Editor's Note: The Third Plenary Session of the 20th Central Committee of the Communist Party of China proposed exploring a tax system compatible with new business forms. As a typical new business form, the flexible employment sector has long plagued employing enterprises with a chronic lack of labor - related invoices. To address the issues of low willingness among natural persons in the flexible employment sector to apply for invoice issuance on behalf of others and the difficulty for enterprises in obtaining such labor - related invoices, Fujian Province has innovatively developed the "Long - Zero Work" platform and launched the application scenario of "reverse invoice issuance upon payment". The Gansu Provincial Tax Service has introduced the "reverse application for invoice issuance" service, allowing employing enterprises to initiate the process of issuing invoices for service remuneration on behalf of individuals. These measures have to a certain extent solved the problem of enterprises obtaining labor - related invoices and provided tax support for promoting the high - quality development of new business forms. This article intends to analyze the potential tax - related risks for employing enterprises and individuals in the future comprehensive promotion by combining these two new initiatives in the flexible employment sector, for readers' reference.

I.Essential Differences Between "Reverse Invoice Issuance" and "Reverse Application for Invoice Issuance"

Article 18 of the Measures for the Administration of Invoices stipulates the "reverse invoice issuance", stating that "units and individuals selling goods, providing services, or engaging in other business activities and receiving payment for external business operations shall issue invoices to the payers; under special circumstances, the payer shall issue invoices to the payee". Herein, the provision that "the payer shall issue invoices to the payee" refers to "reverse invoice issuance", meaning the invoice issuer is the payer.In terms of invoice format, such invoices are marked with the words "Purchase" or "Reverse Issuance". In practice, "reverse invoice issuance" is mainly applied in fields including agricultural product procurement, renewable resource recycling, second-hand car purchases by automobile sales enterprises, and distributed photovoltaic power generation purchases by State Grid Corporation of China.

Article 16 of the Measures for the Administration of Invoices specifies the basic rules for invoice issuance on behalf of others: "Units and individuals needing to use invoices temporarily may apply directly to the tax authority at the place of business for invoice issuance on their behalf by presenting written proof of purchasing or selling goods, providing or receiving services, or engaging in other business activities, as well as the identity certificate of the handling person. ... For the needs of invoice administration, tax authorities may entrust other units to issue invoices on their behalf in accordance with the provisions of the competent tax department under the State Council".In practice, "reverse application for invoice issuance" refers to the scenario where the party purchasing goods or receiving services applies to the tax authority or other entrusted units for invoice issuance on behalf of the payee, i.e., the applicant for invoice issuance on behalf of others is the payer. In terms of invoice format, such invoices are marked with the word "Issued on Behalf". In recent years, "reverse application for invoice issuance" has been gradually promoted in the flexible employment sector.

II.Practical Application of "Reverse Application for Invoice Issuance" in the Flexible Employment Sector

(i)Fujian Province: Employing Enterprises Realize "Reverse Application for Invoice Issuance Upon Payment" via the "Long Zero Work" Platform

Last December, Longyan City in Fujian Province innovatively developed the "Long Zero Work" platform, integrating the entire process of flexible employment services. The platform provides information services for both employing enterprises and flexible workers, achieving precise matching of supply and demand between the two parties. Meanwhile, relying on the construction of the social security card "All-in-One Card" application service platform, the platform requires flexible workers to complete real-name authentication to ensure the authenticity and reliability of their information.

In terms of fund settlement and invoice issuance, when employing enterprises pay remuneration to flexible workers through the platform, they can obtain invoices simultaneously without waiting for flexible workers to apply to tax authorities for invoice issuance on their behalf. Reverse application for invoice issuance is completed directly within the platform during the payment process. In fact, the platform only plays the role of a "channel", responsible for providing technical services and not participating in transactions between employing enterprises and flexible workers.

(ii)Gansu Province: Employing Enterprises Realize "Reverse Application for Invoice Issuance" via the Electronic Tax Bureau

In the past, when flexible workers provided services such as design, installation, and expert consulting to employing enterprises, they were required to apply to tax authorities for invoice issuance on their behalf for service remuneration. When applying for such invoice issuance, flexible workers paid value-added tax (VAT) and additional taxes. Individual income tax (IIT) was withheld and remitted by employing enterprises.The methods for invoice issuance on behalf of others included online application via the electronic tax bureau and offline application at tax service halls. Due to the cumbersome procedures of both online and offline applications, flexible workers generally had low willingness to apply for invoice issuance on their behalf, resulting in the risk that employing enterprises could not obtain compliant invoices. At the same time, as invoice data and IIT data were not interconnected, deviations were prone to occur in tax payment data.

Recently, the Gansu Provincial Tax Service launched the "reverse application for invoice issuance" for service remuneration. Tax personnel of employing enterprises log in to the web terminal of the Natural Person Electronic Tax Bureau to initiate an application to the tax authority for invoice issuance on behalf of flexible workers for service remuneration. Then, flexible workers log in to the IIT APP to confirm invoice information and pay VAT and additional taxes. IIT is still withheld and remitted by employing enterprises, but the interconnection between invoice data and IIT data has been realized, ensuring the accuracy of tax payment.

Currently, the electronic tax bureau only supports invoice issuance on behalf of others for service remuneration under the categories of "Others" and "Internship Students (Full-time Academic Education)", excluding "Insurance Sales Agents" and "Securities Brokers".

As the practice of "reverse application for invoice issuance" in the flexible employment sector deepens, in the future, the realization of "reverse application for invoice issuance upon payment" through flexible employment platforms will no longer be limited to specific platforms or regions. The scope of application of "reverse application for invoice issuance" via the electronic tax bureau will also break through the category restrictions of "Others" and "Internship Students (Full-time Academic Education)", and the types of invoices issued on behalf of others are expected to expand beyond ordinary invoices, resulting in more diversified application scenarios.

While developing, employing enterprises and individuals must always adhere to the principle of business authenticity, strictly observe the bottom line of tax compliance, and refrain from using the convenience of "reverse application for invoice issuance" to conduct fraudulent invoice issuance on behalf of others.

III.Main Causes of Fraudulent "Reverse Application for Invoice Issuance" in the Flexible Employment Sector

Fraudulent invoice issuance on behalf of others in the flexible employment sector is mainly attributed to two reasons:First, to avoid high labor costs and reduce tax burdens for high-income personnel, employing enterprises split the remuneration that should be paid to high-income personnel among many natural persons by collecting a large number of natural person ID information, and then centrally remit the funds to the bank accounts of high-income personnel through various means.Second, some employing enterprises have off-the-books expenses. To embezzle funds for other purposes, they conduct fraudulent invoice issuance on behalf of others by fabricating business scenarios, transferring funds to the accounts of individuals with whom they have no actual business transactions, and then redirecting the funds to the accounts of personnel associated with the employing enterprises.

Although "reverse application for invoice issuance" strengthens the verification of business authenticity through measures such as real-name authentication via social security cards and connection to the IIT APP, if employing enterprises induce individuals to cooperate in completing "reverse application for invoice issuance" procedures by paying a certain percentage of fees, the difficulty of identifying fraudulent invoice issuance will be significantly increased, and the concealment of such illegal acts will be enhanced. In the future, regulatory measures need to be further improved, and relevant entities should also fully pay attention to the tax-related risks they face.

IV. What Tax-related Risks Do Employing Enterprises and Individuals Face?

(i) Tax-related Risks for Employing Enterprises

Employing enterprises that conduct fraudulent "reverse application for invoice issuance" by fabricating business activities face criminal risks of being suspected of the crime of falsely issuing special VAT invoices, the crime of falsely issuing invoices, and the crime of tax evasion. The specific crime involved needs to be further analyzed based on actual circumstances.

In the author's opinion, in the future, regardless of whether the invoices obtained by employing enterprises through "reverse application for invoice issuance" are special VAT invoices or ordinary invoices, if their subjective purpose is to reduce the IIT burden of high-income personnel or embezzle corporate funds, resulting in the loss of tax revenue from IIT and corporate income tax without harming the interests of VAT revenue, such acts are essentially tax evasion through fraudulent invoice issuance, which is a relationship of means and purpose.

Regarding the instrumental act of falsely issuing special invoices, according to the interpretation and application of the judicial interpretations on tax-related crimes issued by the Supreme People's Court and the Supreme People's Procuratorate, the key distinction between false invoice issuance and tax evasion lies in whether the falsely increased tax amount obtained by acquiring falsely issued invoices exceeds the scope of tax payable. Even if the invoices obtained through "reverse application for invoice issuance" are special invoices, as long as the tax amount of the falsely obtained invoices does not exceed the scope of tax payable, it constitutes a tax evasion act of falsely offsetting input tax, which shall be punished as tax evasion and does not fall under the category of implicated offenses. Because implicated offenses require that several acts must violate different charges.

Regarding the purposive act, completing false tax returns by falsely filling in input tax amounts constitutes tax evasion. Although employing enterprises commit two acts, namely fraudulent invoice issuance and false tax return, both acts violate the crime of tax evasion.

Regarding the instrumental act of falsely issuing ordinary invoices, even if such act is suspected of constituting the crime of falsely issuing invoices, since its core purpose is tax evasion, it should still be characterized as the crime of tax evasion in accordance with the principle of "punishing the more serious offense" for implicated offenses.

The author believes that the main reason is that if the purposive act of tax evasion has not been subject to criminal liability, the instrumental act of fraudulent invoice issuance should not be subject to criminal liability independently. Since the crime of tax evasion applies the administrative prior procedure, if the employing enterprise fully pays the overdue taxes, late fees, and fines within the time limit determined by the tax authority, criminal liability will no longer be pursued.

At the administrative level, if an employing enterprise reduces the IIT payment for high-income personnel and underpays IIT, it faces the risk of being fined 0.5 to 3 times the amount of IIT that should have been withheld but not withheld.

In terms of corporate income tax, although the invoices obtained by employing enterprises through "reverse application for invoice issuance" are fraudulent, the relevant costs and expenses are actually incurred, so they can still be deducted in accordance with the law without the need for corporate income tax adjustment. If the funds are embezzled for other expenses and the relevant costs and expenses are unrelated to the actual operation of the employing enterprise, corporate income tax adjustment is required, and the enterprise faces the risk of paying back taxes, late fees, and being characterized as tax evasion.

(ii) Tax-related Risks for Flexible Workers

For flexible workers who actually provide services, if employing enterprises split their income through "reverse application for invoice issuance" to reduce their IIT burden, and the natural person ID information used for income splitting is provided by the flexible workers themselves, according to the principle of "subjective intent reflected in objective acts", it can be determined that they have the subjective intent of evading IIT, facing the tax risk of being characterized as tax evasion and needing to make up the underpaid IIT.

In addition, regarding the collection of late fees, Article 28 of the Measures for the Administration of the Final Settlement and Payment of Individual Income Tax on Comprehensive Income, which came into effect on February 26, 2025, stipulates that "after the deadline for final settlement and payment, the tax authority shall, in accordance with the law, recover the unpaid or underpaid taxes from taxpayers and impose late fees". This has resolved the past dispute over "whether late fees should be imposed on IIT that should have been withheld but not withheld". Taking February 26, 2025 as the boundary, for such cases occurring before this date, no late fees shall be imposed on the underpaid IIT of flexible workers; for cases occurring after this date, flexible workers also face the risk of being charged late fees.

(iii) Tax-related Risks for Individuals Providing Identity Information

Compared with the past, individuals providing identity information to participate in "reverse application for invoice issuance" face significantly increased tax-related risks. In the past, due to the lack of real-name authentication requirements, a large number of natural person identity information was fraudulently used by employing enterprises. These individuals were unaware of such acts and had no fault, so they could not be held liable for relevant legal responsibilities.

However, under the "reverse application for invoice issuance" model, these individuals are required to take the initiative to cooperate in completing real-name authentication, information confirmation and other operations, which makes them an important part of the fraudulent invoice issuance acts. According to Article 19 of the judicial interpretations on tax-related crimes issued by the Supreme People's Court and the Supreme People's Procuratorate, "whoever, knowing that another person is committing a crime endangering tax collection administration, still provides bank accounts, credit information certificates or other assistance shall be convicted as an accomplice to the corresponding crime". These individuals will face the same criminal risks as the employing enterprises.