Editor's Note: In the field of renewable resources, coal and other bulk trade, road transport is one of the main modes of transport, and thus the authenticity, accuracy and completeness of transport information play an important role in the determination of the authenticity of the business of purchase and sale. In practice, due to the inconsistency between the transport information and the real business in the purchase and sale business, a large number of cases in which the authenticity of the enterprise's business has been denied and thus characterised as false opening or tax evasion. Then, the enterprise should be how to achieve the form and substance of transport information compliance, this article will be briefly analysed in conjunction with the case.

I. Case warning: business authenticity is denied due to missing transport information or abnormal transport track 

Case 1: The petrochemical enterprise was found to have false invoicing due to defective transport information and abnormal transport track 

From April 2020 to May 2021, a petrochemical enterprise issued 94 special invoices for a chemical enterprise, with a total of 8.6 million yuan in price and tax. The tax authorities found that the vehicles recorded in the entry slip provided by the chemical enterprise did not provide transport business for the petrochemical enterprise or the chemical enterprise. On the one hand, evidence such as the GPS track of the vehicle recorded on the warehouse receipt proved that the vehicle did not arrive at the location of the chemical enterprise on the day the business took place. On the other hand, the number of the transport vehicle recorded in the delivery pound slip provided by the petrochemical enterprise, the number of the transport vehicle recorded in the warehousing slip provided by the chemical enterprise, and the number of the vehicle stated in the transport invoice were inconsistent. In the end, the tax authorities determined that the petrochemical enterprise issued invoices that were inconsistent with the actual situation as false invoices.

Case 2: Unable to prove that the transport of goods actually took place, the case of false invoicing by a steel trading enterprise was rejected in the first and second instance 

From August 2015 to January 2016, a trading enterprise issued special invoices for a steel factory with a total of 19 million yuan in price and tax. The tax authorities found that the above behaviour of the trading enterprise was false invoicing and imposed a fine of RMB 500,000, the trading enterprise was not convinced and applied for administrative reconsideration, the reconsideration authority upheld the administrative penalty decision of the inspection bureau, and the trading enterprise filed a lawsuit to the court.

The tax authorities considered that part of the steel delivered by the trading enterprise to the steel mill was purchased from a recycling enterprise, and the recycling enterprise did not actually sell that part of the steel to the steel mill, as there were no delivery or receipt documents for any delivery of steel, and there was no relevant information of the logistics company, and almost all of the steel mill's self-manufactured receipt details and self-printed receipt forms were not matched with the trade enterprise's withdrawal of goods from the recycling enterprise. There was no match.

The trading enterprise believes that, on the one hand, a logistics company proved that it had transported more than 7,000 tonnes of steel for it during the period from August 2015 to January 2016; on the other hand, the mismatch in time, specifications and quantities between the steel mill's receipt details and the recycling enterprise's outgoing details is caused by the temporary storage and deployment of goods in the transit warehouse after the goods were shipped out of the recycling enterprise, as well as by the lack of standardised management of the transport and receipt links in the course of the business occurrence. Management is not standardised, the trading enterprise can not provide detailed evidence to restore and match the supply and receipt of each single goods.

The court held that the buyer and seller in this case, a single subject, the implementation of the same contract, the number of goods, specifications, delivery and pick-up time should be the same, it is not possible to change because of a transit warehouse, not to mention mismanagement and exemption from the burden of proof. As a company operating steel and coal trade for many years, trade enterprises should be very aware of the trade process and the risks that may be borne, but it is claimed that in the warehousing company without warehousing records to store a large number of transit steel, in the absence of transport trajectory data of the logistics company to transport the steel, the claim does not have the reasonableness of the transaction can not be proved to really exist.

Case 3: Falsification of Vehicle Transportation Records, Coal Trading Enterprise Qualified as False Invoicing and Referred to Public Security 

In November 2022, a trading enterprise issued 15 special invoices with the name of goods as raw coal, amounting to RMB 1,499,900, and tax amounting to RMB 190,500,000, to a downstream company, without purchasing any business of raw coal, which was qualified as false invoicing by the tax authorities and was referred to the judiciary for the crime of false VAT invoicing. In this case, the tax authorities made use of the reverse checking method to first clarify the transport route, and then determined that the trading enterprise had falsified the vehicle transport records by accessing the vehicle passing records of the toll station, etc., and finally determined that the enterprise had fictitious purchase and sale business of raw coal.

Summary 

From the above three cases, it can be seen that, in the context of tax by numbers, enterprises should not only ensure that the business information (contracts, weighing sheets, invoices, etc.) is complete, but also recognise that whether the transport information is true, accurate and consistent with the business information will also have a significant impact on the determination of whether the business is genuine.

The key to determination: from ‘formal authenticity’ to ‘substantive authenticity’ of transport information 

(a) Industry supervision provides technical support for tax authorities to verify the authenticity of transport 

According to the Measures for Dynamic Supervision and Administration of Road Transport Vehicles (2022), semi-trailer tractors According to the Measures for Dynamic Supervision and Administration of Road Transport Vehicles (2022), semi-trailer tractor-trailers and heavy-duty trucks (ordinary freight vehicles with a total mass of 12 tonnes and above) must be installed with standard satellite positioning devices before leaving the factory and be connected to the national public supervision and service platform for road freight vehicles. This provision enables the tax authorities to access the transport track data of the vehicles, providing a key technical guarantee for verifying the authenticity of transport. By comparing the vehicle track information obtained from the access platform with the transport situation recorded in the incoming/outgoing weighbridge list and other materials, the tax authorities can effectively verify the authenticity of the goods transported by both the purchaser and the seller, and then judge the substance of their business. Therefore, the verification of vehicle track has become a regular technical means for tax authorities to investigate and deal with cases of false invoicing, tax evasion and other offences committed by bulk trading enterprises such as renewable resources and coal. For vehicles that cannot obtain trajectory data, the tax authorities can also carry out alternative verification by accessing records of high-speed entrances and exits.

(ii) Purchasing and selling enterprises need to be alert to the risk of false invoicing and tax evasion caused by abnormal transport data and trajectory 

Purchasing and selling enterprises should be fully aware of the fact that business data such as contracts, warehousing lists, weighbridge lists, and bank flows are the basic and necessary materials to support the authenticity of the business, and under the prerequisite of guaranteeing that the business data are true to form and substance, they should also ensure that the transport data are in line with the business data, such as the licence plate number and the time of entering and exiting warehouses, etc., to ensure that the transport data fully correspond to the real transport situation. Fully consistent with the real transport situation. If there are contradictions between the transport information corresponding to the business of the enterprise and the internal logic of the business information (e.g., the vehicle information of the waybill and the weighbridge sheet is in conflict, etc.), or the vehicle corresponding to the business information cannot be verified for the transport track, the enterprise will be faced with the risk that the authenticity of the business will be denied and thus be characterised as false opening or tax evasion.

Extended discussion: how to achieve substantial compliance with the transport link in the purchasing and selling enterprises?

(i) Focus on the transport link to ensure that the transport information is retained 

As mentioned above, while focusing on the retention of business information, enterprises should also focus on the retention of traces and compliance in the transport link. Purchasing and selling enterprises can put forward clear requirements for the carrier's vehicle positioning device, and at the same time, when entering and exiting the warehouse, they can retain the image information of the vehicle by means of cameras and other means. For enterprises with conditions, they can establish or access to the information platform, in addition to retaining contracts, invoices, warehousing pound sheets and other business information, but also on the vehicle transport track and other real-time records, multi-dimensional risk prevention and control. This information is not only a record of business execution, but also the core basis for proving the authenticity of the business and building a complete tax evidence chain.

(ii) Strictly control the details of the transport documents to ensure that the information is substantially true 

Enterprises should also establish a strict audit process, and obtain, save and analyse the relevant business information as a necessary part of the enterprise's internal control and financial accounting. It should be reminded that enterprises should focus on and verify the key details recorded in the documents, including but not limited to: (1) the accuracy of the vehicle information: the waybill, weighbridge and other documents on the licence plate number and the actual carriage of the vehicle is completely consistent? (2) Logical reasonableness of time: whether the time of entry and exit, weighbridge time and track record time coincide with each other, and whether they are in line with transport common sense and route distance? (3) Consistency of information: all documents (pound, waybill, invoice, etc.) reflecting the cargo information, weight, send and receive party information is uniform and no contradiction? In addition, enterprises should regularly conduct self-inspection of the retained transport information. Such self-inspection is an important means of proactively identifying risks and plugging loopholes, aiming at timely detection and correction of potential defects in the information, effectively preventing tax challenges due to contradictory or missing information, and circumventing potential risks of false invoicing and tax evasion.

(iii) Establishing the awareness of track evidence and making good use of data to cope with challenges 

In daily operation, enterprises should keep business-related transport data, including but not limited to waybills, image data, and so on. If the authenticity of the business is questioned, the enterprise can provide relevant transport track data to support; if the vehicle track is doubtful or missing, the enterprise can provide timely explanation or additional evidence (such as high-speed traffic records, third-party certificates, situation descriptions, etc.) to provide reasonable explanations, and strive to restore the real business scenarios, and resolve tax risks.

Summary 

To sum up, industry regulation provides strong technical support for tax authorities, enabling them to verify the authenticity of transport and overall transactions through verification of vehicle transport tracks and other data penetration, which has become an important method for investigating and dealing with cases of false opening and tax evasion. In the face of this regulatory trend and technological change, bulk trade purchase and sale enterprises such as renewable resources and coal should recognise the importance of retaining information in form and substance compliance. In the process of daily operation, enterprises should pay attention to the retention of business information, but also pay attention to the transport link to leave traces and compliance. On this basis, establish a strict internal control and review system to verify and confirm the details of the business information, and conduct regular self-examination to proactively identify business risks and plug control loopholes in a timely manner. Finally, if the authenticity of the business is questioned, the enterprise can also provide relevant track data for corroboration, or provide reasonable explanations and supplementary explanations for the doubtful or missing track evidence, so as to restore the substance of the business and resolve the tax risks.