Editor’s Note: Invoices are important vouchers for enterprise operations, which are directly related to core tax-related matters of enterprises such as VAT input deduction and pre-tax deduction of corporate income tax. On May 15, 2026, the State Taxation Administration explicitly required that local tax authorities shall conduct categorized disposal, and shall not simply adopt a "one-size-fits-all" approach to suspend invoice issuance, restrict invoice issuance or reduce invoice quota for enterprises without actual verification. In practice, regulatory measures taken by tax authorities such as suspending invoice issuance, restricting invoice issuance and reducing the credit line of fully digitalized electronic invoices will exert varying degrees of impact on enterprises’ business operation, tax cost and supply chain cooperation. With the promotion of fully digitalized electronic invoices, invoice management has shifted from the "purchase system" to the "credit system". The dynamic adjustment of credit lines by tax authorities has triggered new legal disputes—whether such adjustment constitutes de facto suspension or restriction of invoice issuance. Based on the current tax laws and regulations, this paper clarifies the statutory conditions for invoice suspension and restriction measures, objectively analyzes the impact of various invoice regulatory measures on upstream and downstream enterprises combined with the new rules of credit line management under the fully digitalized electronic invoice system, and provides professional references for enterprises to prevent and resolve relevant tax risks.

 

I. Legal Definition of Suspending and Restricting Invoice Issuance

Suspending and restricting invoice issuance measures implemented by tax authorities, including confiscating invoices, stopping the sale of invoices, and restricting the invoice issuance quota, are typical administrative measures in the field of tax collection and administration. The core legal basis is Article 72 of the *Tax Collection and Administration Law of the People's Republic of China*: "Where taxpayers engaged in production or business operations or withholding agents have committed tax-related illegal acts specified in this Law and refuse to accept treatment by tax authorities, the tax authorities may confiscate their invoices or stop selling invoices to them."

Accordingly, tax authorities shall meet the following conditions when imposing suspension or restriction of invoice issuance:

First, taxpayers engaged in production or business operations or withholding agents have committed tax-related illegal acts, including various acts such as violating tax declaration, violating invoice management, tax arrears, tax evasion and fraud;

Second, tax authorities have imposed corresponding treatment on taxpayers’ tax-related illegal acts, such as ordering corrections within a time limit and recovering tax payments;

Third, taxpayers or withholding agents refuse to accept treatment by tax authorities, including failing to implement the treatment such as ordering corrections within a time limit and urging tax payment, or obstructing by means of deception, concealment, transfer of property, etc.

When tax authorities impose suspension or restriction of invoice issuance, they shall follow due process, formulate and serve the *Decision on Confiscation and Suspension of Invoice Issuance*, which shall clearly state the illegal facts, legal basis, treatment content and the relief rights lawfully enjoyed by taxpayers in writing. In practice, tax authorities that restrict invoice issuance or reduce invoice quota only through oral notification or back-end system operation without issuing and serving official documents face risks of procedural defects or even procedural illegality. In addition, suspending and restricting invoice issuance are not permanent punitive measures. After taxpayers take the initiative to rectify tax-related issues, accept treatment by tax authorities and eliminate the illegal status, tax authorities shall lawfully restore the invoice collection and issuance rights or original invoice quota of taxpayers.

 

II. Dynamic Adjustment Rules and Legal Nature of Credit Lines for Fully Digitalized Electronic Invoices

In accordance with Article 6 of the *Announcement of the State Taxation Administration on the Promotion and Application of Fully Digitalized Electronic Invoices* (Announcement No. 11 [2024] of the State Taxation Administration), tax authorities grant the total invoice quota through the electronic invoice service platform based on factors such as taxpayers’ tax risk level, tax credit rating and actual business operation, and conduct dynamic adjustment. The total invoice quota refers to the upper limit of the total invoice issuance amount (excluding VAT) of a taxpayer in a natural month. If a taxpayer needs to adjust the total invoice quota due to changes in actual business operation, the adjustment shall be made upon confirmation by the competent tax authority. This means that under the fully digitalized electronic invoice system, whether an enterprise can issue invoices and the amount of invoices it can issue no longer depends on the quantity and format of purchased invoices, but on the credit line granted by the system.

Dynamic adjustment of credit lines mainly includes four methods: monthly initial quota adjustment (automatically adjusted by the system at the beginning of each month), temporary quota adjustment (automatically and temporarily increased by the system when taxpayers with good tax credit reach a certain proportion), regular quota adjustment (automatically adjusted by the system based on recent data and risk status) and manual quota adjustment (adjusted manually upon taxpayer application or ex officio by tax authorities). Among them, the first three types are mainly automatically executed by system algorithms and belong to normalized risk supervision acts; manual quota adjustment is an active administrative act made by tax authorities. When an enterprise triggers tax risk early warning, tax credit fluctuation, abnormal declaration and other circumstances, its credit line may be reduced, and the enterprise can restore the dynamic quota only after resolving the risk issues.

From the perspective of legal nature, dynamic adjustment of credit lines is different from suspension and restriction of invoice issuance. Suspension and restriction of invoice issuance are punitive measures premised on confirmed tax-related illegal acts and refusal to accept treatment, while dynamic adjustment is a preventive management act based on risk assessment. The two are different in legal basis, applicable prerequisites and procedural requirements. Despite the different nature, when the credit line is reduced to zero or close to zero, the enterprise’s invoice issuance capacity is de facto deprived, and such measure is equivalent to suspension or restriction of invoice issuance in substantive effect. Therefore, the tax law evaluation of credit line adjustment shall prioritize the principle of substance over form. If tax authorities significantly reduce or even clear the credit line only based on system risk early warning without conducting on-site verification, verifying specific tax-related illegal facts or giving enterprises the opportunity to defend and rectify, such act is suspected of evading the statutory applicable requirements for suspending and restricting invoice issuance, and shall be deemed an unreasonable and illegal administrative act. In addition, the significant reduction of quota shall also be tested by the principle of proportionality. Imposing measures equivalent to strictly restricting business activities on enterprises with only minor risks or unverified early warnings obviously does not meet the requirements of appropriateness and necessity.

 

III. Impacts of Suspending and Restricting Invoice Issuance on Enterprises

(I) Impacts on Invoice-Issuing Enterprises

At the VAT level, after an enterprise is suspended from issuing invoices, its VAT liability for selling goods or providing services still exists, and it shall declare and pay tax on unbilled income. This means that while bearing the VAT burden, the enterprise cannot provide compliant invoices to the purchaser, which will weaken its market competitiveness. Long-term suspension of invoice issuance will block the sales end of the enterprise, sharply reduce output tax, and make it impossible to digest the excess input tax for a long time, occupying a large amount of funds.

 

At the corporate income tax level, revenue recognition for corporate income tax follows the principle of accrual basis, not premised on invoice issuance. Even if invoices are not issued for completed sales business, revenue shall still be recognized and tax paid. At the same time, business stagnation and revenue decline caused by restricted invoice issuance will affect the sustainable operation capacity of the enterprise to a certain extent. In addition, enterprises subject to invoice regulatory measures are usually included in the tax risk list, facing the possibility of downgrading tax credit ratings, which further affects multiple rights and interests such as invoice credit lines, export tax rebates, enjoyment of tax incentives and bidding operations.

 

(II) Impacts on Downstream Invoice-Receiving Enterprises

At the VAT level, downstream invoice-receiving enterprises cannot obtain legal and valid special VAT invoices, and the corresponding input tax shall not be deducted from the output tax. If the upstream enterprise is identified as having abnormal tax-related status and the suspension and restriction of invoice issuance continue, the invoices already issued by the upstream enterprise may be listed as abnormal VAT deduction vouchers. The undeducted ones shall not be deducted temporarily, and the deducted ones shall be transferred out of input tax.

 

At the corporate income tax level, temporary suspension and restriction of invoice issuance by upstream enterprises will lead to the failure of downstream enterprises to obtain compliant invoices for paid and performed businesses, facing the problem that costs and expenses cannot be normally deducted before tax. According to the *Measures for the Administration of Vouchers for Pre-tax Deduction of Corporate Income Tax* (Announcement No. 28 [2018] of the State Taxation Administration), when upstream enterprises are cancelled, have their business licenses revoked, or are identified as abnormal households, downstream enterprises can complete pre-tax deduction by proving the authenticity of the business with supporting materials such as contracts, payment vouchers and logistics documents. However, if the invoice-issuing enterprise is only temporarily suspended from issuing invoices without meeting the above special circumstances, the invoice-receiving enterprise may not apply this remedial approach and face the risk of corporate income tax adjustment.

 

IV. Compliance Management Recommendations for Tax-related Risks of Enterprise Invoice Suspension and Restriction

(I) Take the Initiative to Eliminate Risks and Restore Invoice Issuance Rights

After receiving a risk early warning or preliminary investigation notice, an enterprise shall immediately conduct internal self-inspection, and sort out the business materials, capital flow and tax declaration records corresponding to tax-related doubts. If the self-inspection finds declaration deviations or non-standard invoice use, the enterprise shall take the initiative to make supplementary declaration and pay back taxes, and restore invoice issuance through compliant rectification. For the case where the credit line of fully digitalized electronic invoices is significantly reduced, the enterprise may submit materials such as business operation description, recent business contracts and capital flow statements to the competent tax authority in accordance with the relevant provisions of Announcement No. 11 [2024] of the State Taxation Administration, apply for manual quota adjustment, and strive to restore a reasonable invoice issuance credit line matching its own business scale.

 

(II) Correct Illegal Invoice Suspension and Restriction through Relief Procedures in Accordance with the Law

Enterprises may review the legality of invoice suspension and restriction from both substantive and procedural dimensions.

At the substantive level, verify whether the enterprise has committed tax-related illegal acts and refused to accept treatment, and whether the tax-related illegal acts identified by tax authorities have been investigated and verified.

At the procedural level, verify whether tax authorities have lawfully formulated and served official documents and protected taxpayers’ right to statement and defense.

If the tax authorities fail to serve documents for the suspension and restriction of invoice issuance, in accordance with Article 63 of the *Interpretation of the Supreme People's Court on the Application of the Administrative Procedure Law of the People's Republic of China* (Fa Shi [2018] No. 1): "Where an administrative organ makes an administrative act without formulating or serving legal documents, if a citizen, legal person or other organization can prove the existence of the administrative act and institutes a lawsuit within the statutory time limit, the people's court shall file a case in accordance with the law." Enterprises may prove the existence of invoice suspension through system records of inability to normally issue invoices and communication materials, and initiate relief procedures in accordance with the law.

In the process of administrative relief, tax authorities shall bear the burden of proof for the legality of specific administrative acts, and enterprises may raise defenses from the perspectives of erroneous fact finding, procedural illegality, violation of the principle of proportionality, etc.