With the reply of the Research Office of the Supreme People's Court and the clarification of the guiding cases, the behavior of dependence and truthful issuance is not recognized as the criminal act of false issuance because it does not cause the loss of tax. However, the practice of "truthful opening" behavior, the caliber is still narrow. In the face of the defendant and his defense put forward belongs to the "truthful opening" claim, the judicial organs is how to identify the actual transaction mode, on what grounds to deny, there is no space for defense, it is worth studying. 

I. the supreme law clear "truthfully open" should not be recognized false opening, but the judicial practice caliber is narrower

(I) Case Introduction: Wood Processing and Sales Sentenced to False Openings

Due to the strict control of VAT invoices, many market players cannot issue invoices on their own in practice; due to the "tax control by invoice" invoicing and payment of taxes are linked, many people have the misconception that "no invoicing can be done without paying taxes"; in addition, the tax authorities will not issue invoices on their behalf. In addition, the complexity of the invoicing procedure by the tax authorities ...... Under the effect of many factors, the sellers of goods and services are unwilling or unable to issue invoices, resulting in the buyers not being able to obtain the VAT invoices to offset the inputs and the tax burden surging, and they can only obtain the invoices from the third party to offset the inputs, which creates an " The buyer can only obtain false invoices from a third party to offset the inputs, forming a triangle relationship of "proxy invoicing". 

Huatax has dealt with similar cases for many times. Recently, Huatax has received a consultation on a case with the characteristics of proxy invoicing, which has already passed the final judgment of the second instance and the judgment result is that it constitutes the crime of falsely issuing VAT invoices.

The basic facts of the case are: the defendant is a timber processing and sales enterprise, whose main business is to purchase timber from all over the country and sell it to downstream furniture factories after rough processing, etc., which is characterized by large flow of water and low profit. The defendant's upstream supply units, individuals, small scale, and can not issue invoices. Therefore, the Defendant contacted through others intermediary, so that dozens of enterprises to issue invoices for its sales of timber.

(II) the defendant, the defense claimed that the "truthful invoicing", but did not get recognized

The evidence in this case is solid, the court also found that the defendant has a real business, but there is no real goods transaction between the defendant and the invoicing party. Therefore, the defendant and the defense claimed that the defendant was "truthfully issuing on behalf of the invoicing party" and submitted the 2018 Supreme People's Court Guiding Case "Zhang Mouqiang's Case of False Issuance of VAT Special Invoice", proposing that the act of issuing on behalf of the invoicing party which does not have tax loss should not be treated as a false invoicing crime. .

The Court of First Instance did not make a clear determination on the act of proxy invoicing; the Court of Second Instance held that buying the goods from the upstream at a price that did not include tax and then deducting the input tax by means of false invoicing would inevitably result in a tax loss. In the end, it did not recognize the claim of opening on behalf of the company.

(III) Supreme Court: the act of proxy opening should be judged whether it meets the subjective and objective elements constituting false opening

In 2015, the Research Office of the Supreme People's Court, in its reply to the "Reply for Opinions on How to Determine the Nature of the Behavior of Implementing Business Activities in the Name of the Company concerned by "Dependent on" the Company and Allowing the Company concerned to Fraudulently Issue VAT Special Invoice for Itself" (Law Research [2015] No. 58), made an explanation of the determination of the three types of proxy invoicing behaviors, namely. Explanations, namely:

1, the behavior of dependency on behalf of the opening is not appropriate to be recognized as false opening.

2, the truthful prescribing is not appropriate to be recognized as false prescribing. In the case of as-referred prescribing, although the actor does not rely on you, he is carrying out activities in the name of another person.The case of Zhang Mouqiang in 2018 belongs to this category.

3, the other act of opening should be based on the elements of the crime of false opening to determine whether it constitutes a crime, constitutes the crime or other crimes. The reply letter cited the case of "Lu Caixing's false invoicing for tax deduction" as an example of tax evasion, and the case of "Quanzhou Songyuan Mianjie Industrial Co. It is clear that in cases of false invoicing, full consideration should be given to whether the perpetrator subjectively has the intention of fraudulently obtaining the deducted tax and whether objectively it causes the loss of national VAT.

In a word, if an act of proxy invoicing meets the requirements of "subjectively not having the intention to cheat tax" and "objectively not having caused the loss of VAT payment", it is not suitable to be punished by false invoicing.

(IV) Narrow caliber of judicial practice

Firstly, as the effectiveness of the reply letter is not high, it cannot be applied as a basis for judicial decision, and whether it constitutes false opening in judicial practice still depends on the specific determination of the court in individual cases.

Secondly, false invoice cases involve multiple entities and different business models, leading to very complex, if the principle of value-added tax is not properly grasped, there may be a misjudgment on whether there is tax loss. For example, there are tax evasion situations in false cases, or there is no exploration of economic essence, which leads to the mistaken identification of tax losses by the invoice amount.

II. Judicial cases in recent years that did not recognize "truthful invoicing" and the reasons thereof

In this paper, in recent years, the case involving "truthful opening" to be a preliminary comb, the defendant (or his defender) of the claim, the court's viewpoint to be summarized, generally the court does not recognize the "truthful opening" of the reasons for three categories:

(1) the existing evidence failed to prove that the relationship between the proxy billing

(2) the court only based on the invoicing, the invoiced parties do not have a real transaction between the goods to determine the false invoicing

(3) although it is issued on behalf of, but there is a loss of state taxes

III. recognized "truthful invoicing" verdict of acquittal of judicial cases and its determination of standards

This paper combed through the current cases of "truthful opening" and found that the number of cases is not large, probably because the current standards for the type of "truthful opening" are too strict and the court is not willing to easily change the verdict of acquittal. Currently, only when a party selling goods/services issues a "second-stream" invoice in the name of another party can it constitute "truthful invoicing".

(I) Supreme People's Court Guiding Case "Zhang Mouqiang's Case of False VAT Invoice".

The basic elements of this case are:

1. The perpetrator, Zhang Mouqiang, belonged to the party who sold the goods, and should have issued the invoices but was unable to do so himself.

2. The perpetrator invoiced externally in the name of a third person. The invoicing party and the real trader are inconsistent.

3, the actor has a real transaction of goods, and the invoiced amount, item, time and business consistent.

The Supreme People's Court held that this situation belongs to the subjective not having the intention of tax fraud, and objectively did not cause the loss of national tax, and it is not appropriate to recognize it as false invoicing. Finally, Zhang Mouqiang was acquitted.

(II) Shandong trucks operating transportation business on behalf of the acquittal case

In 2021, Shandong Higher People's Court ruled that the defendant Wang Moumou was not guilty of the case of "Wang Moumou's criminal re-trial criminal judgment on the crime of falsely issuing VAT invoices, used to fraudulently obtaining export tax refunds and tax deductions invoices" ((2021) LU Penal Re- No. 4). The basic facts of the case were:

1, the defendant Wang Moumou is a party who provides trucks to operate the transportation business and should issue VAT invoices, and his invoicing rate in the tax bureau is 5.8%.

2, the defendant was introduced by others, to lower than the tax rate of the invoicing fee (4.6%) from a transportation company invoicing.

3, Wang Moumou has a real transportation business, the ticket amount, invoicing time is also consistent with the business.

The court held that in this case, Wang Moumou did not have the subjective intent to cheat tax: Wang Moumou has a real business, and the purpose of invoicing is for the settlement of transactions. Objectively, this case did not result in tax loss; Wang provided a real business and the invoiced amount was consistent with the business, and the downstream recipient unit's deduction of the invoice would not result in tax loss.

Similarly, there is (2017) Lu 02 Criminal Re-2 judgment, the case is consistent with the above.

IV. although not recognized as "truthful invoicing", but recognized as the crime of illegal purchase of invoices.

In practice, the court, the procuratorate also has to illegal purchase of invoices for the characterization of the act, due to the illegal purchase of VAT invoices and other crimes than the false opening of the crime is light, for the defendant is justified.

(I) Tianjin recognized illegal purchase decision not to prosecute

According to the Jinwu Prosecution three criminal non-prosecution [2021] No. 11 decision not to prosecute contained in the decision letter, the public security organs to suspected of false opening of VAT invoices transferred to the procuratorial organs for examination and prosecution, the procuratorial organs that:

Zhao Moumou, the non-prosecuted person, was the project manager of Tianjin ** Co. Ltd. and, because some of the construction materials and labor labor costs could not be provided with input tax invoices during the construction of the ** Building, through Gu Moumou, the non-prosecuted person, Gu Moumou, through Li Moumou, the non-prosecuted person, Li Moumou, who purchased VAT invoices from Wang Moumou (a separate case) for Zhao Moumou, and Gu Moumou and Li Moumou, who made a profit from it, purchased VAT invoices in the name of ** Ltd., Tianjin ** Co., Ltd. and Tianjin ** Co., Ltd. to issue special VAT invoices for small-scale taxpayers on behalf of the tax authorities, and committed the acts stipulated in Paragraph 1 of Article 208 of the Criminal Law of the People's Republic of China (i.e., the crime of purchasing VAT invoices). The court decided not to prosecute the perpetrator due to the minor circumstances of the crime and the fact that he had surrendered, pleaded guilty and admitted punishment, and returned the stolen goods.

(II) The court found that having someone write invoices for himself was the crime of illegally purchasing VAT invoices

According to (2018) Lu 0303 Criminal Judgment No. 557, in this case, the two defendants did not dispute the facts of the crime of false invoicing as charged by the public prosecution, and they all made a guilty confession, admitting that "in the absence of a real transaction of goods", the company actually controlled by Cao Moumou was issued VAT invoices by others or intermediated with others. The defendants admitted that they had others issue VAT invoices for the company under Cao's actual control "without real goods transactions", or intermediated in issuing VAT invoices. The Defendant confessed that the main business of the company under his control was coal sales. The company signed a contract of sale and purchase of goods with upstream coal manufacturers, but the upstream coal manufacturers could only issue 70% of the VAT invoices, and the remaining 30% of the invoices could only be settled by themselves. The company's sales behavior with downstream companies was fully compliant. The Defendant could only purchase VAT invoices from a third party in the absence of a real goods transaction in order to offset the input tax. The defendant admitted that he intermediated and introduced other companies to issue 20 VAT invoices, from which he earned the price difference.

The defense pointed out that in the determination of the piece of false invoices for Cao Moumou's own company, the two defendants' characterization of the criminal facts was inaccurate, and it should be the crime of illegally purchasing VAT invoices.

After hearing, the court held that: in this case, although the company controlled by Cao Moumou and the invoicing company did not have any actual purchase and sale business, they just let someone issue invoices on behalf of others, which belonged to violating the state's management system of VAT invoices, purchasing VAT invoices with inaccurate content to make up for the shortfall of input tax, constituting the crime of illegally purchasing VAT invoices;

(III) The procuratorate and the court are of the opinion that it constitutes the crime of illegally purchasing VAT invoices

According to (2020) Lu 0406 Criminal Judgment No. 64, in this case, when the defendant Yingge Food Company purchased raw material peanut rice, due to the fact that farmers and some suppliers of raw material peanut rice could not provide VAT invoices, resulting in the lack of input VAT invoices of raw material peanut rice for Yingge Food Company, Yingge Food Company's purchasing manager and finance manager, Mr. Zhu Xianfeng, after discussing the matter, decided to purchase peanut rice in the After discussion, Zhu Xianfeng, the purchasing manager and financial manager of Yingge Food Company, decided to purchase VAT invoices from a third party's company in the name of purchasing peanut rice and pay the expenses.

The court held that the defendant, as the actual controller of Shandong Yingge Foods Co., Ltd, in order to solve the problem of farmers and some raw material peanut rice suppliers not being able to provide VAT invoices, resulting in the company not being able to pay VAT correctly, and after determining the amount of input tax invoices required according to the production situation of the company, illegally purchased VAT invoices from others in the name of Shandong Yingge Foods Co. Ltd. constituted the crime of illegally purchasing VAT invoices, and the defendant, as the actual controller of the company, also constituted the crime of illegally purchasing VAT invoices. 

V. Prior compliance: to strengthen the construction of the invoicing party and the seller's affiliation, affiliation relationship

To sum up, the behavioral pattern of proxy invoicing can be said to be very high risk of false invoicing. Taxpayers should actively take action to strengthen their own compliance, from the front-end to solve the problem of insufficient invoices; if they are indeed caught in the risk of false invoicing, they should actively seek the advice of professionals to develop a reasonable litigation strategy.

(I) High risk for the buyer/invoice payee to find its own invoicing party

In two cases of "truthful invoicing" non-prosecution case, the perpetrator is the seller. However, in practice, the demand for invoices is mostly for the invoiced party. Purchasers of goods and services because of the inability to obtain input invoices and bear an excessive tax burden, its incentive to find the invoicing party, which leads to the invoicing party and the seller does not have any connection, do not know each other, it is difficult to constitute a form of dependence and truthful invoicing model. In addition, it will lead to

(1) Discrepancies between sales behavior and invoicing behavior. In this case, it is impossible for the invoiced party to purchase the corresponding invoice for each transaction. Therefore, it is not possible to have a one-to-one correspondence in the invoicing amount, but the total invoicing amount can be slightly less than the transaction amount to reduce its own tax burden; in the invoicing time, a large number of invoices may be issued at one time in a short period of time. In the case of (2021) cloud 25 criminal end 694, the court to "the current invoicing amount" is much larger than the current business amount, found that there is a tax loss.

(2) Since the seller does not issue invoices and evades VAT payment, it may sell the goods to the buyer at a price slightly lower than the average market price, resulting in a finding of "low price excluding tax". The court will hold that the VAT credit system requires "payment before credit", and if the invoiced party does not pay tax when purchasing the goods, but offsets the input tax by means of false invoicing, it will inevitably lead to the loss of tax.

(II) Strengthening the construction of affiliation and association between the invoicing party and the selling party

For this reason, if the invoiced party (buyer) is in the middle of the contact, in the signing of the contract of sale and purchase, invoicing the invoicing party and the seller has a dependent relationship, then the risk of false invoicing can be greatly avoided.

(III) retain the evidence of invoicing

If the defendant fails to prove the existence of truthful invoicing, it may not be recognized by the court due to insufficient evidence. Therefore, it is necessary to do a good job of evidence preservation.

VI. After-the-fact remedies: defense strategies for the suspected false opening crime of the substitute opening mode

(I) The act of opening on behalf of the tax loss does not have

This paper argues that the common act of opening on behalf of the tax should not be recognized as having a tax loss. The viewpoints of this paper are briefly summarized as follows:

1, the transaction of goods occurs in the long term, but the invoicing is centralized in a certain period of time, resulting in the current invoicing amount is much larger than the transaction amount. But in the long run, the state tax does not necessarily have a loss, this tax loss measurement should cover a long-term defendant transaction behavior.

2, "tax-free low price" leads to seemingly tax losses, essentially due to the upstream goods, services, tax evasion caused by the seller, not the act of false billing, which should be accurately differentiated between the crime and the crime, can not be grafted on the loss of tax evasion to the crime of false billing. The reasons for this view are:

(1) If there is no agreement between the parties on the so-called "tax-free" low price, then the sales revenue obtained by the upstream shall be presumed to be the total of price and tax in accordance with the trading practice. If the parties have agreed on the so-called "low price excluding tax", due to the violation of the mandatory administrative provisions of the tax law, it is invalid, and the upstream seller cannot be exempted from the obligation to pay VAT.

(2) Uninvoiced price does not exempt the upstream seller from the obligation to pay VAT. Even if the price is not invoiced, the upstream seller shall pay VAT on the "uninvoiced income".

(3) The low price of the upstream transaction will not lead to the loss of the state VAT. VAT is a turnover tax, which is based on the value-added amount of goods. If the purchase price of goods in this segment is too low, but their sales price remains unchanged, resulting in a higher value-added amount, the tax paid will be higher as a result. In addition, the tax authorities themselves may authorize the sales if they are obviously low and there is no justifiable reason for it.

Therefore, the so-called tax loss is essentially the upstream seller's concealment of income due to non-payment of VAT, which constitutes tax evasion (the crime of tax evasion). This loss of tax is not caused by the invoicee having a third party write the invoice for him/her, i.e., it is not caused by false invoicing. There is actually no loss of state tax money caused in the relationship of proxy invoicing.

(II) It should not be recognized as a crime to constitute truthful invoicing, and the sentence should be changed to acquittal.

On the current relevant cases, if you want to find "truthful opening" to seek a judgment of acquittal, the conditions are very strict, basically to comply with the supreme people's court law research [2015] No. 58 letter of reply, the guiding case of all the constituent elements, namely:

1, the perpetrator is preferably a party to the sale of goods or services, i.e., the perpetrator has the obligation to issue invoices, but for objective reasons it can not issue invoices.

2.The actor issues invoices to its downstream in the name of the invoicing company.

3,The actor must provide a real transaction of goods (services), and the invoice issued by the actor in the name of the invoicing company is consistent in time and amount with the transaction it provided.

Under this model, since the perpetrator does not subjectively have the intention to cheat tax and objectively does not cause the loss of national tax, it does not constitute a crime.

However, this situation is too narrow after all. In most cases, the seller of goods or the provider of services cannot issue invoices and does not look for the invoicing agent or affiliation, but the invoiced party looks for the invoicing party itself, which brings extremely high risks for the invoiced party.

(III) Seeking to reclassify the crime of "illegal purchase of VAT invoices".

In practice, since there is no tax loss in the act of proxy invoicing but it violates the invoice management system, some procuratorates and courts have convicted the act of illegal purchase of VAT invoices on the ground that the act violates the state's management system of VAT invoices, and it is a crime of purchasing VAT invoices with inaccurate content to make up for the shortfall of input tax amount. Since the maximum sentence for the crime of illegal purchase of VAT invoices is 5 years of imprisonment, which is much lower than the crime of false invoicing, it is also beneficial to defend the rights and interests of the defendant by turning the defense of innocence into a defense of misdemeanor.