Editor's Note

The crime of falsely issuing invoices, added by the Criminal Law Amendment (VIII), has long been regarded as mainly applicable to the evaluation of acts such as falsely issuing Value-Added Tax (VAT) ordinary invoices and other invoices without tax deduction function. This offense is classified as a conduct crime, meaning criminal liability can be pursued once the statutory incrimination threshold is met, and this issue was basically uncontroversial in the past.

Following the issuance of the Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Application of Law in Handling Criminal Cases Endangering Tax Collection and Administration (Fa Shi [2024] No. 4), in numerous cases involving the obtaining of falsely issued special VAT invoices, where the fraudulently inflated input VAT does not exceed the scope of the taxpayer's taxable liability, the act is determined to lack the intent to fraudulently offset tax, and is categorized as a tax evasion act of "falsely offsetting input VAT". Such acts are eligible for the application of the administrative prepositive procedure, and no criminal liability will be pursued after the fulfillment of administrative liabilities, including paying back underpaid taxes, late payment surcharges and administrative fines.

This has created a notable split in the criminal liability assessment between the false issuance of special VAT invoices and ordinary VAT invoices: the former, which usually entails greater social harmfulness, can be conditionally exempted from criminal liability through fulfilling administrative liabilities; while the latter, which usually has lesser social harmfulness, may still result in a conviction even if the administrative liabilities are fully fulfilled. How to coordinate and resolve this contradiction? The author attempts to conduct an analysis using the method of natural interpretation for readers' reference.

I. Comparison of the Social Harmfulness Between Falsely Issuing Special VAT Invoices and Ordinary VAT Invoices

From the perspective of tax collection and administration, the core difference between special VAT invoices and ordinary VAT invoices lies in the tax deduction function. A special invoice can serve not only as a cost accrual voucher for pre-tax deduction of Corporate Income Tax (CIT), but also as an input VAT deduction voucher for VAT offset. In contrast, an ordinary invoice only has the function of pre-tax deduction, with no VAT deduction eligibility.

Assuming an enterprise obtains falsely issued special and ordinary VAT invoices with the same total price and tax amount:

In terms of CIT: since the tax portion of the ordinary invoice is also accrued as costs, the CIT loss caused by the ordinary invoice is higher than that of the special invoice by an amount equal to tax amount × CIT rate, which constitutes underpaid tax.

In terms of VAT: the VAT loss caused by the special invoice is higher than that of the ordinary invoice by the full amount of the tax, which may constitute either underpaid tax or fraudulent tax offset.

With regard to the legal interests protected by the Corporate Income Tax Law, the harmfulness of falsely issuing ordinary invoices is slightly higher than that of falsely issuing special invoices of the same total price and tax amount. However, the two acts cause CIT losses in the same manner: tax underpayment, that is, the failure to pay tax that is lawfully due, both infringing on the expected tax revenue interests that the state is entitled to levy but has not yet collected.

In terms of the legal interests protected by the VAT Law, however, there is a material difference in the harmfulness of the two acts:

1.The false issuance of ordinary invoices cannot cause any loss of VAT interests, and has no connection with the legal interests protected by the VAT Law.

2.If the invoice recipient is a physical enterprise, and the fraudulently inflated input VAT from the obtained falsely issued special invoices does not exceed the scope of its taxable liability, the object infringed by the act is the state's expected tax revenue interests. Its harmfulness is similar to that of CIT underpayment and can be evaluated equally. The amount of underpaid VAT (the full tax amount) will inevitably exceed the additional amount of underpaid CIT caused by falsely issuing ordinary invoices compared to special invoices (tax amount × CIT rate). Therefore, in terms of monetary amount, the total underpaid tax caused by falsely issuing special invoices is obviously higher than that of falsely issuing ordinary invoices of the same total price and tax amount, resulting in greater social harmfulness.If the fraudulently inflated input VAT from the obtained falsely issued special invoices exceeds the scope of the taxable liability, the object infringed is the state's vested tax revenue interests that have already been collected, which bears the nature of defrauding state property. Its harmfulness cannot be equated with tax underpayment, and shall be determined as fraudulent tax offset. In this case, the social harmfulness of falsely issuing special invoices is escalated, and is significantly higher than that of falsely issuing ordinary invoices.

3.With regard to the legal interest of invoice administration order, it cannot be compared by numerical amount. However, special invoices have more functions and involve more complex tax collection and administration rules, so the infringement on the legal interest of invoice administration order caused by falsely issuing special invoices is at least no less than that of falsely issuing ordinary invoices.

Overall, the act of falsely issuing special VAT invoices will inevitably cause higher tax revenue losses and greater social harmfulness than the act of falsely issuing ordinary VAT invoices of the same total price and tax amount, and may even lead to the escalation of social harmfulness due to the change in the form of tax loss. The above discussion is limited to the legal interests of tax revenue. If the purpose of the false issuance act is to illegally possess or embezzle company property, it may infringe on the legal interests protected by other crimes such as duty-related crimes, and the comparison of harmfulness shall be discussed separately. In such cases, the act will constitute an implicated offense of false issuance and other crimes, and the liability for illegal possession or embezzlement shall be evaluated by other crimes (such as the crime of corruption, the crime of duty encroachment, etc.), which is not the object of evaluation for the crime of falsely issuing invoices.

II. The Split of Criminal Liability for False Issuance Acts Caused by Two Major Changes in the Two High Courts' Judicial Interpretation

Theoretically, since the false issuance of special invoices has higher social harmfulness, the criminal liability for falsely issuing ordinary invoices should not be heavier than that for falsely issuing special invoices of the same total price and tax amount. However, two major changes in the judicial interpretation of the Supreme People's Court and the Supreme People's Procuratorate have altered this relationship and resulted in the split of criminal liability.

The first change is the addition of a decriminalization clause for the crime of falsely issuing special VAT invoices. Where an act is not committed for the purpose of fraudulently offsetting tax and has not caused any tax loss through fraudulent offset, it shall not be convicted as the crime of falsely issuing special VAT invoices. This decriminalization clause reasonably distinguishes the subjective intent of the perpetrator and the form of tax loss: acts committed for the purpose of defrauding tax and resulting in tax being defrauded are evaluated as the crime of falsely issuing special VAT invoices; acts committed for the purpose of evading tax and resulting in tax underpayment are not convicted as the crime of falsely issuing special VAT invoices. That is, the crime of falsely issuing special VAT invoices is a type of fraud offense, which is consistent with the statutory penalty of the crime and conforms to the principle of suiting punishment to crime and criminal responsibility.

The second change is the addition of the act of falsely offsetting input VAT to the constitutive elements of the crime of tax evasion. This change is also reasonable. The act of falsely issuing special invoices that meets the decriminalization clause only fails to constitute the crime of falsely issuing special VAT invoices, but can still be classified into other crimes according to its infringement of legal interests. Then, which crime is appropriate to evaluate the act of VAT underpayment? Obviously, the crime of tax evasion is the proper choice.

However, the act of falsely offsetting tax was not listed in the constitutive elements of the crime of tax evasion in the past. Although it can be covered by false tax declaration, it has been highly controversial in judicial practice. To unify adjudication standards, the element of falsely offsetting input VAT is added, which sets a conviction path for the act of falsely issuing special invoices that meets the decriminalization clause, that is, to be classified into the crime of tax evasion.

The specific evaluation standard is whether the fraudulently inflated input VAT from the falsely issued special invoices exceeds the scope of the taxable liability. If it does not exceed, the nature is false offset, and there is no essential difference between falsely offsetting VAT and underpayment of other taxes. If it exceeds, it constitutes fraudulent offset, which is transformed into the crime of falsely issuing special VAT invoices for tax fraud.

However, a core conflict lies in that the administrative prepositive clause shall be applied to the crime of tax evasion in accordance with the law. Except for those who have received criminal punishment for tax evasion or been imposed administrative penalties for more than twice within five years, no criminal liability shall be pursued against those who have paid back the underpaid tax, late payment surcharges and administrative fines as required by the tax authorities.

This leads to the result that after the act of falsely issuing special invoices is classified into the crime of tax evasion, it can be conditionally exempted from criminal liability through the fulfillment of administrative liabilities. In contrast, there is no such provision for the crime of falsely issuing invoices, and it is generally recognized that the crime of falsely issuing invoices is a conduct crime, where the false issuance of ordinary invoices can constitute a crime once the incrimination threshold is reached, and the fulfillment of administrative liabilities can only be considered as a sentencing circumstance.

The end result is that an act with lower social harmfulness is convicted, while an act with higher social harmfulness can be exempted from criminal liability, leading to unfairness in criminal law evaluation.

III. Re-examination of the Conviction Logic of the Crime of Tax Evasion and the Legal Interests Protected by the Crime of Falsely Issuing Invoices

What is the root cause of this split?

First, from the perspective of the conviction logic of the crime of tax evasion, after the issuance of the two high courts' judicial interpretation, the legal interests protected by the crime of falsely issuing special VAT invoices are relatively clear, which is mainly used to evaluate false issuance acts for VAT fraud. Those who commit the act of falsely issuing special invoices but have no intent to defraud VAT shall not constitute this crime.

At this time, the act can be split into two parts: the act of falsely issuing special invoices, and the tax evasion act of using the falsely issued special invoices to falsely offset input VAT. The latter constitutes the criminal act of the crime of tax evasion and shall be evaluated by the crime of tax evasion. However, for the former, whether it should be evaluated separately and by which crime it should be evaluated has rarely been discussed.

According to Case No. 1669 in the Criminal Trial Reference, the perpetrator who falsely issued special invoices was finally convicted of the crime of tax evasion for failing to fulfill the administrative liabilities as required. Then, if the perpetrator has fulfilled the administrative liabilities and the tax evasion act is exempted from criminal liability, there is still room for discussion on whether the act of falsely issuing special invoices should still be convicted on the grounds of infringing the legal interest of invoice administration order.

Second, there is also controversy over which crime only evaluates the infringement of the legal interest of invoice administration order. According to the viewpoint of the Supreme People's Court, the crime of illegally selling special invoices is restricted to a potential damage offense, which requires at least the risk of causing fraudulent tax offset. Therefore, it cannot only evaluate the act of infringing the invoice administration order. In contrast, both the crime of illegally purchasing special invoices and the crime of falsely issuing invoices can evaluate acts that only infringe the invoice administration order.

It can be concluded that even if the falsely issued ordinary invoices are not used for tax evasion, such as for inflating business performance, the act can still be evaluated by the crime of falsely issuing invoices. Then, the act of falsely issuing ordinary invoices and then using them to falsify costs and expenses for tax evasion actually infringes the legal interests protected by two crimes, namely the crime of falsely issuing invoices and the crime of tax evasion.

For the provisions of the crime of tax evasion, we should not only focus on the changes, but also the unchanged parts: falsifying expenditures has always been a criminal act of the crime of tax evasion. Therefore, tax evasion through falsely issuing invoices should of course be split into the act of falsely issuing ordinary invoices and the tax evasion act of falsifying expenditures.

In summary, obtained falsely issued special invoices can be used for both falsely offsetting input VAT and falsifying expenditures, while obtained falsely issued ordinary invoices can only be used for falsifying expenditures. In the past, the act of falsely offsetting input VAT was widely considered not to be evaluated by the crime of tax evasion, and thus was classified into the crime of falsely issuing special invoices, while falsifying expenditures has always been eligible for evaluation by the crime of tax evasion.

After the issuance of the two high courts' judicial interpretation, combined with the changes and unchanged parts of the constitutive elements of the crime of tax evasion, only the act of falsely offsetting input VAT is classified into the criminal acts of the crime of tax evasion, so that both the falsely offsetting input VAT and falsifying expenditures through the false issuance of special invoices can be evaluated by the crime of tax evasion. Similarly, according to this logic, the act of falsifying expenditures through the false issuance of ordinary invoices should also be evaluated by the crime of tax evasion. The act of falsely issuing special invoices and the act of falsely offsetting input VAT constitute an implicated relationship between means and purpose, and the act of falsely issuing ordinary invoices and the act of falsifying expenditures also constitute an implicated relationship.

IV. Coordinated Handling of the Crime of Falsely Issuing Special VAT Invoices and the Crime of Falsely Issuing Invoices

First of all, special invoices and ordinary invoices are not two completely separate and different things. Special invoices have all the functions of ordinary invoices, with an additional tax deduction function. The core difference between ordinary invoices and special invoices also mainly lies in the tax deduction function.

Where two things with an inclusive relationship constitute two separate crimes respectively, there must be a concurrence of articles of law between the two crimes. In short, the difference between the crime of falsely issuing special invoices and the crime of falsely issuing invoices does not lie in whether the criminal object is a special invoice or an ordinary invoice in form, but the fundamental difference lies in which specific function of the invoice is abused.

In fact, the crime of falsely issuing special invoices can be fully covered by the crime of falsely issuing invoices, and is a special circumstance of the latter. The crime of falsely issuing special invoices protects the tax deduction function of invoices and the legal interests of VAT, while the crime of falsely issuing invoices protects the administration function of invoices and the legal interest of invoice administration order.

The act of falsely issuing special invoices will inevitably infringe the invoice administration order, but does not necessarily abuse the deduction function to cause VAT losses through fraud. If special invoices are falsely issued without abusing the deduction function to cause VAT losses through fraud, the result is no different from the false issuance of ordinary invoices, and at this time, it does not touch the legal interests protected by the crime of falsely issuing special invoices.

As for the result of underpaid VAT and CIT, it falls within the legal interests protected by the crime of tax evasion and shall be evaluated by the crime of tax evasion. The result of disrupting the invoice administration order falls within the legal interests protected by the crime of falsely issuing invoices and shall be evaluated by this crime. In this regard, Case No. 1679 in the Criminal Trial Reference also supports that the act of falsely issuing special invoices independently constitutes the crime of falsely issuing invoices.

An implicated offense is a crime consolidated for adjudication, and shall be punished in accordance with the more serious offense. When the statutory penalty of the crime of tax evasion is higher than that of the crime of falsely issuing invoices, classifying the act of falsely issuing special invoices into the crime of tax evasion is not because it only constitutes the statutory single crime of tax evasion, but because it constitutes an implicated offense of the crime of falsely issuing invoices and the crime of tax evasion, and is punished in accordance with the more serious one.

Then, when determining the more serious offense for an implicated offense, should the exceptional rule of exemption from criminal liability be taken into account? After the taxpayer fulfills the administrative liabilities and is exempted from criminal liability, is the crime of tax evasion still the more serious one?

If an affirmative conclusion is held, then the act of falsely issuing special invoices can be exempted from criminal liability through the fulfillment of administrative liabilities, and the same treatment shall be applied to the act of falsely issuing ordinary invoices. That is, tax evasion through falsely issuing ordinary invoices constitutes an implicated offense of the crime of falsely issuing invoices and the crime of tax evasion, which shall be handled in accordance with the crime of tax evasion as the more serious offense, and no criminal liability shall be pursued after the fulfillment of administrative liabilities.

If a negative conclusion is held, then even if the perpetrator fulfills the administrative liabilities for the act of falsely issuing special invoices, he shall still be convicted and punished in accordance with the crime of falsely issuing invoices. The act of falsely issuing ordinary invoices can be independently convicted, and the fulfillment of administrative liabilities by the perpetrator does not affect the conviction.

The author holds that the first point of view is reasonable. Fulfillment of administrative liabilities is a post-crime remedial act, not part of the criminal act itself. Under normal circumstances, it is a sentencing circumstance, and constitutes a special cause for penalty preclusion in the crime of tax evasion.

When determining which crime is more serious for an implicated offense, sentencing circumstances and penalty preclusion causes should not be taken into account, only the criminal act itself should be considered. Therefore, the severity can only be determined according to the statutory penalty of the criminal act.

When the statutory penalty for the purpose act of tax evasion is heavier than that of the act of falsely issuing ordinary invoices for falsifying expenditures to evade tax, the offender shall be convicted and punished only for the crime of tax evasion. Meanwhile, if the perpetrator has fulfilled the administrative liabilities, criminal liability shall be exempted.