulated by the crime of false invoicing, in short, the risk of criminal liability is unavoidable.

Legal basis:

 or a fine of not more than five times the amount of tax fraudulently obtained; where the amount is particularly large or there are other particularly serious circumstances, the penalty shall be fixed-term imprisonment of not less than ten years or life imprisonment, and a fine of not less than twice but not more than five times the amount of tax fraudulently obtained or confiscation of property."

Paragraph 1 of Article 205: "Anyone who fraudulently issues special invoices for value-added tax or fraudulently issues other invoices used for fraudulently obtaining export tax refunds or tax deductions shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall be sentenced to a fine of not less than 20,000 yuan and not more than 200,000 yuan; if the amount of the fraudulently issued tax is larger or if there are other serious circumstances, he or she shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years and shall be sentenced to a fine of not less than 50,000 yuan but 500,000 yuan or less; where the amount of tax falsely invoiced is huge or there are other particularly serious circumstances, he shall be sentenced to fixed-term imprisonment of not less than ten years or life imprisonment, and shall also be sentenced to a fine of not less than 50,000 yuan but not more than 500,000 yuan or to confiscation of property."

Paragraph 1 of Article 205-1: "If the circumstances are serious, a person who falsely issues invoices other than those stipulated in Article 205 of this Law shall be sentenced to fixed-term imprisonment of not more than two years, detention or control, and shall be fined; if the circumstances are particularly serious, he shall be sentenced to fixed-term imprisonment of not less than two years and not more than seven years, and shall be fined."

Risk IX: Invoicing between associated enterprises to inflate performance, both criminal and administrative risks exist!

In practice, we also note that some affiliated enterprises under the same de facto controller sometimes also exists between each other frequent invoicing behavior, or a sum of goods through the purchase and sale of several affiliated enterprises, and then sold to the downstream enterprises, so as to create a good operation of these enterprises, the turnover and revenue of the illusion of high. Then in the process of buying and selling some goods, some of them have real goods but only with the transfer of the goods right certificate as the form of delivery of goods, and some of them may not have real goods. According to the viewpoints of the State Administration of Taxation and the Supreme People's Court, this kind of suspected inflated performance by the behavior of false VAT invoices is not punishable as the crime of false VAT invoices because it is not a subjective intention of evading the state tax and objectively does not cause the loss of the state tax. However, in practice, some enterprises have been held criminally liable, e.g., some enterprises can rely on its high turnover in exchange for financial incentives from the local government, and thus be considered as cheating the state tax, etc. Even if it is not considered a crime, issuing invoices that do not match the real transaction belongs to false invoicing as stipulated in the Measures for the Administration of Invoices, which requires the payment of the corresponding VAT and the imposition of a fine of up to 500,000 RMB, and the administrative responsibility still cannot be exempted.

Legal Basis:

Paragraph 1 of Article 37 of the Measures for the Administration of Invoices: "Where a false invoice is issued in violation of the provisions of Paragraph 2 of Article 22 of these Measures, the tax authorities shall confiscate the illegal income; where the amount of the false invoice is less than 10,000 yuan, a fine of less than 50,000 yuan may be imposed; where the amount of the false invoice exceeds 10,000 yuan, a fine of 50,000 yuan or more than 500,000 yuan shall be imposed; and where the violation constitutes a crime, the criminal responsibility shall be investigated in accordance with the law. criminal liability."

Risk 10: In order to expand the market and solicit business, a large amount of gray expenses can not be digested, and "looking for votes" triggers the risk of false invoicing.

In the process of opening the market for small and medium-sized enterprises, due to the weak legal awareness may implement some commercial bribery, but these enterprises pay out of the benefits, commissions, etc., can not be deducted as a cost in the pre-tax deduction in the enterprise income tax, but also can not get qualified deduction vouchers. Then some enterprises will find some consulting services and enterprise management companies, make false service or consulting contracts, and then issue service or consulting VAT invoices to offset the cost of the enterprise. In practice, there are also some enterprises that let their employees go to the tax bureau to falsely open invoices for personal labor fees to offset the cost of the enterprise. Although these behaviors are ordinary invoices, there are still criminal risks.

Related case: natural person false invoicing case broke out, the recipient of the invoice is held criminally liable for false invoicing

https://mp.weixin.qq.com/s/mJOMBmZAnUkvVL4Yp4C9QQ

Revenue and Cost Control

Risk XI: Letting a third person issue invoices after purchasing goods without a ticket reduces costs but brings criminal liability for false invoicing.

According to the viewpoint of the Supreme People's Court, the truthful invoicing is not false invoicing, but still have to bear the administrative responsibility of paying back taxes. At the same time, according to some current judicial opinion, if the enterprise paid "service fee" which is lower than the invoice tax rate, it still constitutes false invoicing. For example, in order to avoid paying taxes, a refined oil sales enterprise did not want invoices when purchasing refined oil, thus purchased goods at a lower price, and then obtained the corresponding input invoices from gas stations with surplus tickets at a service fee of less than 13%, which is also at the risk of being recognized as false invoicing.

Relevant case: a transportation and logistics company implemented the transportation business by commissioning its own contact with individual drivers, paid the freight charges to them, and then obtained invoices from a network freight platform by way of fund walking and payment of a 5% service fee, which was characterized as false invoicing and tax evasion and punished by the tax authorities.

Risk XII, individual consumers do not want tickets are not considered income? Hiding income by private enterprises constitutes tax evasion.

Direct consumer-facing retail enterprises, such as gas stations operating refined oil retail, e-commerce companies retailing commodities, restaurants and hotels providing services directly to consumers, etc., have accumulated a large amount of non-invoiced income due to the fact that a large number of natural consumers do not have the habit of asking for invoices. Some business leaders will then collect the corresponding payment for goods, so that these natural persons through WeChat, Alipay code payment method will be paid to the business leader or employee's personal account, so as to achieve the purpose of the enterprise income tax evasion hidden income. This behavior is usually accompanied by "two sets of internal and external accounts" because the person in charge of the enterprise has too much income and needs to be accounted for. Such behavior constitutes the risk of tax evasion by overstating expenditures or understating or understating income in the books of accounts.

Legal Basis:

Article 63 of the Law on Administration of Tax Collection: A taxpayer who forges, alters, conceals, or destroys without authorization account books and bookkeeping vouchers, or overstates expenditures or omits or understates revenues in account books, or who refuses to make a declaration after being notified to do so by the tax authorities or makes a false tax declaration, and who fails to pay, or pays less than he should, the tax due, is guilty of tax evasion. If a taxpayer evades tax, the tax authorities shall recover the unpaid or underpaid tax, late payment fees, and impose a fine of not less than fifty percent and not more than five times the unpaid or underpaid tax; if the taxpayer constitutes a crime, he shall be held criminally liable in accordance with the law.

Paragraph 1 of Article 201 of the Criminal Law: "If a taxpayer adopts deception or concealment means to make a false tax declaration or fails to make a declaration, and evades the payment of tax in a larger amount and accounting for more than ten percent of the tax payable, he shall be sentenced to fixed-term imprisonment of not more than three years or detention, and shall be fined; if the amount is huge and accounts for more than thirty percent of the tax payable, he shall be sentenced to fixed-term imprisonment of not less than three years and not more than seven years, and shall be fined. and a fine."

Risk 13: Switching the nature of income to avoid the obligation to withhold and pay personal tax, facing a fine of 0.5 to 3 times

In practice, some enterprises, in order to evade the obligation to withhold and pay employees' individual income tax, will find ways to cooperate with some labor dispatch companies or flexible labor platforms, and adjust the wages and salaries of their own employees to the labor remuneration or business income of flexible workers who provide labor services. This behavior is mainly for the payment of large amounts of year-end bonuses or other one-time bonuses to employees for "planning". A number of labor dispatch companies have already been investigated. In addition, there are also companies that adjust employees' bonuses into subsidies, business trip expenses, reimbursements and other items, which are also suspected of violating the law. According to the provisions of Article 69 of the Tax Collection and Management Law, enterprises can be fined 0.5 times to 3 times.

Relevant case: two enterprises in Shanghai conspired with a platform to allow the platform to issue wages and bonuses to their employees, and at the same time allowed the platform to issue false VAT invoices to the enterprises, thus evading the obligation to withhold and pay the employees' personal tax and obtaining the false invoices. Now the suspected crime of false opening of other invoices is prosecuted by the procuratorial authorities.

Legal basis:

Article 69 of the Tax Collection and Management Law: "Where a withholding agent should withhold but does not withhold, or should collect but does not collect the tax, the tax authorities shall recover the tax from the taxpayer, and the withholding agent shall be subject to a fine of not less than fifty percent and not more than three times the amount of the tax that should be withheld but does not withhold, or that should be collected but does not collect."

Tax Preference

Risk 14: Failure to truthfully provide enterprise information in order to enjoy the policy of authorized levy and small-scale taxpayers, which fraudulently obtains national preferential policies or constitutes tax evasion

The State Administration of Taxation has repeatedly requested that the collection of enterprise income tax should be based on the principle of checking the books of accounts, with authorized levy as the exception. Approved levy is mainly a tax incentive policy for individual business households, sole proprietorship enterprises and some small and micro enterprises with low income and confusing account books, which generally has a certain standard limit. Similarly, the 3% VAT levy rate (and related tax reduction and exemption policies) for small-scale taxpayers also needs to meet certain standards and conditions. If an enterprise or individual business meets the criteria for conversion to a general taxpayer or a checking account levy because of good business, but provides false tax information to obtain tax incentives, this may also lead to the risk of tax evasion.

Risk 15: Incorrect application of tax exemption and reduction policies for small and micro enterprises and tax incentives for high-tech enterprises may constitute tax evasion.

This year, the Ministry of Finance and the State Administration of Taxation (SAT) have extended the tax reduction and exemption policy for small and micro enterprises, i.e., the annual taxable income does not exceed 1 million yuan, which is reduced by 25% of the taxable income, and the enterprise income tax is paid at a rate of 20%, with the total tax burden rate as low as 5%. In addition to small and micro-profit enterprises, the state has set up corresponding income tax concessions for high-tech enterprises that are supported by the state, i.e., a reduced enterprise income tax rate of 15%. But the application of the relevant tax incentives also need to meet certain conditions, mainly the enterprise's development costs shall not be less than a certain percentage.

Relevant case: a software development enterprise in Hainan because the company's R & D expenditure rate did not reach 60% of the standard software development enterprise identified, its violation of the income tax concessions were characterized as false tax returns, recovery of nearly 200 million yuan of enterprise income tax and impose a fine of more than 100 million yuan. https://mp.weixin.qq.com/s/hCr7gWsmiiEkyn69_ s6hiA

Risk sixteen, by making a large VAT input in exchange for "tax rebate"? High risk of false invoicing and tax evasion

In 2022, China implemented a large-scale enterprise tax rebate policy, which has now been normalized and institutionalized. The tax credit refund is to return the VAT input tax that enterprises have not offset in advance to solve the problem of tight capital flow of some enterprises. There are enterprises that falsely increase the input tax by means of false opening or reduce the output tax by means of concealing the income in the sales process, so as to ultimately "enlarge" their input tax in order to obtain the purpose of tax rebate by means of fraudulent offsetting. At present, if the enterprises increase the inputs by means of false invoicing, they will be held responsible for the false VAT invoices; if the enterprises reduce the outputs by means of tax evasion, they will be held responsible for the tax evasion, and the related risk is high, and the enterprises should be vigilant.

Relevant case: China Tax News disclosed that a food processing factory obtained input tax amount of 800,000 RMB in March 2022 from VAT special invoices meeting the conditions for deduction, and input tax amount of 800,000 RMB from invoices for acquisition of agricultural products, but only 400,000 RMB in the acquisition invoices is the real input tax amount that can be deducted for the real purchases, and the remaining 400,000 RMB is the acquisition invoices that the enterprise fictionalized the business and fraudulently retained the offsetting tax rebate.

https://mp.weixin.qq.com/s/Gpl_KxBr88CVxYN9cJCD6w