Since 2012, the pilot work of approved deduction of input tax credits for agricultural products has been carried out in a number of industries nationwide, and is currently at the stage of authorizing provinces to select the scope of products to be piloted on their own. In practice, it is found that localities have the right to independently delineate the scope of agricultural products to which the policy of approved deduction of input tax amount can be applied, but these provisions are rather sketchy, and there will be deviation in the interpretation and cognition between tax authorities and taxpayers within a province as to whether a product belongs to the scope of approved deduction, which leads to great uncertainty in the application of approved deduction by taxpayers, and may result in the application of approved deduction being The tax authorities may deny the application of the approved deduction, which may result in the payment of back taxes, late payment fees or even the risk of tax evasion.

I. Case introduction: with the head, hooves and tails of the white strips of pigs do not belong to the "white strips of pigs".

China has implemented a series of tax incentives and support policies in the field of agriculture, through the means of tax regulation to encourage the development of agriculture. According to the tax law, the purchase of agricultural products, with the purchase of agricultural products invoice or sales invoice to do input deduction. As farmers usually do not issue sales invoices for agricultural products, and the purchase invoices for agricultural products are filled in by enterprises themselves, it is difficult to check the authenticity. Input tax credit for agricultural products is allowed to be approved for deduction, which means that taxpayers are no longer allowed to directly deduct VAT input tax on the basis of tax deduction vouchers for agricultural products purchased as raw materials, but rather, they are allowed to approve input tax credit for agricultural products in accordance with certain deduction standards for the current period, based on their agricultural products as raw materials and commodities they produce and sell. This policy alleviates the compliance risk of issuing invoices for the purchase of agricultural products at the time of purchase of agricultural products, improves the efficiency of the purchase of agricultural products, and helps to curb the phenomenon of false invoicing of agricultural products' tax deduction vouchers.

(I) Brief description of the case

A pork slaughtering and processing enterprise in a city of a certain province recently received a Notice of Tax Matters from the local tax authority. The tax authority considered that the slaughtering and processing enterprise, as a pilot enterprise for authorized deduction of input tax of agricultural products, when implementing the authorized deduction method to calculate the input tax allowed to be deducted from VAT, the head, hoofs and tails of the pigs were allowed to be deducted from VAT input tax of agricultural products, which belonged to exceeding the scope of the pilot project as stipulated in a certain province, and asked it to make up for the already deducted tax and pay the late payment fee.

The reason of the tax authority was that, according to the Notice on Relevant Issues Concerning the Further Expansion of the Pilot Scheme for the Authorized Deduction of VAT Input Amount on Agricultural Products (X Cai Shui [2017] No. 33) issued by a certain province, the production of white-striped hogs with live hogs as raw materials belonged to the scope of deduction. As X Cai Shui [2017] No. 33 does not explain the specific meaning of "white strips of pigs", it relies on the interpretation of the national standard GB/T 9959.1-2019 on "slices of pork, white strips of pigs", which considers that white strips of pigs must have their heads, hooves and tails removed. The taxpayer included the head, hooves and tails of the pigs in the scope of deduction and approved the deduction, which violated the local government regulations of a certain province, and the tax should be recovered from the taxpayer.

(II) Point of contention: the head, hooves and tails were not sold separately

The core argument of the taxpayer is that X Cai Shui [2017] No. 33 and other relevant documents are explicitly stipulating that the head, hooves and tails of pigs are not deductible, and the taxpayer understands that the head, hooves and tails of pigs belong to the component parts of the white pigs, and they should be included in the scope of the approved deduction. To take a step back, even if the head, hooves and tails of the pig do not belong to the components of the white stripe pig, the taxpayer is not selling the head, hooves and tails of the pig separately, but selling them as part of the white stripe pig and split pork. The taxpayer belongs to the primary processing enterprise of pig slaughtering, the product sales market, customer groups are more extensive, according to the customer demand, the taxpayer produces products with white strips of pigs' hooves, with pigs' hooves hind legs, with pigs' hooves forelegs, etc., and has not directly sold pigs' legs and hooves and other products.

Since the taxpayer did not sell the head, hoof and tail of the pig separately, it made the taxpayer unable to accurately calculate the input tax of the head, hoof and tail separately and make up for it. If all the input taxes deducted for products such as white strips with pig's hooves, hind legs with pig's hooves and front legs with pig's hooves are paid, it is not only a huge amount of tax but also significantly unfair.

(III) Relevant regulations of a province and national standards

The regulations for the production of white strips of pigs with hogs as raw materials are set out in the Notice on Relevant Issues Concerning the Further Expansion of the Pilot Scheme for Approved Deduction of Input Taxes on Value-added Taxes on Agricultural Products (X Cai Shui [2017] No. 33), which provides that:

"I. Adopting the input-output method, the province shall implement the approved deduction of input VAT on agricultural products in accordance with the province's unified approved deduction standard (see the Annex for details) for general VAT taxpayers engaged in the following acquisition and processing of agricultural products (hereinafter referred to as pilot taxpayers).

"......

"(iii) Producing split pork with purchased hogs as raw materials;

"(iv) Producing white pigs with purchased live pigs as raw materials;

"......"

However, the document did not explain the specific connotations of the said split pork and white stripped pigs. The national standard relied on by the tax authorities in issuing the Notice on Tax Matters is "Fresh and Frozen Pork and Pig By-Products Part 1: Sliced Pork" (GB/T 9959.1-2019), which states:

"3.1 Sliced pork Pork Pork white strips

"The pork carcass is sawed (split) longitudinally into two parts along the center line of the spine, including skinned sliced pork and skinless sliced pork.

"3.2 Skinned sliced pork Skinned white strips

"Sliced pork after pigs have been slaughtered and bled, and processed by scalding, dehairing, removing the head, hoof and tail, and internal organs.

"3.3 Skinless sliced pork Skinless white strips

"Sliced pork after bloodletting of pigs for slaughter, processed by the process of removing the head, hoof and tail, skinning and gutting."

Accordingly, the tax authorities determined that the head, hooves and tails products were not part of the pork white strips and could not be applied to the authorized deduction of input tax.

II. the provisions of the tax law is vague, conflict with other regulations, should be used in favor of the taxpayer's interpretation

(I) Local regulations are ambiguous and cause tax-related disputes

This paper argues that the occurrence of tax-related risks in this case is essentially due to the relevant provisions issued by a province did not grasp the differences between the slaughtering and processing of agricultural products, especially meat, and the ordinary processing and manufacturing industries, the definition of the relevant agricultural products is vague and unclear, the lack of clear guidelines, leading to the tax authorities and taxpayers may make inconsistent understanding of the practice.

The slaughtering and processing industry is quite different from the ordinary processing and manufacturing industry in terms of production mode. Generally speaking, the processing and manufacturing industry purchases a variety of raw materials and processes them into one or a few products for sale. However, the slaughtering and processing industry is to purchase one kind of raw materials, such as live chickens, ducks, pigs, etc., and split them into a variety of products through processing.

For example, with live pigs as raw materials, it can produce more than two dozen kinds of sliced pork, dozens of kinds of split pork, in addition to pig heads, pig ears, pig tongues, viscera and other products, and as far as common market transactions are concerned, white strips of pigs with hooves and split pork are common forms of products, but whether they can be included in the provisions of X Cai Shui [2017] No. 33 is not known. In addition, taking the slaughtering and processing of meat ducks as an example, in the market, there are about 60 to 100 different types of products with different category specifications for the general division of meat ducks. However, there is only one item listed in the scope of products stipulated by a certain province, namely "split duck meat", which will give rise to disputes between taxpayers and tax authorities over the definition of agricultural products, such as: whether the bones, duck blood, duck hair and internal organs of the split duck belong to the split duck meat? Is duck meat without the removal of hair, bones and internal organs considered as split duck meat?

In fact, not only the tax authorities in each province to determine that there are also deviations, a province within the tax authorities, tax officials around the understanding is not consistent, which involves the interpretation of the relevant provisions of the problem, at the same time buried tax disputes hidden trouble.

The provisions of the local government normative documents are not clear, first of all, the local government should focus on the local government according to the provisions of the superior law basis. According to the provisions of the Annex to the Circular of the Ministry of Finance and the State Administration of Taxation on the Trial Implementation of Approved Deduction Measures for VAT Inputs on Agricultural Products in Some Industries (Cai Shui [2012] No. 38), agricultural products refer to primary agricultural products included in the Notes on the Scope of Taxation of Agricultural Products (Cai Shui Zi [1995] No. 52). The Notes on the Scope of Taxation on Agricultural Products (Cai Shui Zi [1995] No. 52) stipulates that "meat products of veterinary, avian and reptilian animals, including whole or divided fresh meat, refrigerated or frozen meat, salted meat, offal, head, tail, hooves and other tissues of veterinary, avian and reptilian animals." , although the provisions of the head, tail, hoof products, did not provide for the concept of white pigs, etc., there is still ambiguity.

(II) Interpretation of national standards: the conflict itself

National standards themselves are not laws and regulations, only administrative management functions, but the Standardization Law of the People's Republic of China gives it a certain legal effect, especially the mandatory national standards. Therefore, national standards can be used to refine and explain legal concepts. But there is still no lack of doubt:

First of all, the development of national standards has its own specific purpose, the definition of some of the concept is to serve the specific purpose of the standard, such as food inspection, inspection and quarantine, various types of indicators, etc., rather than specifically on the concept of the product, the form of interpretation. Fresh and frozen pork and pig by-products Part 1: Sliced Pork (GB/T 9959.1-2019) is a national standard for food inspection, quarantine, transportation and other issues of sliced pork, rather than a national standard specifically defining the concept of pork, the terminology defined by its limitations, not a blanket approval.

Secondly, there is a conflict between the standards. After a preliminary search, this paper found that in another national standard "pork and pig by-products circulation classification and code" (SB/T 10794-2012), clearly listed "with belt hoof pieces of pork", the code is "21113 013 0003 The code is "21113 013 0003". According to the definition of terms in Fresh and Frozen Pork and Pig By-Products Part 1: Sliced Pork (GB/T 9959.1-2019), "3.1 Sliced Pork Pork White Strips The pork carcass is sawn (split) lengthwise along the center line of the spine into two parts, including skinned sliced pork and skinless sliced pork." This paper understands that the slice of pork and pig white belongs to the same concept, so the "pork and pig by-products circulation classification and code" (SB/T 10794-2012) recognized the existence of pig white with hooves, and in the "fresh, frozen pork and pig by-products Part 1: slice of pork" document perhaps based on the perspective of the food safety inspections, and did not do a comprehensive classification of pig white.

(III) Tax law interpretation should be doubtful in favor of taxpayers

This paper argues that the interpretation of relevant concepts and terms involves the issue of legal interpretation, which not only needs to find the basis of the superior law of the legal concepts, but also needs to be combined with the relevant practices and trading habits. This paper argues that if there is still doubt in the end, it should be in accordance with the principle of "doubt is in favor of taxpayers" to avoid increasing the tax burden of taxpayers and to maintain taxpayers' reliance on tax regulatory documents.

III. the tax-related risks of the authorized deduction of input tax on agricultural products summary

(I) Tax evasion risk caused by the cognitive bias of the scope of pilot deduction

Due to the approved deduction policy is still in the pilot, by the provinces in part of the industry, part of the product categories were selected for approved deduction, the remaining agricultural production and sales are still in accordance with the old deduction method for deduction. Therefore, on the scope of agricultural products that are allowed to be authorized for deduction and those that are not allowed to be authorized for deduction, there are disputes due to the overly broad and vague provisions, which are prone to tax-related disputes and lead to the risk of tax evasion.

At the same time, the current policy of approved deduction of input tax on agricultural products puts forward higher requirements for taxpayers' accounting, which need to be detailed to the use, amount and dosage of purchased agricultural products, and its deduction method is also more complicated.

(II) Inaccurate deduction leads to underpayment of tax, which triggers tax-related risks.

In the pilot practice of authorized deduction, there are problems such as taxpayers artificially reducing the transfer of inputs of agricultural products inventory at the beginning of the period, calculating the transfer of inputs of agricultural products inventory at the beginning of the period without restoring the tax-inclusive price to reduce the transfer of input tax, and intentionally confusing low-consumption products with high-consumption products by failing to make payment of tax at the prescribed time.

(III) Tax-related risks arising from duplicate deductions due to pooling and distribution

Approved deduction method stipulates that "for a single agricultural raw materials to produce a variety of goods or a variety of agricultural raw materials to produce a variety of goods, in accounting for the current period of agricultural consumption and the average purchase price, should be based on a reasonable method of aggregation and distribution", but the aggregation and distribution is not clear, a little careless easy to produce repeated calculations of deduction. Such as the production of vegetable oil as an example, the purchase of rice bran for production and processing, the production of products not only rice bran oil, there are bran meal, fatty acids, bran wax and other products, if the current period of sales of only the main product of rice bran oil, rice bran oil can be deducted in accordance with the standard calculation of input tax, but if the next period of sales of only the by-products of the bran meal, then can be deducted in accordance with the standard calculation of the by-products of the input tax, thus resulting in a batch of raw materials deduction twice. In the actual production and operation, this situation is more common, it is very easy to produce repeated deductions.

(IV) Raise the purchase price to bring the risk of tax evasion by inflating deductions

Approved deduction of import tax on agricultural products, canceling the policy of "fixed-rate deduction on the basis of invoices", which is intended to link the phenomenon of false VAT invoices in the field of agricultural products. Instead of "authorized deduction", the deductible input tax is calculated according to the deduction rate and the sales quantity of the month, so that there is no need to consider the invoice issue at the time of purchase. However, "the average purchase price of agricultural products" and "the number of goods sold during the period" are still two important indicators for calculating input tax, these two indicators, especially the "average purchase price", have a direct impact on the amount of input tax. These two indicators, especially the "average purchase unit price", have a direct impact on the input tax amount. Although the abolition of the acquisition voucher credit function but still financial accounting vouchers, acquisition vouchers are still filled in by the enterprise itself, the object of the acquisition of agricultural products for the individual, basically cash transactions, the tax authorities lack of effective means of supervision, the enterprise may still raise the purchase price and the number to achieve the false increase in the number of production and sales or lowered the unit price of the sale of goods to inflate the sales of the number of false offset input tax purposes.

(V) Approved deduction of input tax on agricultural products still requires invoices

Pilot taxpayers no longer purchase agricultural products with VAT deduction vouchers to offset VAT input tax, but it does not mean that taxpayers do not need to issue the corresponding acquisition vouchers when purchasing agricultural products. If the taxpayers cannot obtain invoices or issue purchase invoices for agricultural products in accordance with the relevant provisions of the Measures for the Administration of Invoices of the People's Republic of China, there will be a risk of deduction of enterprise income tax.

For example, Article 4 of the "Announcement of the Guangdong Tax Bureau of the State Administration of Taxation Guangdong Provincial Department of Finance on the Trial Implementation of Approved Deduction Methods for VAT Input Amounts of Agricultural Products in the Soy Sauce Manufacturing and Tempeh Manufacturing Industries" (Announcement of the Guangdong Provincial Department of Taxation of the State Administration of Taxation Guangdong Provincial Department of Finance No. 5 of 2020) provides that: "Pilot taxpayers purchasing and importing agricultural products will no longer offset VAT input amounts on the basis of VAT deduction vouchers. VAT input tax credit. When purchasing agricultural products, taxpayers should still obtain invoices or issue invoices for the purchase of agricultural products in accordance with the relevant provisions of the Measures for the Administration of Invoices of the People's Republic of China, and include the costs in accordance with the provisions of Article 6 of the Implementation Measures. Taxpayers who do not obtain invoices or issue invoices for the acquisition of agricultural products in accordance with the provisions, resulting in unsound accounting or inability to provide accurate tax information, will be withdrawn from the pilot project of authorized deduction for agricultural products after verification and confirmation by the competent tax authorities."

"V. If a taxpayer acquires all of the agricultural products purchased and obtains VAT invoices, customs import VAT special payment letters and other VAT deduction vouchers to offset the input tax amount, the taxpayer may choose whether or not to be included in the pilot program of approved deduction for agricultural products."