Recently, the Research Society of Finance and Taxation Law of China Law Society, the Law School of Capital University of Economics and Business, the Research Center of Finance and Taxation Law of Capital University of Economics and Business, and Deheng Law Firm identified ten 2022 Influential Taxation Judicial Trial Cases in respect of tax-related judicial cases made public by courts of all levels during the period of November 1, 2021, to December 10, 2022, and identified ten 2022 Influential Taxation Judicial Trial Cases. Among them, a case in which an introducer was convicted and sentenced for the crime of illegally purchasing VAT invoices, knowing that there was no real business transaction to introduce false invoicing, deserves attention.

I. Convicted for Illegal Purchase of VAT Special Invoice by Introducing False Invoicing with Knowledge of No Genuine Business Transactions

(I) Basic facts of the case

Zhang Mou has registered and established hundreds of shell enterprises in Anhui, Jiangxi and other places, and from 2017 to 2019, Luo Mou and others introduced inter-operators such as a Wuhu science and technology company to issue VAT invoices for offsetting from companies controlled by Zhang Mou in the absence of real business dealings, from which they earned benefit fees. Taxes have been paid by Zhang Mou, the local government, according to the agreement with Zhang Mou company, will have paid taxes on the local retention of 95% of the portion of the funds returned in the form of enterprise support funds.

The public security authorities believe that: Luo Mou and others, knowing that there is no real transaction between the company controlled by Zhang Mou and the recipient unit, introduced others to the company controlled by Zhang Mou to falsely issue VAT special invoices for offsetting, from which they earned benefit fees, resulting in the loss of national tax, the amount is particularly huge, suspected of the crime of falsely issuing VAT special invoices.

The Public Prosecution held that Luo and others were suspected of the crime of illegally purchasing VAT invoices.

The court held that: Luo Mou violated the invoice management system, knew that there was no real business transaction between the downstream invoiced enterprise and the shell company controlled by Zhang Mou, and in order to enable the downstream invoiced enterprise to make smooth settlement, make cost entry and deduct tax, illegally purchased VAT invoices for the downstream invoiced enterprise from the enterprise controlled by Zhang Mou by paying invoicing fees, and his behavior constituted the crime of illegally purchasing VAT invoices.

(II) Question raised: Where is the line between this crime and the other crime when it is known that there is no real business transaction to introduce false invoicing?

According to Article 1 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Decision of the Standing Committee of the National People's Congress on Punishing the Crimes of False Opening, Counterfeiting and Illegal Selling of VAT Special Purpose Invoices (Fafa [1996] No. 30), the behavioral modes of the false opening of VAT Special Purpose Invoices are specifically expressed as:

(1) Issuing VAT invoices for others, for oneself, or letting others issue VAT invoices for oneself or introduce others without the purchase or sale of goods or without providing or accepting taxable labor services;

(2) Issuing VAT invoices for others, or for oneself, or letting others issue VAT invoices for oneself, or introducing others, with unrealistic quantity or amount, without purchasing or selling goods, or providing or accepting taxable labor services;

(3) Conducted actual business activities but let others issue VAT invoices for themselves.

The crime of illegally purchasing VAT invoices refers to the act of obtaining VAT invoices provided by others by paying a certain price in violation of the state tax collection and management regulations and the invoice management system.

In this case, the court decision did not find that Luo had the subjective intention of cheating against VAT, nor did it find that he had caused the damaging consequences of the loss of state tax, so where is the line between this crime and the other when Luo introduced others to issue special VAT invoices by paying invoicing fees in the absence of a real transaction?

II. Connection and Boundary between the Offense of False VAT Invoice and the Offense of Illegal Purchase of VAT Invoice

(I) The two offenses constitute competing legal provisions

In the case where there is a genuine transaction, the seller shall provide the buyer with the relevant documents and information in accordance with the agreement or transaction custom. According to Article 19 of the Measures for the Administration of Invoices, as the "payee" of the sale of goods, provision of services and other business activities, the invoice should also be issued to the payer. Therefore, the issuance of invoices is not only a private law obligation, but also a public law obligation. In judicial practice, the false invoicing of VAT often involves the illegal sale and purchase of VAT invoices, i.e., the party who obtains the invoice pays the invoicing fee to the party who issues the invoice, and obtains the false invoice. At this time, the two sides essentially formed a false invoice for the purchase and sale of "goods", "invoicing fee" "benefit fee" for the consideration of the sale relationship. Since there is no real business, the invoicing party lacks a reasonable basis for charging the fee. If the perpetrator, for the purpose of tax deduction, pays the fee to the invoicing party to obtain the false invoices for deduction and causes tax loss when he or she carries out the act of letting others falsely issue VAT invoices for himself or herself or introducing others to falsely issue VAT invoices, the perpetrator complies with the constitutive elements of the crime of falsely issuing VAT invoices and unlawfully purchasing VAT invoices at the same time.

In addition, when the two crimes are related and it is impossible to prove that the false invoicing behavior has the danger of infringing the state tax or the subjective purpose of cheating the state tax, in the process of false invoicing of VAT special invoices, regardless of the name of the invoiced party and the introducer to make the invoicing party obtain the benefit based on the invoices, the nature of the crime can be dealt with as the crime of illegally purchasing VAT special invoices. The crime of purchasing VAT invoices can be punished for its essence.

(II) Boundary between the two crimes

How to distinguish between the crime of false invoicing of VAT and the crime of illegal purchase of VAT special invoices relates to the application of law for different crimes.

On the one hand, from the point of view of the legal interests protected by the crime, maintaining the management order of invoices is a function common to the regulation of the two crimes, which requires the market entities to carry out economic activities, abide by the Law on Administration of Tax Collection, Measures for the Administration of Invoices, and other laws, regulations, and administrative rules, and to print, collect, purchase, issue, obtain, keep and sell invoices in accordance with the law in order to exert their functions of financial supervision, safeguarding national tax revenue and maintaining economic order. Illegal purchase of VAT invoices infringes upon China's strict system of collation and purchase of VAT invoices, and the subjective aspect of the crime only requires the perpetrator to have a clear cognition of the illegal sale and purchase behavior. However, in addition to this, another legal interest protected by the crime of false VAT invoices is the security of national tax money. Although the crime is not explicitly defined, the general view of the criminal law academic circles is that the crime is a non-statutory purpose crime, and its composition requires the perpetrator to have the purpose of fraudulently obtaining national tax money.

On the other hand, from the unity of criminal law interpretation, the crime of illegally purchasing VAT invoices is a behavioral crime, and its composition objectively only requires that the act of illegally purchasing and selling be carried out and reach a certain quantity, and it does not matter whether or not it has caused certain harmful consequences. According to the relevant state regulations, the purchase of VAT invoices should strictly follow the order of invoice procurement, and the general VAT taxpayers should go to the designated tax authorities with the corresponding certificates to take the same way to replace the new ones with new ones, and any other units and individuals who purchase them privately will be regarded as "illegal purchase". As to the purpose of the perpetrator to buy, whether to cause the loss of national tax, can be considered as a sentencing circumstances. If there are other specific purposes, it may also constitute other crimes.

To sum up, the boundary between the crime of false invoicing of VAT special invoices and the crime of illegal purchase of VAT special invoices lies in whether the perpetrator subjectively has the purpose of cheating the state tax and objectively causes the loss of the state tax.

III. Criminal Defense Strategies for the Crime of False Opening

In practice, China's tax collection and management has been practicing the basic principle of "controlling taxes with votes", focusing on the management of VAT invoices. With the "Opinions of the Supreme People's Procuratorate on Giving Full Play to Procuratorial Functions to Serve and Guarantee the Six Stabilizations and Six Guarantees" (hereinafter referred to as the "Opinions"), it was clearly pointed out in July 2020 that "for enterprises with actual production and operation activities, it is necessary for the government to take measures to ensure that they are able to fulfill their obligations. (hereinafter referred to as "Opinions") clearly states that "for enterprises with actual production and operation activities to falsely issue VAT invoices for the purpose of non-tax fraud such as false increase in performance, financing, loan and other non-tax fraudulent purposes without causing tax loss, the crime of falsely issuing VAT invoices will not be characterized and dealt with", and that the grasp of the crime of false invoicing in the judicial practice focuses on the subjective intent of the perpetrator and the consideration of objective consequences. Therefore, taxpayers should adopt reasonable defense strategies to safeguard their legitimate rights and interests.

(I) The behavior violates the invoice management system and may not cause the loss of national tax.

The act of false invoicing has the dual nature of violating the management system of VAT special invoices and jeopardizing the national tax security. The issuance of VAT special invoices shall be based on the actual occurrence of commodity flow or taxable labor service, detached from the real transaction, and the false issuance of VAT special invoices will cause damage to the normal invoice management order. In terms of tax law, if the content recorded in the VAT invoice does not match with the real transaction, it belongs to false invoicing in violation of tax law and constitutes an administrative offense. However, at the level of criminal offense, as a traditional "result crime", the crime of false VAT invoicing should have the damage consequence of causing loss of national tax money.

For one thing, the conviction and sentence for the crime of false VAT invoices should reach a certain amount and circumstances. According to Article 56 of the Provisions of the Supreme People's Procuratorate and the Ministry of Public Security on the Criteria for Filing Criminal Cases under the Jurisdiction of the Public Security Organs (II), the criterion for filing a case for prosecution for the crime of falsely issuing VAT special invoices is that the amount of falsely issued tax is more than one hundred thousand yuan or the amount of loss is more than fifty thousand yuan or the amount of loss of state tax is more than fifty thousand yuan. or "causing a loss of more than 50,000 yuan of national tax". In judicial practice, the "amount of false tax" as an important sentencing criteria.

Secondly, the act of false invoicing itself will not cause the loss of national tax, but only when the false VAT invoices are used to offset the input VAT amount, will it cause the loss of national tax. This is because the false invoicing itself means that there is no real transaction, and without real transaction, the invoicing party is not liable for VAT according to the law, and no matter whether it pays the tax or not, it will not cause the loss of state tax. However, the invoiced party does not carry out real transactions, i.e., there is no legal right of offset, and if the invoiced party offsets its legal tax obligation, the offsetting behavior will lead to the loss of state tax. If the offeree of the false VAT invoice does not actually offset the tax, or in a complete false invoicing chain, the offeree ultimately obtains ordinary VAT invoices that do not have the function of offsetting, then it is not appropriate to determine that it has caused the loss of state tax. For example, in the case of Hehui Weiye, the complete chain of false invoicing was as follows: TIANZHENG BORANG/ENBAIZE - HEHUI WEIYE - CHINA CHENGTONG - SHANDONG BRANCH, of which TIANZHENG BORANG/ENBAIZE issued false VAT invoices to  The court held that there was no real transaction between Hehui Weiye and China Chengtong and no VAT obligation, and its non-payment of VAT would not result in loss of state tax. Now that it obtained input invoices from TIANZHENG BORANG/ENBAIZE, it could not be considered that there was a tax loss as the input tax was used to offset the output tax arising from the false invoicing. In the case, the court did not reason on the tax loss arising from China Chengtong's acceptance of false invoicing and offsetting of tax, but in view of the whole case, China Chengtong obtained the invoice falsely issued by Hohui Weiye, which was also used to offset the output tax arising from false invoicing from its Shandong branch, and there was no loss of tax; whereas the one obtained by the Shandong branch was an ordinary value-added tax invoice, which did not have the function of offsetting. Therefore, the enterprise in the whole case did not offset the legal VAT obligation it should have borne due to the false invoicing behavior, and there was no VAT loss in the whole case.

Thirdly, although there is no factual basis for the payment of VAT, the invoicing party has already paid the tax, and the invoiced party has a real procurement business, it is not appropriate to consider that there is a tax loss. This situation, i.e. truthful invoicing, can be categorized into different situations such as dependent invoicing and invoicing in the name of another person's business. For the buyer, it has real procurement and obtained the right of deduction, but the seller did not issue invoices in accordance with the law, resulting in its inability to deduct, the root cause of the tax loss in this link is the seller did not declare VAT in accordance with the law, that is, due to the implementation of tax evasion behavior caused by tax loss, while the tax loss caused by the seller in the economy passed on to the buyer. For the invoicing party, it has no real sales and is not liable for VAT, but by issuing invoices to the buyer/invoicee and paying the tax, it fulfills the tax obligation on behalf of the seller, and at the same time, the buyer/invoicee realizes the right of deduction according to the law, which makes the whole chain of tax deduction return to the formal way. The invoicing party in such cases usually reduces the cost of invoicing through other means, for example, in this case, the invoicing party enjoys the support policy, the local government in the form of enterprise support funds to Zhang Mou tax rebate, but this rebate is a government subsidy for the purpose of attracting investment and assisting enterprises in production. Tax collection and tax refund are based on different legal relationships, can not be recognized that the financial return constitutes "tax loss". And the basis of such cases still lies in the actual seller does not invoice, do not pay taxes, should be held responsible for tax evasion sales.

(II) Behavior does not have the subjective purpose of cheating the state taxes

In addition to the objective aspect of constituting the crime of false VAT invoicing, the perpetrator should also have the subjective purpose of cheating national VAT tax in addition to the implementation of false invoicing in the absence of real transactions. In other words, to determine whether an act constitutes the crime of false issuance of VAT invoices, it is necessary to examine whether there exists the act of false issuance which violates the order of invoice management, and it is more important to pay more attention to why it is false issuance, and determine whether the act of false issuance really touches the legal interests protected by the crime. Although Article 205 of the Criminal Law does not specify that the perpetrator must have the subjective purpose of "defrauding the state of taxes", the subjective purpose is embedded in the description of the crime, i.e., the purpose of issuing other invoices is to fraudulently obtain export tax refunds or tax credits. For different forms of crimes with the same penalties that are listed side by side in the same article, they can be different in the objective behavioral methods and objects, but should be consistent in the subjective and subjective aspects, therefore, the fraudulent issuance of VAT invoices should also have the purpose of fraudulently obtaining the national tax. For taxpayers who carry out folio or ring-fencing of VAT invoices for the purpose of increasing performance, demonstrating strength, financing, loan and other non-fraudulent national tax purposes, but pay tax according to the law, or falsely increase the items but do not use them for offsetting, they should not be punished for the crime of falsely issuing VAT invoices.

As the Opinions strengthen the importance of subjective aspect of false invoicing, if the perpetrator only commits the act of false invoicing, but not for the purpose of obtaining tax fraudulently and without causing the loss of national tax, it does not belong to the scope of evaluation of Article 205 of the Criminal Law, which is also in line with the principles of "arresting fewer people", "prosecuting with caution", "prosecuting with caution", "prosecuting with caution", "prosecuting with caution", "prosecuting with caution" and "prosecuting with caution". This is also in line with the criminal justice policy of "fewer arrests", "more prudent prosecution" and "more prudent detention". In the judicial practice, more and more judicial organs also recognize the view that it can not be treated as a crime if it does not have the purpose of tax fraud and does not cause loss of tax, for example, the Shandong Higher People's Court made (2021) Lu criminal again No. 4 criminal judgment, which clearly pointed out that: the defendant did not have the criminal intent of fraudulently deducting the tax on the subjective side, and objectively neither used for his own deduction of the tax, nor allowed others to use it to illegally deduct the national tax, and did not cause the national tax to be deducted. The defendant subjectively did not have the criminal intention of fraudulently deducting taxes, and objectively neither used it to deduct taxes himself, nor allowed others to illegally deduct taxes in this way.

IV ensure compliance and strengthen tax-related risk response

For enterprises and their de facto controllers, the response to the risk of fraudulent invoicing mainly consists of two aspects, namely, prevention and defense.

From the perspective of prevention, enterprises should operate legally, standardize management, strengthen the understanding and application of tax-related regulations by financial and business personnel, and establish internal control management and supervision mechanisms from within the enterprise, which is conducive to enhancing its tax compliance. Externally, in the transaction process, enterprises should carefully select upstream suppliers, and judge whether their production and operation and tax credit status are normal in terms of their business scope, qualifications, production capacity, scale of operation, tax payment and social security payment, etc., and ensure that the whole process from signing contracts, payment of purchase price to transportation of goods and warehousing of goods can be supported by transaction documents and complete formalities.

From the perspective of defense, the enterprise should strengthen the communication with the tax authorities, actively and fully exercise the right of statement and defense, and provide sufficient defense opinions in terms of whether there is a real transaction, whether there is the purpose of cheating national tax, whether it causes the loss of national tax, whether there is an administrative violation or a false invoicing crime, whether there is a crime or a crime, and whether there is a crime or a crime, etc., so as to avoid the enterprise from being pursued for the crime of falsely issuing VAT invoice and being subjected to heavy burden. The enterprise was subjected to a heavy burden.