Recently, the Criminal Investigation Brigade of Naiman Banner Public Security Bureau of Tongliao City, Inner Mongolia, successfully cracked a large-scale case of false VAT invoicing supervised by the Ministry of Public Security, in which the enterprise involved in the case, through fictitious transactions, changed the name of the raw material oil, crude white oil, and other chemical raw material input tickets into transportation tickets and then falsely invoiced them outward, with a total amount of 113 million yuan (prior to the introduction of Circular No. 11 in 2023) involved in the case. This article intends to analyze the tax risks of each transaction subject in different purchase and sale modes by combining the different modes of oil invoices renamed as transportation invoices, and put forward the defense and compliance points of enterprises according to the focus of the investigation and handling of the case.

I. Diesel oil tickets change the name of transportation tickets, different modes trigger tax-related risks

(I) Mode 1: Diesel oil ticket changed its name to transportation ticket, compliant deduction

The logistics and transportation industry is characterized by low profitability, unstable source and scale of transportation services. With high market dependence, even large transportation enterprises with strong strength are unwilling to operate and manage huge fleets. For a long time, the actual carriers in the logistics and transportation industry are often large-scale individual drivers and other subjects. Due to their low tax compliance, they may not know and are unwilling to declare and pay individual income tax and value-added tax to the tax authorities in respect of the transportation business they carry out and they are unable to issue VAT invoices on behalf of others, which makes the transportation enterprises entrusted with the actual transportation lack of input tickets and cost tickets.

After the issuance of the Announcement on VAT Issues such as Tax-Exempt Filing of Cross-Border Taxable Acts (Announcement No. 30 of 2017 of the State Administration of Taxation, hereinafter referred to as the "Announcement No. 30"), taxpayers, in the capacity of carriers, enter into a transportation service contract with shippers, collect the freight charges and bear the responsibility of the carriers, and entrust the actual carriers to complete the transportation services, in whole or in part. When a taxpayer, as a carrier, enters into a transportation service contract with a shipper, collects freight and assumes the responsibility of the carrier, and entrusts the actual carrier to complete all or part of the transportation service, the refined oil products purchased by the taxpayer can be deducted from the input tax according to the current regulations if the following conditions are satisfied

1. The refined oil is actually used for the transportation services entrusted by the transportation enterprise to the actual carrier;

2. The VAT deduction vouchers obtained are in accordance with the current regulations.

Accordingly, the transportation enterprise will be obtained in accordance with the law, can be used to complete the transportation services of diesel oil and other refined oil invoices "renamed" as freight invoices have the legitimacy, can be used for input credit and pre-tax deduction in accordance with the law.

(II) Mode 2: Gasoline and diesel oil surplus invoices are renamed as transportation invoices, which triggers the risk of false opening.

In March 2018, after the refined oil invoice module went online, the traditional variable ticket mode was unsustainable, but the demand of refining and chemical enterprises to cut costs still existed, and a series of new variable ticket modes appeared instead. Taking refined oil retailing as an example, the sales terminals faced by gas stations are mainly individual drivers and other oil-buying subjects who don't want tickets, which enables them to accumulate a large number of surplus input invoices through off-the-books operation and not declaring the payment of uninvoiced income. In order to digest these surplus invoices and avoid tax audits triggered by "input but no sales", gas stations issue these diesel invoices to transportation enterprises by charging an invoicing fee, and the transportation enterprises then change the name of the invoice for refined oil products into a transportation invoice and issue it to the downstream actual carriers.

(III) Mode 3: Other oil invoices changed their names to transportation invoices, implicating the risk of tax evasion

For refining and chemical enterprises, the essence of a series of invoice-changing transactions is to cover up the purchase and sale of crude oil, chemical raw materials, etc. and the production and sale of refined oil products. Among them, when the refining enterprise has been through the off-the-books operation will produce the refined oil circulation to the actual purchase of oil main body, the same need for its procurement of non-products of oil invoices to find a reasonable destination. At this point, a new type of variable ticket model emerges.

In this model, refining and chemical enterprises flow "non-product oil invoices" into the logistics and transportation field through overbilling companies, and then the transportation enterprises change their names to transportation invoices, and then falsely open them to the outside world for profit.

Starting from July 2021, transportation enterprises purchasing non-product oil and obtaining non-product oil invoices have become a key aspect of tax supervision. The reason is that non-processed oil cannot be directly used for transportation services without processing or commissioned processing, and the deduction of non-processed oil inputs by transportation enterprises lacks rationality. Transportation enterprises themselves do not have the qualification and capacity of production, processing and storage of refined oil products, and generally do not have the conditions to use such oil products, but they do not sell the purchased oil products directly, nor commissioned the processing of the relevant oil products, and the sales invoices are all transportation invoices, which is very easy to trigger tax warnings due to the invoice anomaly. At the same time, the refining enterprise, as the beginning of the transaction chain, is also very easy to be implicated in the audit storm, and its production of refined oil and off-book sales of refined oil tax evasion risk will be triggered.

It is important to note that after the introduction of the Announcement of the Ministry of Finance and the State Administration of Taxation on the Implementation Caliber of the Consumption Tax Policy for Certain Refined Products (Announcement of the Ministry of Finance and the State Administration of Taxation No. 11 of 2023), alkylated oils, part of the industrial white oils, blended carbon octane, mixed aromatics, and other products are subject to consumption tax on the basis of finished products, and it would be difficult for refineries to issue invoices of these products in the future to achieve the purpose of evading the consumption tax.

II. Tax-Related Risks of Each Transaction Subject from the Viewpoint of Purchase and Sales Chain

(I) Tax-related risks of refining enterprises

In Mode 3, the refining enterprise is the main body that purchases non-product oil and produces and sells product oil, with heavy VAT and consumption tax obligations.

On the one hand, in the actual sale of refined oil products by the refining enterprise, as the terminal individual drivers, etc. do not require invoicing, they often neither issue invoices nor declare and pay VAT on the uninvoiced revenues, and conceal the revenues through off-the-books operations, and do not or underpay the VAT. On the other hand, in the external invoicing segment of the refining and chemical enterprise structuring transactions, it purchases and obtains invoices for non-finished oil products and issues invoices for non-finished oil products externally, so that the formal purchase and sale of non-finished oil products conceal the substantive production of finished oil products, thus evading the consumption tax payment obligation.

According to Article 63 of the Tax Collection and Administration Law, the above behavior of the refining enterprise constitutes tax evasion, which not only requires the payment of back taxes and late fees, but also requires a fine of not less than 50% and not more than five times of the unpaid or underpaid taxes. If the taxpayer fails to pay the said amount on time, or has been criminally penalized for tax evasion within five years, and has been given more than two administrative penalties by the tax authorities, the taxpayer also faces the conversion of administrative penalties to criminal liability for tax evasion.

In addition, refineries issuing invoices for non-product oil to downstream transportation enterprises through over-invoicing enterprises subjectively have the intention of letting over-invoicing enterprises have false credits. If the over-invoicing enterprises actually do not have any purchasing behaviors, objectively there is also the risk of causing loss of national tax, and the refineries may be held criminally liable for the crime of fraudulent issuance of special VAT invoices.

(II) Tax Risks of Trading Enterprises

In the above transaction mode, the main body of the circulation link mainly consists of two categories, one is the gas station engaged in retailing of refined oil products, and the other is the ordinary invoicing enterprise which joins the purchase and sale chain for the purpose of making illegal profits or being deceived.

1. Tax-related risks of gas stations

In Mode 2, the gas station sells the goods to the terminal consumers by way of "separation of invoices and goods", and issues the diesel invoices to the transportation enterprises with which it does not have a real transaction relationship, which not only evades VAT through off-the-books operation, but also evades VAT according to the "On the Application of the Law of the Standing Committee of the National People's Congress on Interpretation of Several Issues on the Decision on the Application of the Decision of the Standing Committee of the National People's Congress on Punishing the Crimes of Falsely Issuing, Counterfeiting and Illegally Selling VAT Special Purpose Invoices" issued by the Supreme People's Court (Fa Fa [1996] No. 30), the gas station is also prone to be recognized as a fraudulent issuer of VAT Special Purpose Invoices when it issues VAT Special Purpose Invoices to other people without any real purchase or sale of goods. Especially in the case where the generation and use of its overvouchers are closely linked, once the use of the overvouchers is recognized as false invoicing, it is directly exposed to the criminal risk and loses the cushion of the administrative pre-procedure.

2. Other Overbilling Enterprises

In Mode 3, trading enterprises play the role of "bridging" between refineries and transportation enterprises, and by accepting tickets, issuing tickets and providing accounts to be used for book-keeping, the trading enterprises are able to earn the difference between purchase and sale prices. However, due to the lack of real transaction basis between upstream refineries and trading enterprises, the invoices issued by refineries can be easily characterized as false invoicing, and the competent tax authorities of upstream enterprises will issue "Letters of Concurrence" and "Notification of Confirmed False Invoicing" to the competent tax authorities of downstream trading enterprises, thus triggering tax audits of the trading enterprises. In addition, it provides accounts with the upstream and downstream enterprises with the operation of payment, after deducting the invoicing fees need to return the rest of the funds to the source of the main body of the trade enterprises and upstream refineries, trading enterprises and downstream transportation enterprises, respectively, the formation of two groups of funds back, it is more likely to be involved in the risk of fraudulent invoicing.

(III) Tax-related risks of transportation enterprises

In the above model, the transportation enterprise obtains invoices for refined oil or non-finished oil in order to solve the tax burden pain point of insufficient inputs and costs, but after obtaining the invoices from the refinery, it does not actually pick up the goods or deliver them to the actual carrier for use, which belongs to letting others falsely issue VAT invoices for themselves, and the criminal risk is extremely high. Even if the transportation enterprise does have a real transaction basis for purchasing refined oil products from a third party, although its behavior of obtaining invoices from the refinery may constitute truthful invoicing, the transportation enterprise may also be held criminally liable for the crime of unlawfully purchasing VAT invoices due to the fact that the behavior does violate the order of VAT invoices management.

(IV) Tax-related risks of consignment enterprises

In the above model, the consignment enterprise is in the last link of the invoicing chain, and the tax-related risk of the consignment enterprise mainly comes from the risk conduction of the upstream invoice issue. This is because, as VAT invoices are ring-fenced, the risk of false invoicing will be transmitted downstream along with the chain of deduction. According to Article 2 of the Announcement on the Management of Abnormal VAT Deduction Vouchers and Other Related Matters (State Administration of Taxation Announcement No. 38 of 2019), if the accumulated input tax amount of a taxpayer's abnormal vouchers for the current period accounts for 70% or more of the total input tax amount of all VAT special invoices for the same period or the accumulated input tax amount of the abnormal vouchers exceeds RMB 50,000 yuan, the corresponding invoices issued by the taxpayer are included in the scope of the abnormal vouchers. Once the upstream invoicing party has problems with input items, the downstream invoiced party will not be spared. If it is found that the transportation enterprise also has the problem of false invoicing, the invoice obtained by the consignment enterprise is not only not deductible, but may even be involved in the administrative and criminal risks of false invoicing.

III. Defense and Compliance Points of the Enterprises Involved in the Case from the "Four Streams

In the case of false invoicing handled by Naiman Banner Public Security Bureau, the determination of the criminal facts by the case officers is based on the evidence related to the business flow, information flow and capital flow stripped from the massive information. In fact, whether the flow of goods, funds, invoices and contracts is consistent is an important basis for judging the authenticity of the transaction, so the "four streams of consistency" is also the key to get rid of the enterprises involved in the case of false opening, tax fraud suspected of the choke point.

(I) Goods: "name" and "reality" match

Enterprises should focus on their own purchasing and selling links, through the provision of bills of lading, instructions for the delivery of goods, settlement statements and other transfer of goods transfer vouchers, supporting the existence of real goods in the transaction chain, and clear specific sources of purchased goods, as well as sales of goods and the destination and use of the goods, the type of goods, the nature of the number of invoices with the same matters, in order to prove that their own link does not exist in the absence of false invoicing of the situation.

(II) Funds: reliable source, destination compliance

For the transaction link there is a return of funds, first of all, it should be clear that the return is not necessarily a false opening, is not necessarily a false opening of the return, the return is only a clue or characteristic of false opening. Enterprises should be combined with the real situation of the business, the source of funds and other aspects of the phenomenon of reflux reasonableness. For example, whether there is the payment of payment for invoicing and payment to the public lead to reflux and other objective circumstances.

(III) Invoice: Consistency between invoice and goods

On the one hand, the enterprise should emphasize the tax authorities, judicial organs and other facts of the case, the burden of proof, claiming that it should be ascertained by the whole transaction chain whether there is sales without invoicing, or the purchase of goods and the purchase of invoices contained in the name of the inconsistent situation. On the other hand, the enterprise should take into account the characteristics of the industry and put forward a defense. For example, "instructions to deliver" is easy to cause the surface of the "separation of goods", but in bulk trade, the transfer of the right of goods in the form of universality and reasonableness, the characterization of the substance of the business is still to the contract, transport documents, transfer of the right of goods and other documents shall prevail.

(IV) contract: proper retention, risk prevention

In practice, the seller, the invoicing party and the payee is the same subject, the buyer, the invoiced party and the payer is the same subject, that is, "three streams of the same". On this basis, the contract signed by the purchaser and seller also matches the actual business, amount and invoice, which can achieve the "four streams of consistency", which can further strengthen the authenticity of the business. Therefore, enterprises should pay great attention to the retention and storage of original documents such as contract information when conducting business, so as to be able to respond to tax risks and provide a reliable basis for the restoration of the transaction chain.

In addition, enterprises can also submit relevant tax returns and tax completion certificates to show that they have fulfilled their VAT and enterprise income tax obligations in accordance with the law, and claim that the loss of national tax caused by the transaction chain has nothing to do with the transaction links involved. It is also possible to combine the attribution of illegal benefits to emphasize the small role played by the enterprise in the transaction chain and the low subjective malignancy, so as to prevent the further expansion of the risk of false opening and tax evasion. In particular, in criminal cases, enterprises should combine the above four streams of circumstances to actively assert that they do not subjectively have the intent to cheat the state tax and objectively have not caused the loss of state tax, so as to isolate the risk of false opening as much as possible.