Editor's Note: In the purchasing and selling chain, the coal industry has long existed the situation of selling without invoices, resulting in coal trading enterprises not being able to obtain invoices for VAT input deduction and pre-tax deduction of income tax when purchasing coal; and in the transportation chain, as the actual individual drivers did not issue transportation invoices to the coal trading enterprises, resulting in the same problem of not having invoices to be recorded in the accounts. In order to cope with the above dilemma and reduce operating costs, some coal trading enterprises have set up a third party in the purchase and sale chain and obtained invoices from it. With the in-depth promotion of the joint crackdown on tax-related crimes by eight departments, the risk of false invoicing by this kind of third-party invoicing companies is frequently occurring, which causes the downstream coal enterprises receiving the invoices to face the risk of false invoicing and tax evasion in terms of administrative and even criminal liabilities. Based on the recent tax-related cases in the coal industry, this article analyzes the tax-related administrative and criminal risks of the “proxy invoicing” business of coal trading enterprises and puts forward risk prevention suggestions for readers' reference.

I. Actual case: obtaining invoices through a third party company, coal trading enterprises face different degrees of tax-related administrative and criminal risks

(I) Administrative Case: Individual Driver Failed to Invoicing, Coal Trading Enterprise Obtained Invoice from Third-Party Transportation Company and Was Characterized as Tax Evasion

On April 23 this year, the “Decision on Tax Administrative Penalty” published by a local inspection bureau showed that the transportation vehicle of A coal trading enterprise selling coal was a personal vehicle, and it failed to obtain the transportation invoice after paying the freight to the driver.Between April 2021 and June 2022, in order to obtain the transportation invoice, A coal trading enterprise had a transportation company issue 16 invoices with the name of In order to obtain the transportation invoices, A coal trading enterprise asked a transportation company to issue 16 VAT invoices with the name of “Transportation Service*Freight”, with a total amount of RMB1,288,066.68, a total tax amount of RMB115,926.02, and a total price tax amount of RMB1,403,992.70, and declared them as credits. The Audit Bureau considered that Company A, in order to achieve the purpose of underpayment of tax, had allowed a transportation company to issue false invoices for itself by signing a false contract and paying a handling fee when there was no real transaction with the company, which resulted in the harmful consequence of underpayment of tax. The Audit Bureau recognized the above behavior of Company A as tax evasion and imposed a fine of fifty percent of the underpaid tax totaling 76,422.54 Yuan.

(II) Criminal Cases: After the Tax-related Judicial Interpretations of the Two Higher Levels were Issued, the “Generation Opening” Type of False Opening Still Faces Different Characterizations

The criminal judgment of a local court shows that Liu Mou is the actual controller of B Coal Trading Company, because he did not obtain transportation invoices from individual drivers, he obtained 83 VAT invoices from a transportation company in the form of payment of invoicing fees from October 2019 to July 2021, which involved a tax of RMB 640,516.44, with a total of RMB 7,757,365.86 in price and tax, which were declared and deducted. In August 2024, the court found that Liu had illegally purchased VAT invoices, and his behavior constituted the crime of illegally purchasing VAT invoices. Because Liu was a self-surrendered person and Company B had already paid all the taxes, Liu was sentenced to one year and six months of fixed-term imprisonment, with a probationary period of one year and nine months.

The criminal judgment of a local court showed that Company C operated by Chen Mou was a coal trading company, and Company C purchased coal from Wang Mou without obtaining invoices, so it obtained invoices from Company A through Wang Mou in the form of paying invoicing fees during 2016; another company operated by Chen Mou, Company D, was also a coal trading enterprise, and it did not obtain invoices for purchasing coal, so it obtained invoices from Company B through Wang Mou in the form of paying invoicing fees. The invoice was obtained from Company B through Wang Mou in the form of payment of invoicing fee. During the period of time involved in the case, Company C and Company D obtained a total of 1,346,240.15 yuan of tax on the falsely issued VAT invoices, with a total of 9,265,300 yuan of price and tax.2024 In December 2024, the court found that Chen Mou had purchased the coal at a price that did not include value-added tax (VAT), and had issued VAT invoices for tax deductions from other people through the subject of a fictitious transaction, which was a relatively large amount, and that his behavior constituted the crime of falsely issuing VAT invoices. special invoices, and combined with other circumstances, Chen was sentenced to three years' imprisonment.

It is not uncommon in practice for coal trading enterprises to obtain invoices from third-party companies because they have not obtained invoices after the actual purchase and sale of coal or transportation services, and such third-party companies are mostly trading enterprises enjoying local financial subsidies or are usually recognized as shell companies “engaging in the business of issuing invoices by false invoicing”. After the third party company is suspected of false invoicing, the downstream recipient enterprises often face many administrative and criminal risks. The first case reflects the administrative risk of tax evasion for coal trading enterprises obtaining false invoices, while the second and third cases reflect that after the implementation of the tax-related judicial interpretations of the two high courts, such “invoicing” cases still face different convictions for false invoicing or illegal purchasing. Based on tax-related laws and regulations, this article further analyzes the tax-related administrative and criminal risks of coal trading enterprises and provides risk prevention suggestions.

II. Administrative Risk Prevention: Striving to Reduce Economic Losses and Deterring Criminal Liability

According to Article 8 of the Provisional Regulations on Value-added Tax (VAT), “The amount of value-added tax (VAT) paid or borne by a taxpayer on the purchase of goods, services, services, intangible assets and real estate shall be the amount of input tax. The following input tax amounts are allowed to be deducted from the output tax amount: (a) the VAT amount stated on the VAT invoice obtained from the seller”. That is to say, from the viewpoint of tax control by invoice, only if the actual seller of the goods or services, the amount and so on are consistent with the seller and the amount stated on the invoice, the invoice obtained by the invoiced enterprise is allowed to be used as input VAT deduction. In the case of “opening on behalf of” discussed in this article, the invoices obtained by coal trading enterprises are often recognized as “separation of goods and invoices”, i.e., the actual seller of coal is not the same as the invoicing party, which results in the legitimacy of the invoices obtained by the coal enterprises being denied, and the coal enterprises are faced with the following possible treatments. Possible treatments: Firstly, due to obtaining false invoices, they are required to make VAT input transfer and charge late fees, and may also face the characterization of false invoicing, and will be transferred to pursue criminal liability if the criminal prosecution standard is reached; secondly, as in the first case above, the coal trading enterprise obtaining false invoices to offset tax is characterized as tax evasion, and faces fines in addition to the payment of additional tax and late fees; moreover, some of the local tax authorities will not be satisfied with the characterization of the enterprise as a “tax evader” when they characterize the enterprise as a “taxpayer”, which means that the actual coal seller is not the same as the invoicing party. In addition, some local tax authorities, after characterizing the enterprise as a tax evader, still referred the enterprise to the public security for false invoicing, and the related risk of criminal liability is very likely to erupt. It is worth noting that, in addition to paying VAT, coal trading enterprises may also face the problem of adjusting the payment of enterprise income tax because the invoices obtained are characterized as false invoicing.

Therefore, coal trading enterprises obtaining false invoices face different degrees of administrative and criminal referral risks. We believe that crimes endangering tax collection and management are typical administrative crimes, and it is of great significance to strive for favorable characterization in administrative procedures such as tax audit, administrative reconsideration, and litigation, in order to reduce the economic loss and prevent and control the risk of criminal liability. In the administrative procedures, coal trading enterprises can actively respond from the following aspects:

First, restore the substance of the transaction and strive for favorable characterization. Whether it is obtaining coal tickets or transportation tickets from a third party company, the root of tax compliance lies in whether there is a real transaction between the issuer and the recipient. Taking the purchase and sale of coal as an example, coal trading enterprises need to argue the reasonableness of the existence of the third-party company in the trade chain, and provide transaction information to support that the third-party company did sell coal to them, and the invoices obtained by the coal trading company are in line with the actual business, and there is no case of over-invoicing. In addition, the coal trading company can also make a reasonable definition of the status and role of the invoicing party in the transaction according to the actual situation of the case, combined with the provisions of the tax law, and solidify the legitimacy of obtaining invoices.

Secondly, it pays attention to the application of law to reduce economic loss and prevent and control criminal risk. In the case of obtaining false invoices, different transaction modes and circumstances are usually faced with different treatments, such as the qualification of good faith acquisition requirements for the transfer of inputs, the requirement for the transfer of inputs and late fees, qualification of tax evasion, etc., the understanding and application of the different laws is also precisely the coal trading enterprises to control the economic losses, prevention and control of criminal risk space, coal trading enterprises can be based on the application of the requirements of the acquisition of good faith, false or tax evasion constitutive elements, and so on. Coal trading enterprises can fully discuss and provide evidence around the applicable requirements of good faith acquisition, the constitutive elements of false invoicing or tax evasion, etc. to strive for a good characterization.

Thirdly, focusing on the tax recovery period, the acquisition of false invoices for more than five years should not be recovered. According to the provisions of the Tax Collection and Management Law, except for the existence of tax evasion, tax fraud, tax resistance and tax arrears, the recovery period of unpaid or underpaid taxes by tax authorities for taxpayers is from three to five years. Therefore, if the coal trading enterprise is recognized as false opening without constituting tax evasion, the tax authorities' recovery of its tax is limited by the five-year recovery period. Therefore, in addition to defending at the substantive level such as business authenticity and administrative characterization, the coal trading enterprise should also pay attention to the application of the recovery period in the case in question, and communicate with the tax authorities in time for the portion of the tax that exceeds the recovery period, so as to avoid excessive liability.

III. Prevention and control of criminal risk: combining evidence in the case, application of law, etc. to strive for acquittal or mitigation of the crime

In the two cases mentioned above, the coal trading enterprises involved in the case obtained invoices from the third party under the circumstance of real transactions, but faced with different convictions of the crime of falsely opening VAT invoices and the crime of illegally purchasing VAT invoices, and with the clarification of the tax-related judicial interpretations of the two high courts on the crime of tax evasion of “false offsetting of input tax”, some cases may also have the characterization of the crime of tax evasion. The characterization of tax evasion may also exist in some cases. The maximum penalty for the crime of false VAT invoicing is life imprisonment, while the maximum penalty for the crime of illegal purchase of VAT invoices is five years, and the maximum penalty for the crime of tax evasion is seven years. Before discussing the composition of this crime and other crimes, should be based on the constituent elements of the crime and the circumstances of the crime to discuss whether the problem of the crime, this article is more common in practice to explore the characterization of false invoicing as an example.

After the introduction of the two high tax-related judicial interpretations, whether the behavior of coal trading enterprises “on behalf of the opening” constitutes the crime of false VAT invoices is still a big controversy. The first paragraph of Article 10 of the two high tax-related judicial interpretations stipulates four kinds of false invoicing offenses, including “having actual deductible business, but issuing VAT invoices that exceed the tax corresponding to the actual deductible business, and other invoices used to fraudulently obtain export tax rebates and tax deductions”. Regarding the understanding and application of this provision, some judicial organs believe that the invoiced enterprise purchases goods at a price excluding tax and then obtains invoices from a third party to declare deduction, in which case, since the invoiced enterprise has not actually borne the tax burden of the previous link, it cannot enjoy the right to deduction, and the invoiced enterprise obtains invoices from a third party to reduce its own cost in essence by way of extracting VAT payments from the state, which shall constitute the crime of false invoicing. The crime of false invoicing. The aforementioned viewpoints lead to the great risk of criminal liability for false invoicing for coal trading enterprises in practice. In our opinion, when facing the charge of false opening crime, coal trading enterprises can strive for innocence or misdemeanor from the following points:

Firstly, combining with the evidence in the case, it is argued that the coal trading enterprise does not have the false opening offense listed in the tax-related judicial interpretations of the two high courts. For example, in combination with the principle of tax law, it is argued that the market transaction price includes tax, and the coal trading enterprise has obtained the right of VAT deduction based on the real purchase business according to law, etc. According to the actual situation of each case, it is argued that the coal trading enterprise does have the real transaction of purchase and sale of coal, and there is no case of “false invoicing without goods”, and the amount of tax invoiced on behalf of the coal trading enterprise does not exceed the actual amount of deductible tax, which belongs to “false invoicing”. Deductible tax, belongs to the “truthful opening”, and combined with the provisions of the Law Research [2015] No. 58, for the existence of actual transactions on behalf of the opening behavior should not be characterized as false opening.

Secondly, combined with the provisions of the crime, the coal trading enterprises did not have the purpose of fraudulent offsetting tax, did not cause fraudulent loss of national tax, and should not constitute the crime of false invoicing of VAT special invoices. The second paragraph of Article 10 of the Tax-related Judicial Interpretations of the two high courts clarifies the exculpatory provisions of the crime of false VAT invoices, “for the purpose of falsely increasing the performance, financing, loaning, etc. without fraudulently offsetting the tax, and without causing fraudulent loss of tax due to the offsetting, the crime shall not be punished by the crime, and if it constitutes any other crime, the criminal responsibility shall be investigated by other crimes according to the law”. In the handling of individual cases, it can be combined with the transaction mode and the evidence in the case to argue that the coal trading enterprise is in line with the above incriminating circumstances: in the case that the coal trading enterprise paid the tax-inclusive price, and chose to issue invoices from a third party merely because the seller did not issue invoices, and the tax issued on behalf of the seller did not exceed the actual tax to be offset, which belongs to the illegal invoices which are not to be offset according to the law, rather than not being able to offset according to law because it does not have the right of offsetting, and the purpose of it The purpose of the invoice is not to cheat the state tax, and it will not cause the loss of tax, so it is in line with the provisions of the crime, and should not be convicted and sentenced for the crime of false VAT invoicing.

Thirdly, other crimes are applicable to strive for a lesser offense. In individual cases, it is also possible to defend the case from the perspective of lesser offense by combining the actual transaction mode and evidence of the case, such as purchasing VAT invoices in the form of paying invoicing fees, which constitutes the crime of illegally purchasing VAT invoices, or fraudulently offsetting the input tax amount within the scope of tax payable, which constitutes the crime of evasion of tax.

IV. Summary

Whether in the response to tax-related administrative risks or the prevention and control of criminal liability risks, it is necessary for coal trading enterprises to clarify the substance of the transaction, sort out the business information to consolidate the authenticity of the purchase and sale transactions, and combine the evidence in the case with the level of the application of the law to actively communicate with the authorities in charge of the case, in order to strive for a good characterization, reduce the economic losses, and prevent and control the risk of criminal liability.