Recently, a tax platform has been implicated in the case of pharmaceutical enterprises. At present, the platform has been investigated by the public security, if the case is not handled properly, the invoiced pharmaceutical enterprises are very likely to be transferred to the judicial organs, facing the criminal responsibility of the crime of false VAT invoices. In fact, after the reform of the “two-invoice system”, the pharmaceutical field through the establishment of CSOs, CSPs and other organizations to obtain funds through false invoicing cases are few, and in recent years, CSOs, CSPs and other organizations have been frequently subject to tax audits, and they have been upgraded to online consulting platforms, in an attempt to add a veneer to hide the act of false invoicing. However, now pharmaceutical companies through the online platform to inflate sales costs with the intention of reducing the tax burden, the means of arbitrage funds by the tax authorities and judicial organs are also concerned. At the same time, since last year's anti-corruption storm is still continuing, this year, the Health Commission issued a number of departments to correct the unhealthy wind in the field of medicine notice, the pharmaceutical industry tax risk should not be underestimated, the pharmaceutical enterprises should be in the end, this paper is intended to explore.

I. the trend of observation: the pharmaceutical industry tax false opening risk surge

(i) case introduction: a tax platform mine, implicated in the pharmaceutical enterprises

Recently, a tax platform mine implicated in the case of pharmaceutical enterprises triggered concern. The pharmaceutical enterprise obtained VAT invoices from the tax platform with the name of “information service fee” and “marketing fee”, involving an amount of more than 80 million yuan. The pharmaceutical enterprise was implicated in the crime of false invoicing by the tax platform. The competent tax authority of the pharmaceutical enterprise required the pharmaceutical enterprise to transfer the input tax amount and pay the VAT, surtax, enterprise income tax and late payment fee. More importantly, the pharmaceutical enterprise may face the risk of being directly transferred to the judicial authorities if it fails to provide the tax authorities with materials on the authenticity of its business.

(ii) Tax case observation: many places successively investigated and dealt with the case of false opening of pharmaceutical enterprises

1. Chongqing Public Security uncovered a case of false invoicing through pharmaceutical enterprises

According to the Liangjiang New District Public Security Bureau, Chongqing public security in handling a private hospital suspected of fraudulent use of the national health insurance fund case found that during the period from 2020 to November 2021, Wang Mou, Huang Mou and others through a pharmaceutical company in Chongqing false VAT invoices, the amount of more than 1 million yuan. At present, the persons involved in the case have been taken criminal coercive measures.

2.Sichuan tax police jointly investigated and dealt with a case of false invoicing to pharmaceutical enterprises

On April 28, the State Administration of Taxation (SAT) notified a case of false invoicing by a pharmaceutical enterprise that was jointly investigated by the tax police in Panzhihua, Sichuan Province. The criminal gang falsely issued VAT ordinary invoices to several pharmaceutical enterprises by utilizing several pharmaceutical consulting service individual businesses under its control, involving an amount of 4.25 million yuan. The criminal Song has been sentenced by the court for the crime of false invoicing.

3.Xiamen tax police jointly cracked a case involving false VAT invoices and ordinary invoices in the field of medicine.

According to Xiamen.com, Haicang police and Xiamen tax authorities successfully cracked a case of false VAT invoices and ordinary invoices in the field of medicine, involving invoices totaling more than 84 million yuan in value and tax. In order to realize the purpose of tax avoidance, the company's legal person Yang entrusted two financial management companies to do tax avoidance program. The two financial management companies in the absence of real transactions from Beijing, multiple false invoices and general invoices, the amount involved is more than 80 million yuan. The case has been transferred by the Xiamen Haicang District People's Procuratorate to the Haicang Court for public prosecution.

4.Ulanhaote public security informed of the successful detection of 7.22 pharmaceutical field of large-scale false invoicing case

According to Xinhua News, the Inner Mongolia Autonomous Region Public Security Bureau on May 14 this year announced the detection of the past two years, five typical cases of economic crime. Among them, involving Ulaanhaote public security cracked 7.22 pharmaceutical field of large false invoicing case, involving the price of tax totaled more than 6 billion yuan. The pharmaceutical enterprises involved in the case through false invoicing means to extract funds to the name of sponsorship fees, activities and other funds to the pharmaceutical organizations and other relevant personnel to pay bribes.

II. the tax regulatory situation: the pharmaceutical industry is still the focus of tax regulation

(i) multi-departmental continue to correct the unethical practices in the field of medicine purchasing and marketing

“Correcting unethical practices in the field of medicine purchasing and marketing and in medical services” is a long-term special rectification activity jointly carried out by the Commission on Health and Welfare with taxation, public security, auditing, market supervision and other departments, with the aim of cracking down on commercial bribery in the field of medicine purchasing and marketing, and jointly combating tax-related illegal issues.

On May 27 this year, the Commission on Health, the State Administration of Taxation and other 14 departments jointly issued another notice entitled “22024 Correcting Unconscionable Practices in the Field of Pharmaceutical Purchase and Sales and in Medical Services”. This year, the focus of correcting unhealthy practices in the field of medicine purchase and sale is still focused on the strict investigation of bundled sales and “sales with gold” under the guise of various conferences, scientific research cooperation and other forms of sales, and to crack down on the practice of taking bribes to obtain funds by means of false invoices, false activities and other forms of activities.

(ii) The anti-corruption storm in the field of medicine has not stopped and is still sweeping across the region

In July last year, the National Health Commission (NHC), in conjunction with a number of departments, deployed a one-year nationwide campaign to focus on corruption in the pharmaceutical sector. Since the start of the activity, hundreds of hospital directors, responsible for bribery involved, and then implicated a number of pharmaceutical companies through false invoicing bribery cases. According to the time projection, the activity will end next month, but recently, fujian, heilongjiang, shaanxi and other health department issued a notice, clearly will be anti-corruption activities extended to the end of this year, it can be seen, along with the anti-corruption efforts continue, the risk of false invoicing of pharmaceutical enterprises to be investigated and dealt with is also strengthened.

(iii) Summary: under the high-pressure situation, the tax risk of false billing in the pharmaceutical industry should not be underestimated

Through the above cases and tax supervision situation observation can be seen, through the intention to use false invoices to obtain funds, reduce their tax burden of pharmaceutical enterprises, tax risk will always be in a high state.

III. why the pharmaceutical industry repeatedly outbreak of false invoicing risk?

(i) pharmaceutical purchasing and marketing areas of interest distribution pattern has not been fundamentally changed

For a long time, the field of medicine purchase and sale of doctors and medical representatives to accept kickbacks, pharmaceutical companies “with gold sales” and other corruption problems, pharmaceutical companies due to rebates, kickbacks, resulting in further compression of profits, which has become the pharmaceutical industry, false open, tax evasion behavior repeated motives. Although through the “two-ticket system” reform and other ways to try to eliminate from the sales of pharmaceutical enterprises in the past multi-channel distribution links caused by the high price of drugs, but because the hospital doctors on the use of drugs have absolute right to speak, pharmaceutical companies rely on pharmaceutical representatives to promote the interests of the inherent pattern of drugs has not been fundamentally changed, the cost of pharmaceutical enterprises from the original layer by layer, and the cost of the pharmaceutical industry, and the cost of the pharmaceutical industry, and the cost of the pharmaceutical industry. The cost of pharmaceutical enterprises has shifted from the original layer to layer to increase the price from the source of the factory, and pharmaceutical enterprises have extracted the funds for rebates and other expenses by means of false invoicing, which has led to the invoice violation problem of the pharmaceutical industry to remain serious.

(ii) External environment, such as anti-corruption storm, has increased the probability of tax-related violations in the pharmaceutical industry to be investigated and dealt with.

In recent years, not only has the tax department increased its investigation and handling of tax issues in the pharmaceutical industry, but also the Healthcare Commission, a multi-departmental joint effort to rectify corruption in the pharmaceutical industry, has often been implicated in false billing cases while investigating corruption in the pharmaceutical industry. At the same time, the formation of the eight departments to combat tax violations and criminal behavior of the formation of a regular mechanism has also contributed to the pharmaceutical industry, external tax risk intensification. In addition, with the number of electric votes in the national landing coverage, pharmaceutical enterprises in the use of the process to take the face of the authentication method of logging in the account, invoice risk can be directly locked to the invoicing person, exacerbating the risk of invoices up and down the chain of transmission for the tax authorities and the judicial authorities to combat the false CSP, CSO and other outsourcing sales enterprises, pharmaceutical consulting services platform to provide a powerful hand.

IV. what are the common forms of false invoicing tax risk performance of pharmaceutical enterprises?

(i) the use of CSO, CSP, inflated consulting fees, meeting fees and other sales expenses

Since the reform of the “two-ticket system”, the illegal mode of the past to take a long sales link to extract funds has been blocked, some pharmaceutical companies will look to the pharmaceutical consulting services company. In practice, the pharmaceutical enterprises through the use of its employees, relatives and other information to set up a number of CSO, CSP, through the CSO, CSP and other enterprises to sign a false marketing, advertising, consulting, planning, meetings and other contracts to obtain invoices so that the bribe money out.

(ii) Utilizing pharmaceutical platforms for false invoicing or being implicated by pharmaceutical platform mines

In recent years, with the successive characterization of CSP, CSO as “money laundering” shell companies, a large number of CSOs, CSPs are subject to tax audits, consulting services companies suspected of false invoicing, tax evasion increasingly severe investigation and punishment, so a number of large-scale pharmaceutical digital consulting services platform appeared. The advantage of the online platform is that the platform can take online records of how the academic conference is carried out, signing forms, activity photos and other information to be retained. At the same time, the promotion costs of pharmaceutical enterprises can be completed through the platform to pay, effectively avoiding the problem of public to private accounts. However, due to the nature of the platform as a “bridge”, once the pharmaceutical enterprises and consulting companies collude with each other, it is very likely that they will be deceived into invoicing, which will lead to false invoicing tax risks. To put it in another way, if the pharmaceutical platform and the consulting service company collude, the pharmaceutical enterprise as the recipient of the invoice, it will also face the administrative risk of false invoicing and criminal risk.

(iii) Offsetting inputs by filling out agricultural invoices or obtaining special invoices for false invoicing

For pharmaceutical enterprises whose business scope covers proprietary Chinese medicines, as they can directly purchase Chinese herbal medicines and other agricultural products, they can increase the procurement cost and reduce the tax cost by utilizing the characteristics of self-invoicing of agricultural products and obtaining false invoices for the purchase of agricultural products by themselves. Or some pharmaceutical enterprises collude with the upstream raw material drug producers, the raw material drug producers falsely open VAT invoices to the pharmaceutical production enterprises by means of falsely opening the invoices of agricultural products, and the pharmaceutical production enterprises obtain the falsely opened VAT invoices by paying a certain handling fee to carry out the input deduction and cost expensing.

(iv) Summary: High Tax Risks of False Invoicing and Highly Prone to Criminal Risks

According to the Measures for the Administration of Invoices, no matter whether the ordinary invoices or special invoices are falsely issued, as long as the name, amount and other elements are wrong, it is very likely to be subject to an administrative penalty of up to 500,000 RMB. As a matter of fact, at the tax level, generally speaking, the tax authorities will qualify the false invoices obtained by pharmaceutical enterprises as tax evasion and impose a fine of 0.5-5 times. For pharmaceutical enterprises, more importantly, the criminal risk arising from false invoicing, once the response is not appropriate, it is very likely to be convicted and sentenced for the crime of false VAT invoices, with a maximum penalty of life imprisonment, and to take a step back, even if it is a false general invoice, it is also subject to the sanction of up to 7 years of imprisonment.

V. How do pharmaceutical companies prevent and respond to tax risks?

(i) Strengthen the academic conference, marketing expenses and other tax compliance, to business authenticity as the bottom line

For pharmaceutical enterprises, the most important is the issue of sales costs, how to avoid the lack of appropriate business supporting materials by the tax authorities and even the judiciary found to be false business, is a matter of particular concern to pharmaceutical enterprises. For this reason, we suggest that pharmaceutical companies in the business promotion, in addition to retaining invoices, should be retained meeting time, location, participants, agenda, site photos, sign-in sheets and other relevant documents reflecting the authenticity of the meeting, the pharmaceutical company's financial staff to strengthen the collection and management of relevant documents. In addition, pharmaceutical companies should also strengthen innovative research and development efforts to fundamentally change the problem of relying on pharmaceutical representatives and bribes to doctors to sell drugs.

(ii) Seek professional help and actively respond to tax audits to prevent criminal risk

In the case introduced, the pharmaceutical company, as the invoiced party, was implicated in the mine of the tax platform. If the tax authorities have received the Notification of Confirmed False Openings, Letter of Concurrence, according to which the pharmaceutical enterprise is recognized as false openings. For its part, it should provide relevant materials on the authenticity of its business and actively communicate with the tax authorities, stating that the two orders can only prove that the platform has a false invoicing behavior, and that the tax authorities need to be determined in accordance with the provisions of the “Provisions on the Procedures for Handling Tax Inspection Cases” and after investigation in accordance with the statutory procedures, which cannot be directly used as evidence to determine that it constitutes a false invoicing, and, if necessary, it should seek the help of the tax people in a timely manner, and actively make representations and pleadings to the tax authorities. If necessary, it should seek the help of tax professionals in time and actively make representations and defenses to the tax authorities to strive for bona fide acquisition and avoid economic losses and prevent criminal risks to the greatest extent possible.

(iii) Actively utilizing compliance rectification to obtain favorable results of non-prosecution or probation in compliance

In recent years, compliance rectification has been widely practiced in the pharmaceutical field. A number of pharmaceutical companies due to the success of compliance rectification, its relevant responsible persons to obtain the results of non-prosecution or probation favorable results. In particular, after the introduction of the two high judicial interpretations, it is clear that effective compliance rectification can realize “lenient punishment”, and compliance rectification is formally regarded as a discretionary sentencing circumstance. Suspected of the crime of false opening of the pharmaceutical enterprises can be based on the two high judicial interpretation of the first paragraph of Article 21 “the implementation of the crime of endangering the tax collection and management, resulting in the loss of national tax, the perpetrator of the tax, tax losses, effective compliance rectification, can be lenient penalties; the crime is minor and does not require the imposition of penalties, can not be prosecuted or exempted from criminal penalties; the situation is significantly minor and harmful, not as a crime”. If the circumstances of the crime are minor and do not require the imposition of criminal penalties, the perpetrator may not be prosecuted or exempted from criminal penalties; if the circumstances are significantly minor and the harm is not significant, the crime shall not be treated as a crime.