As a national pillar industry, the electric power industry plays an important role in economic construction, social development, financial taxation and national defense construction, etc. However, at the same time, factors such as heavy taxes and low profits objectively restrict the healthy development of electric power enterprises. Due to the insufficient acquisition of front-end VAT credit vouchers and other reasons, the VAT tax burden of electric power enterprises is heavy. As for enterprise income tax, incomplete cost vouchers in the process of raw material procurement lead to the corresponding costs not being able to be deducted normally, which in turn leads to the increase in enterprise income tax burden. In addition to the two major taxes mentioned above, power enterprises are highly susceptible to tax-related risks either due to inaccurate application of tax incentives or lack of necessary understanding of minor taxes such as environmental protection tax. This article is intended to reveal the possible tax-related risks faced by the electric power industry in order to alert the relevant taxpayers so as not to fall into legal risks.

I. Green development of the electric power industry has begun to show results, and will soon usher in a new opportunity for development.

On March 15, 2021, General Secretary Xi proposed at the ninth meeting of the Central Financial and Economic Commission: "14th Five-Year Plan" is a critical period of carbon peak, window period, to build a clean, low-carbon, safe and efficient energy system, control the total amount of fossil energy, focus on improving the efficiency of the use, the implementation of renewable energy substitution, deepen the reform of the electric power system, and build a new power system with new energy as the main body. Build a new type of power system with new energy as the main body. In the same year, on October 24, the CPC Central Committee and State Council issued "on the complete and accurate implementation of the new development concept to do a good job of carbon peak carbon and the views of the work", the views clearly pointed out that, in order to achieve carbon peak carbon and the goal of carbon must be comprehensively promote the market-oriented reform of electric power, promote the reform of the grid system, and improve the price of electricity and other energy varieties of the market-oriented formation of the mechanism. In recent years, the power industry to conscientiously implement the CPC Central Committee and State Council on the reform of the electric power and energy system of the decision-making and deployment, and actively implement the "double carbon" goal of the new requirements for the protection of power supply, people's livelihoods, and to promote China's economic and social development to provide power protection.

According to the China Electricity Council "2023 annual national power supply and demand situation analysis and forecast report" in the data show that, as of the end of 2022, the national full-caliber installed capacity of 2.56 billion kilowatts, of which, the full-caliber coal-fired power generation accounted for the proportion of full-caliber power generation is 58.4%, which can be seen, the coal-fired power supply in China is still the most important source of energy. Especially in the water is obviously dry in the third quarter, the full-caliber coal power generation increased by 9.2% year-on-year, better make up for the decline in hydropower output, giving full play to the role of coal-powered bottoming out to ensure supply.

As China's economic and social order continues to recover steadily, 2023 is expected to China's economic operation is expected to rebound in general, energy demand is also a gradual upturn in the trend of electric power enterprises in the relevant government departments concerned about the policy support, will usher in a new opportunity for development.

II. Efforts to combat tax rebates continue to intensify, with the electric power industry becoming a key target for audits

Since April 1, 2022, the Ministry of Finance and the State Administration of Taxation began to implement a large-scale tax allowance refund policy, and as of November 10, 2022, the total amount of tax allowance refund had reached 230.97 billion yuan, and as of the end of 2022, a total of 15.5 billion yuan of tax allowance refund and various types of tax losses had been recovered. Through the implementation of a series of tax and fee support policies, the burden on market players has been significantly reduced, the pressure on enterprise cash flow has been alleviated, the vitality of market players has been further stimulated, the business environment has been optimized, market confidence has been strongly boosted, and stable economic growth has been assisted.

At the same time, in order to ensure that the tax rebate funds are not cheated and used by lawless elements, the State Administration of Taxation, the Ministry of Public Security, the Supreme People's Procuratorate, the General Administration of Customs, the People's Bank of China, the State Administration of Foreign Exchange and other six departments jointly issued a notice to deploy the specific measures to increase the efforts to fight the fraudulent tax credits, and to normalize the fight against the fraudulent tax credit illegal and criminal acts, since the State Administration of Taxation and other six departments convened a joint crackdown on the Since the State Administration of Taxation and other six departments held a joint crackdown on fraudulent VAT tax rebates, the relevant departments around the world have taken the crackdown on fraudulent tax rebates as the top priority of the current normalized crackdown on fraudulent tax rebates and illegal crimes.

Rikaze City Tax Bureau, for example, Rikaze City Tax Bureau issued the ""three three" solid tax rebate risk prevention and control work" notice, which clearly points out that the key industries into the implementation of the "industry early warning", especially for photovoltaic power generation, wholesale trade and other key industries. Key industries, batch by batch against the analysis, some key risk points, applicable policies, etc. to form a thematic report, against the check; to retain the tax refund amount of 100,000 or less, no less than 10% of the sampling rate for random checks, for the amount of tax refunds of more than 100,000, 100% of the manual review. Through this notice, it can be seen that the power industry, represented by photovoltaic power generation enterprises, has become a key target of inspection by some tax authorities, although it is not yet known whether the storm of inspection for the power industry in some areas will be pushed to the whole country, but for the electric power enterprises, this is a very strong signal that the power industry has begun to come into the vision of the tax authorities, and the tax authorities will usually set aside a certain area for the inspection when carrying out tax inspections. When the tax authorities carry out tax inspections, they usually set a time period for inspection and carry out tax inspections on all tax-related matters within the time frame, and once the tax authorities carry out all-round tax inspections, it may lead to a large-scale collection of multiple taxes. Therefore, electric power enterprises should attach great importance to the legal and compliant operation, but also should improve the awareness of tax risk prevention, not only to strive for tax benefits for electric power enterprises should be enjoyed, but also to avoid falling into the legal risk.

III. Heavy VAT burden and easily implicated in false invoicing by upstream coal enterprises

As mentioned before, coal is still the most important energy source for power generation in China, but in practice, there is an objective situation that most of the power enterprises can not obtain VAT input invoices from small coal mines, which leads to high VAT burden and lack of basis for pre-tax deduction of EIT, and they are always facing the risk of fines from the tax department, which makes them not dare to let go of their hands and operate at full capacity. In addition to several large coal mines across provinces, most of the upstream coal enterprises are small in scale and dispersed, while most of the downstream electric power enterprises are large in scale and centralized, this "upstream dispersed and chaotic, downstream centralized and formal" status quo is not conducive to the downstream electric power enterprises to obtain VAT input deduction invoices for purchases, and the tax burden borne by the higher tax burden.

After searching the websites of China Judicial Instruments Network and Beida Law Treasure, with the key words of "power generation" and "electric power", and with the condition of jeopardizing the tax collection and management crime, a total of 19 criminal cases of jeopardizing the tax collection and management crime of electric power enterprises in the past three years were searched out, in which the crime of false invoicing of VAT special invoices occupies an absolute majority. The crime of VAT special invoice occupies the absolute majority, as high as 14 cases, and most of the cases mentioned that "it is difficult to obtain input invoices" and other similar descriptions, and due to the impossibility of obtaining compliant invoices for VAT input deduction, electric power enterprises can only "settle for the next best thing", to "acquire invoices, homemade vouchers, etc.". Acquisition invoices and homemade vouchers are used as bookkeeping vouchers to calculate and pay taxes. In the process of business operation, the VAT invoices issued by the upstream company are obtained through business re-engineering. As the power enterprises advance and recover the payment for the goods through the associated personal accounts in this business model, there will be "fund reflux", and the authorities in charge of the case will probably pursue the criminal liability of the power enterprises for false invoicing by fund reflux, which will lead to the criminal risk. Criminal risk.

Meanwhile, in this kind of case, as the downstream invoicee, the electric power enterprise is very easy to be implicated by the upstream coal enterprise. Since VAT exists in all aspects of production and sales, whether the upstream enterprises issue VAT special invoices legally and compliantly, and whether they pay VAT on time and in full directly affects whether the downstream electric power enterprises can normally declare and deduct the VAT input tax amount and whether their deduction behaviors will result in the loss of national VAT tax. In the case of false invoicing, a considerable part of the case is due to the problem of false invoicing in the upstream enterprises and then implicated in the downstream enterprises, the downstream enterprises will face the suspension of invoices and accept tax inspection, which will affect the continuous operation of the enterprises; the heavier ones may be required by the tax bureau to pay back taxes, fines and late payment fees; or even worse, they may be transferred to the public security organs for investigation of the crime of falsely issuing VAT invoices. Any of the above situations will have an adverse impact on the healthy development of electric power enterprises.

IV. Heavy corporate income tax burden and high risk of tax adjustment for pre-tax deduction

In the procurement business of electric power enterprises, the sources of procurement mainly come from two aspects: one is purchasing from large-scale coal mining enterprises, and in this kind of transaction, the electric power enterprises can obtain VAT invoices, which can be used for VAT input deduction and pre-tax deduction of enterprise income tax, but the number of this kind of business is relatively small. Secondly, bulk coal is purchased from many individual retailers, and this type of purchase accounts for the majority of the purchase. Since individual retailers cannot issue VAT invoices on their own, they need to issue invoices on behalf of them through tax authorities. In practice, due to the huge quantity and amount of coal purchased by electric power enterprises, some local tax authorities are unwilling to issue invoices on behalf of individual retailers due to the consideration of administrative enforcement risk. As a result, electric power enterprises are caught in a dilemma in tax treatment, neither can they obtain VAT special invoices to offset input tax, nor can they obtain ordinary VAT invoices as the pre-tax deduction vouchers for enterprise income tax. In order to maintain the business operation, the electric power enterprises have to make, print and fill in other vouchers for pre-tax deduction of enterprise income tax, and such vouchers have great tax-related risks in pre-tax deduction of enterprise income tax.

In addition to the risks involved in tax adjustments for EIT deduction due to homemade vouchers mentioned above, I found through searching the official websites of the State Administration of Taxation and tax authorities around the world that electric power enterprises also have the following EIT-related tax risks, which need to be brought to the attention of electric power enterprises:

First, the transaction price between related enterprises is unreasonable, which is recognized by the tax authorities as significantly lower than the market price, and the power enterprises are required to pay the enterprise income tax and other tax-related risks. Specifically, the tax authorities check the power purchase and sale contracts between power generation enterprises and their affiliates, verify the pricing of electricity charged by power generation enterprises to their affiliates to determine whether the power sales settlement price is consistent with the settlement pricing and whether there is any inconsistency between the total power revenue and the total revenue from the settlement of feed-in tariffs and combine the data with the relevant statistical tables of power production, the statistical tables of the total feed-in tariffs, the settlement of the total tariffs and other data. electricity settlement table, etc., to finally conclude whether there are improper transactions between the power generation enterprise and the associated enterprises and whether the power generation enterprise intends to suppress the selling price of its products;

Secondly, when a power generation enterprise, a provincial power company and a large power consumer sign a tripartite agreement to sell electricity in a "direct supply" mode, the tax authorities will focus on checking whether the power generation enterprise has not accounted for or under-accrued the income from the electricity tariff received in advance. The tax authorities usually check the "advance receipts" account of the enterprise, combined with invoices, settlement of electricity summary tables, electricity billing ledgers and other original documents, to determine whether there is any long-term "direct supply" pre-received tariffs on the books, and do not carry forward the revenue from the sale of products after the issuance of electric power products. (c) The situation;

In addition to the above, whether the settlement difference of "generation on behalf of power generation" is accounted for in time, whether there is any non-accounting or under-accounting of income from the sale of fly ash and coal slag consumed in production, and whether the disposal of fixed assets, equity and other special transactions are in compliance with the provisions of the tax law are all the key points to be examined by the tax authorities, and power generating enterprises should, on the basis of their own compliance, focus on the tax treatment matters in the above aspects. Power generation enterprises should, on the basis of their own compliant operation, focus on the above aspects of tax treatment matters to raise awareness of risk prevention and control so as not to fall into tax-related risks.

V. Tax-related Risks Caused by Lack of Corresponding Understanding of Small Taxes and Inaccurate Application of Tax Preferential Policies

In addition to the two major taxes mentioned above, namely VAT and EIT, according to the recent consulting cases received by our firm, I found that electric power enterprises are also susceptible to tax-related risks due to the lack of necessary understanding of small taxes such as environmental protection tax and inaccurate application of tax preferential policies.

1. Environmental Protection Tax

A Power Company Limited has been disposing of fly ash and slag through external sales. Its sales and disposal are specifically divided into two types of modes, one is directly sold to production-oriented enterprises, which will reprocess and dispose of fly ash, slag, etc. as raw materials for its production of construction materials; the other is sold to non-production-oriented enterprises, which will distribute them.2022 At the end of the year, the competent tax authority of Company A issued a Notice of Tax Matters on Company A regarding the declaration of environmental protection tax on solid waste, which required Company A to make up for the solid waste environmental protection tax generated by Company A in the course of production and operation since the environmental protection tax was levied in 2018 and up to the year 2021, the tax amount was up to more than 50 million.Company A was not convinced, arguing that the legislative intent of the environmental protection tax protection was for the protection and improvement of the environment and the reduction of pollutant emissions, but the Company did not have any behaviors such as dumping and other evils of destroying the environment but rather the However, the Company did not dump or destroy the environment, but rather sold and disposed of the solid wastes, especially in the first type of sales mode, reprocessing and utilizing the solid wastes such as fly ash and slag, which were not sanctioned by the environmental protection tax. The dispute between the two parties thus started. Although the environmental protection tax is a small tax, if the tax authority applies a five-year recovery period and retroactively adjusts the accounts to the year 2018, coupled with the fact that in the Tax Collection and Management Law, there is no clear provision on the upper limit of late payment, the amount of tax and late payment borne by the enterprise may be too heavy.

2. Tax incentives

In order to support the development of electric power enterprises, the state has continuously introduced a number of tax incentives, especially for new energy power plants, tax reductions, exemptions and refunds, these policies obviously reduce the burden on the enterprise, alleviate the pressure on the enterprise's cash flow, and enhance the development of the endogenous impetus, but at the same time, due to the fact that tax incentives have not formed a complete and unified system, and the enterprise lacks due attention to the tax-related matters, which results in the electric power enterprises' incorrect application of tax incentives. Tax incentives applied incorrectly, the author through the administrative, criminal case index, now the enterprise high frequency application of the wrong policy is listed below, in order to remind enterprises to pay attention to.

First, according to the Ministry of Science and Technology, the Ministry of Finance and the State Administration of Taxation's Notice on the Revision and Issuance of Administrative Measures for the Determination of High-tech Enterprises (GuoKeFaHuo [2016] No. 32), new energy power generation enterprises should be careful to cross-check whether they themselves belong to the high-tech enterprises, and, if they belong to them, whether there is the wrong calculation of some non-project operating benefits, which are not supposed to be entitled to preferential tax policies, for example containing financial loan subsidies and fixed asset gains, etc;

Secondly, the tax-related problems of electric power enterprises involving preferential enterprise income tax policies: the state encourages enterprises to carry out technological development, and stipulates the tax preferential policies of adding and deducting technological development expenses. However, some electric power enterprises are not standardized enough in the management of technology development expenses, do not separate the accounting for technology development expenses and production and operation expenses, cannot accurately and reasonably divide and calculate the expenditures of various research and development expenses, expand the scope of use of technology development expenses, and do not make tax adjustments in accordance with the regulations;

Thirdly, whether electric power enterprises have purchased equipment that does not comply with the catalog of energy-saving and water-saving, environmental protection, safety production and other special equipment to enjoy tax incentives and offset the taxable amount. Review the original documents of the enterprise's acquisition of the relevant equipment, check the installation and use of the equipment on site, and compare the announcement of the Ministry of Finance, the State Administration of Taxation, the Development and Reform Commission and the Ministry of Ecology and Environment on the publication of the Catalogue of Preferential Enterprise Income Taxes for Environmental Protection, Energy Saving and Water Conservation Projects (2021 Edition) and the Catalogue of Preferential Enterprise Income Taxes for Comprehensive Utilization of Resources (2021 Edition) (Ministry of Finance, the State Administration of Taxation, the Development and Reform Commission). Ministry of Ecology and Environment Announcement No. 36 of 2021), to determine whether the relevant equipment purchased by the enterprise meets the requirements for enjoyment of the preferential tax policies.

VI. Summary

To sum up, the electric power industry is gradually becoming a high incidence industry in which the tax authorities focus on investigating and dealing with tax-related violations, and with the continuous improvement of tax big data, tax-related violations caused by invoices are more likely to break out. If the downstream electric power enterprise fails to improve the awareness of tax-related risk prevention and control and fails to do a good job of the daily operation of the compliance and risk response, then it may be due to the suspected false opening of the upper reaches of the coal enterprise and face the administrative risk of not being able to deduct their own value-added tax and need to For themselves, if in their daily operation, the power enterprises fail to improve their business processes and strictly implement them, and pay attention to the retention of original materials, or because of homemade vouchers in the accounts, or because of the pricing of related transactions below the market price, they may also face the administrative responsibility of being recognized by the tax authorities as tax evasion, and be required to pay the enterprise income tax and late payment fees. administrative liability, and if criminal offenses are involved, they may also be subject to corresponding criminal liability if the prosecution standard is met. Taxpayers of electric power enterprises must pay attention to the related tax-related administrative and criminal risks in their daily operation.