Editor's note: Since the beginning of this year, there have been frequent tax risks such as false invoicing and tax evasion by CSO companies in the pharmaceutical field. The government has also issued normative documents related to CSO companies, such as the "Measures for the Administration of Pharmaceutical Representatives," which demonstrates the increased supervision of CSO companies by the government. As the country strengthens the regulation of CSO companies, non-compliant CSO companies will face more tax risks. Based on this, this article will discuss the administrative and criminal risks faced by CSO companies, and propose corresponding measures to deal with the tax risks faced by CSO companies, combined with the recent specific cases and relevant laws and regulations.

Ⅰ The Case Observation: Frequent Tax Evasion and Falsification Cases of CSO Companies

(1) CSO companies violate tax incentive policies to evade taxes

Case 1: The Longyan City Taxation Bureau's Second Inspection Bureau has lawfully investigated and handled the case of Longyan Yi Yi Shenghui Enterprise Management Consulting Service Co., Ltd. defrauding small-scale micro-profit enterprise income tax preferential treatment. The CSO company reduced its taxable income by falsely claiming expenses in the accounts and made false tax declarations, illegally enjoying the small-scale micro-profit enterprise tax policy, resulting in a shortfall of 3.3367 million yuan in corporate income tax.

(2) CSO companies evade taxes by issuing fake invoices

Case 2: The Fourth Inspection Bureau of Chongqing Municipal State Taxation Bureau conducted a tax inspection on a certain pharmaceutical company. The pharmaceutical company in Chongqing obtained a fake invoice from a certain cultural transmission limited liability company in Xiamen from June to November 2020. The tax bureau determined that the fake invoices obtained by the company could not be deducted before tax, and adjusted the company's taxes, requiring the company to pay back corporate income tax and corresponding penalties.

Case 3: The Deyang Municipal Taxation Bureau of the State Administration of Taxation investigated and dealt with the tax evasion case of Sichuan Renyuan Medical Technology Co., Ltd. in accordance with the law. After investigation, it was found that the company involved in the case had used other people's ID cards to establish four individual industrial and commercial households and created false planning services with these four individual industrial and commercial households. The four individual industrial and commercial households issued false invoices, inflating the operating costs of the company involved. The annual taxable income Control is within 3 million yuan to qualify for the preferential income tax of small and micro-profit enterprises. In addition, the company involved in the case also reduced the company's taxable income by falsely listing costs such as wages.

Ⅱ The Main tax risks faced by CSO companies

(Ⅰ)Administrative risks faced by CSO companies

Firstly, according to Article 12 of the "Administrative Measures for Pre-tax Deduction Vouchers for Enterprise Income Tax", "Invoices obtained by enterprises that do not comply with regulations, such as false issuance, shall not be used as pre-tax deduction vouchers." Therefore, after obtaining false ordinary invoices, the invoices obtained by CSO Company cannot be deducted before tax. As in the case mentioned above, the tax authorities will adjust the tax of the CSO company that obtained false invoices, requiring the involved company to pay corporate income tax and late payment fees.

Secondly, according to Article 63 of the "Tax Collection and Administration Law", Article 21 and Article 35 of the "Invoice Management Measures," when a CSO company engages in fraudulent invoicing and tax evasion, it not only faces the risk of being classified as tax evasion by the tax authorities. The administrative risk of imposing a fine of 0.5-5 times the amount of tax underpaid, and also facing the administrative risk of being classified as false invoicing, with a maximum fine of 500,000 yuan.

（Ⅱ）Criminal risks faced by CSO companies

If CSO companies engage in fraudulent invoicing or tax evasion, they may face criminal liability for tax evasion, fraudulent issuance of value-added tax special invoices, and fraudulent invoicing.

First of all, on the crime of tax evasion. According to Article 201 of the Criminal Law, "Taxpayers who use deception or concealment to make false tax declarations, evade the payment of a large amount of tax and account for more than 10% of the taxable amount, and the amount is huge and accounts for more than 30% of the taxable amount." "The offender shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years, and shall also be fined." In addition, the "Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Application of Laws in Handling Criminal Cases of Harmful Tax Collection and Management" (Judicial Interpretation [2024] No. 4) stipulates that "if a taxpayer makes false tax declarations and meets one of the following circumstances, It should be recognized as "deception and concealment means" as stipulated in Article 201, Paragraph 1 of the Criminal Law: (3) Falsely stating expenses, falsely offsetting input tax, or falsely reporting special additional deductions. Article 52 of the "Provisions of the Supreme People's Procuratorate and the Ministry of Public Security on the Standards for Filing and Prosecuting Criminal Cases Under the Jurisdiction of Public Security Organs (II)" stipulates that "if tax evasion is suspected of one of the following circumstances, a case shall be filed and prosecuted: (1) Taxpayers who use deception or concealment to make false tax declarations, evade tax payment, with an amount exceeding 100,000 yuan and accounting for more than 10% of the total taxable amount for each tax category, and after the tax authorities issue a recovery notice in accordance with the law, Failure to pay the tax payable, failure to pay late fees, or failure to accept administrative penalties." From these legal provisions, it can be seen that if CSO companies engage in fraudulent invoicing, tax evasion, and other behaviors, and falsely declare taxes, resulting in national tax losses reaching the corresponding standards, and still not paying after the tax authorities issue a recovery notice in accordance with the law, They will face the risk of being handed over to the public security authorities for investigation by the tax authorities. Once the public security organs have filed a case for investigation, even if the CSO company pays the taxes, it will not affect the judicial authorities from pursuing its criminal responsibility, and the CSO company will still face criminal penalties.

Secondly, regarding the crime of issuing false value-added tax special invoices and the crime of issuing false invoices. According to Article 205 of the Criminal Law, "false issuance of value-added tax special invoices... shall be sentenced to fixed-term imprisonment of more than ten years or life imprisonment," as stipulated in Article 205-1. "If the circumstances are particularly serious, they shall be sentenced to fixed-term imprisonment of not less than two years but not more than seven years." In addition, Article 10, paragraph 1 of the "Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Application of Laws in Handling Criminal Cases that Harm Tax Collection and Management" stipulates that "if one of the following circumstances occurs: It should be recognized as "false issuance of value-added tax special invoices..." as stipulated in Article 205, paragraph 1 of the Criminal Law: (1) Issuing value-added tax special invoices without actual business," Article 12 stipulates, "If one of the following circumstances exists, it shall be deemed as'false issuance of invoices other than those specified in Article 205(1) of the Criminal Law' as stipulated in Article 205(1) of the Criminal Law: (1) Issuing invoices for others, for oneself, for others, or for others without actual business." Article 56 of the "Provisions on the Standards for Filing and Prosecuting Criminal Cases Under the Jurisdiction of Public Security Organs (II)" jointly issued by the Supreme People's Procuratorate and the Ministry of Public Security stipulates that "if the amount of tax for false value-added tax special invoices is more than 100,000 yuan or the amount of national tax loss is more than 50,000 yuan," Article 57 stipulates that "if the cumulative amount of false invoices other than those specified in Article 205 of the Criminal Law is more than 500,000 yuan, or if more than 100 false invoices are issued with a face value of more than 300,000 yuan" meets the standard for filing a case. Therefore, for CSO companies, once they are found to have engaged in illegal and criminal activities such as false invoicing, they will face criminal liability for the crime of false VAT special invoices and false invoicing. If it constitutes false issuance of value-added tax special invoices, it may face the criminal risk of up to life imprisonment, and if it constitutes the crime of false issuance of invoices, it may face the criminal risk of up to seven years of fixed-term imprisonment.

（Ⅲ）The countermeasures for CSO companies

In the context of deepening the reform of the medical and health system and strengthening compliance supervision in the medical field, CSO companies are facing unprecedented compliance challenges. Only by establishing a comprehensive compliance system from various aspects can CSO companies ensure the compliance of their own business and avoid related tax risks.

First, for CSO companies, it is necessary to establish corresponding compliance regulations. CSO companies should establish tax compliance regulations suitable for their own business scale and other factors, establish a basic framework for tax compliance concepts and principles, and form tax compliance guidelines within the company to raise awareness among all employees.

Secondly, CSO companies need to establish a tax compliance management organization. Due to the professionalism and complexity of taxation, some small-scale CSO companies may not be able to achieve tax compliance, so they can achieve tax compliance from the perspective of senior management. For larger CSO companies, they need to establish a professional and clearly defined compliance management organization to achieve compliance in various aspects of tax policies.

Thirdly, CSO companies need to innovate their development models to ensure the independence of upstream and downstream transactions and avoid risks spreading to the CSO companies. Therefore, CSO companies can consider integrating business and finance to prevent tax risks. In addition, CSO companies should establish corresponding evaluation mechanisms in their business to ensure the authenticity of the trading parties'business, the legality and compliance of the transactions, and ensure the authenticity and reliability of the related information, thus forming a complete business compliance model.

Finally, for tax risks that cannot be resolved by internal compliance mechanisms, CSO companies should consult tax professionals to help manage tax risks and improve internal compliance mechanisms with the assistance of professionals.