This year, there has been a resurgence in foreign trade, but at the same time, a large number of enterprises have been included in the major tax violation and dishonesty list for fraudulent export tax rebates. They not only face the recovery of taxes and administrative penalties but also risk being referred to judicial authorities. In a certain region, the tax authorities have issued a notice requiring foreign trade enterprises to conduct self-inspections and self-rectification. Otherwise, discovered tax evasion clues will be referred to judicial authorities, causing anxiety among local foreign trade enterprises. In light of this, this article will analyze the causes of the risk of fraudulent export tax rebates from both internal and external perspectives. It will also provide suggestions for foreign trade enterprises to self-inspect and self-correct, aiming to mitigate administrative and criminal risks associated with fraudulent export tax rebates and support the long-term development of foreign trade enterprises.

I. Data Observation: Large Numbers of Foreign Trade Enterprises Listed in Major Tax Violation and Dishonesty Records

(I) Xiamen Tax Bureau Investigated 18 Tax Fraud Cases in the Third Quarter

In the third quarter of 2023, the Xiamen Tax Bureau announced information on 18 major tax violation and dishonesty cases involving fraudulent export tax rebates. Most companies faced tax recovery and fines from the tax authorities, some had their export tax rebate rights suspended, and a few were referred to judicial authorities.

(II) Guangdong Tax Bureau Investigated 33 Tax Fraud Cases This Year

This year, the Guangdong Tax Bureau revealed information on 33 major tax violation and dishonesty cases related to fraudulent export tax rebates. Some companies primarily engaged in false reporting of exports or deceptive practices to fraudulently obtain national export tax rebates. A minority of companies also provided false filing documents and obtained fake invoices. The tax authorities imposed fines and initiated tax recovery, while some companies were legally referred to judicial authorities.

(III) Shenzhen Tax Bureau Investigated 94 Tax Fraud Cases This Year

Looking at the information on major tax violation and dishonesty cases published by the Shenzhen Tax Bureau, a total of 94 companies have been listed as major violators for fraudulent export tax rebates since the beginning of the year. This is nearly three times the number reported by the Guangdong Tax Bureau. Among them, 93 companies faced tax recovery, fines, and suspension of export tax rebate rights, and some were legally referred to judicial authorities. It is evident that the Shenzhen Tax Bureau has a relatively strict enforcement approach.

(IV) Extremely High Tax Evasion Risk; Foreign Trade Enterprises Should Conduct Timely Self-Inspection and Self-Correction

Observing the data on major tax violation and dishonesty cases in Xiamen, Shenzhen, and Guangdong Province, it is evident that the risk of fraudulent export tax rebates is extremely high. Companies may face tax recovery, administrative penalties, and, in severe cases, legal referral leading to harsh criminal sanctions.

Therefore, foreign trade enterprises should enhance their awareness of tax compliance and promptly conduct self-inspection and self-correction regarding their tax-related issues. In the following sections, I will conduct a detailed analysis of the risk factors associated with foreign trade enterprises suspected of fraudulent export tax rebates to provide insights for self-inspection and self-correction.

II. Causes of Risk: Internal and External Factors Leading to Alleged Fraudulent Export Tax Rebates by Foreign Trade Enterprises

(I) External Factors: Risk Transmission from Suppliers, Foreign Partners, and Transporters

1. Invoices Issued by Upstream Suppliers Deemed Fake or Suspected of "Separation of Invoice and Goods"

In mid-June of this year, the Fujian Tax Bureau delivered a "Tax Processing Decision" through public announcement. The document stated that, due to the upstream tax authorities determining "separation of invoice and goods" by the supplier, the Fujian Tax Bureau concluded that the implicated foreign trade enterprise fabricated export transactions to fraudulently obtain export tax rebates, resulting in the recovery of 1.5 million yuan in rebates.

It can be observed that once upstream companies are suspected of "separation of invoice and goods," foreign trade enterprises are easily deemed to be involved in tax evasion. In practice, when the invoices of upstream companies are deemed fake, cases involving downstream enterprises are not uncommon. Generally, after the invoices of upstream suppliers are deemed fake, the competent tax authority of foreign trade enterprises may receive notices such as "Confirmed Falsification Notification" and "Tax-related Violation Case Inquiry Letter," exposing them to legal risks such as the recovery of export tax rebates, administrative penalties, or even criminal liability.

2. Collusion between Foreign Partners and Suppliers, Exploiting Foreign Trade Enterprises for "Fake Self-Employment, Real Agency" Activities

The practice of "fake self-employment, real agency" originated from the concept of "four self and three not visible," aiming to prevent illegal individuals from exploiting the export tax rebate system for speculative activities. In practice, foreign trade enterprises are manipulated as tools by unscrupulous entities. Foreign partners collude with suppliers, utilizing the export tax rebate qualifications of foreign trade enterprises to engage in activities such as footing bills and ticket matching, ultimately defrauding the national tax rebate. However, in this process, some foreign trade enterprises may unknowingly face criminal risks related to fraudulent export tax rebates due to a lack of experience in export business practices.

3. Provision of False Transport Documents by Transporters

Transport documents, including bills of lading, airway bills, and railway bills, are essential for the handover of goods and settlement of payments between buyer and seller. According to my knowledge, to avoid the risks associated with sea transportation, some foreign partners require the appointment of customs brokers, freight forwarders, and shipping companies. Foreign trade enterprises are not authorized to obtain bills of lading before taking delivery. After the completion of transactions, foreign partners transmit documents such as bills of lading to foreign trade companies via email. Therefore, it is challenging for foreign trade enterprises to verify the authenticity of transport documents.

In tax audits, discrepancies between the transport documents filed by foreign trade enterprises and the shipping company's basic documents, such as the consignor and the quantity of goods, may lead to allegations of providing false filing documents. This puts foreign trade enterprises at risk of deferred processing of export tax rebates, recovery of tax rebates, treatment as domestic sales, administrative fines, etc. If it is confirmed that tax evasion has occurred, they may face criminal sanctions.

(II) Internal Factors: Lack of Tax Compliance Awareness in Foreign Trade Enterprises Leading to Allegations of Tax Evasion

1. Purchase of Goods Without Invoices, Allowing Others to Falsify Invoices

According to the "Announcement of the State Administration of Taxation on Issues Concerning the Use of VAT Special Invoices by Foreign Trade Enterprises for Export Tax Refund" (Announcement No. 22 of 2012 of the State Administration of Taxation), foreign trade enterprises applying for export tax refunds as general taxpayers must provide VAT special invoices permitted by the tax authorities for deduction of input VAT. ... Foreign trade enterprises can declare export tax refunds based on VAT special invoices. It is evident that foreign trade enterprises, as general taxpayers, need to provide VAT special invoices for export tax refunds. Without obtaining VAT special invoices, although they are not subject to the same taxation as domestic sales and enjoy export tax-free policies, they cannot apply for tax refunds. For foreign trade enterprises, this constitutes a significant loss.

Therefore, when foreign trade enterprises cannot obtain invoices for purchased goods, to meet the requirements of the tax refund policy, they may allow others to forge VAT special invoices for them to apply for tax refunds. Even though the export of goods is genuine, this action may still be considered tax evasion.

2. Collaboration with Suppliers Bringing Foreign Customers, Engaging in "Fake Self-Employment, Real Agency," and Sharing Tax Refunds

In the "fake self-employment, real agency" business, where suppliers bring foreign customers, foreign trade enterprises lack information on foreign customers, goods, manufacturers, forex sources, and forex settlement information. Consequently, foreign trade enterprises lack commercial legitimacy in export business. If foreign trade enterprises agree to share tax refunds with suppliers, they may be deemed to have subjective intent to defraud export tax refunds, constituting the crime of fraudulent export tax rebates.

3. Insufficient Scrutiny of Tax Refund Filing Documents, Non-compliance, or Falsification

According to the "Notice on Further Facilitating the Processing of Export Tax Refunds to Promote the Steady Development of Foreign Trade" (Announcement No. 9 of 2022 of the State Administration of Taxation), taxpayers must, within 15 days after declaring export tax refunds, compile a catalog of documents, including sales contracts, transport documents, etc., and specify the location where the documents are stored for inspection by the competent tax authority.

Exported goods for which enterprises have not filed documents as required are not eligible for tax refund application and should apply the tax-free policy. If already declared, negative reporting should be used to offset the original declaration. In addition, enterprises may face administrative fines of up to 10,000 yuan and adverse effects such as a downgrade in the category of export enterprise management. If enterprises provide false filing documents, they are easily considered to have committed tax evasion. Therefore, enterprises should pay attention to the management of filing documents to prevent tax evasion risks arising from improper document management.

III. Resolving the Issue: Foreign Trade Enterprises Urgently Need Self-Examination and Self-Correction to Establish a Tax Refund Compliance Mechanism

(I) Emphasis on the Self-Examination Period: Tax Authorities Have the Right to Indefinitely Recover

According to the provisions of the "Tax Collection and Administration Law" and its implementation rules, if foreign trade enterprises engage in tax evasion, resistance to tax payment, or fraudulent tax activities, the tax authorities have the right to indefinitely recover the unpaid or underpaid taxes, overdue fines, or the deceived taxes.

If a company has miscalculations or errors resulting in unpaid or underpaid taxes, the tax authorities can recover taxes and overdue fines within three years. If the accumulated amount of unpaid or underpaid taxes is over 100,000 yuan, the recovery period can be extended to five years.

Therefore, tax authorities have the right to investigate enterprises for tax evasion indefinitely. Foreign trade enterprises should pay close attention to this and, at key points in the following business processes, conduct self-examination and self-correction to establish a standardized and compliant tax refund mechanism in the export tax refund process.

(II) Investigation into the Production Process: Verification of Supplier Production Capacity and Compliance

In general goods trade exports, self-declared export tax refund by foreign trade enterprises accounts for a higher proportion than exports by manufacturing enterprises, entrusted agency exports, and comprehensive foreign trade service agency tax refunds. The business model involves purchasing from enterprises or trading companies with production capabilities. Therefore, the choice of suppliers is crucial.

Firstly, use enterprise information disclosure platforms, credit checks, and other means to collect basic information about suppliers, including but not limited to the establishment time, capital situation, whether the legal person and actual controller are consistent, and other relevant information about the strength of the enterprise. Secondly, conduct on-site visits to verify the supplier's production capacity, paying attention to the equipment and tools used to produce and sell self-produced goods to ensure that they have the ability to produce export goods and match actual production capacity. Thirdly, key financial and tax indicators of suppliers are also important. As seen from the above external risks, once upstream suppliers have tax issues, the risk will be transmitted to foreign trade enterprises. Therefore, it is necessary to focus on whether suppliers are suspected of evading taxes or issuing false invoices and whether they are included in the list of major tax-related violations and dishonesty. Finally, establish customer files based on cooperation conditions, continuously track and conduct long-term risk assessments to form a supplier whitelist for long-term cooperation.

(III) Control of the Procurement Process: Ensure Consistency of Invoices in the "Four Flows and One Consistency"

The "Four Flows and One Consistency" refers to the consistency of the flow of goods, funds, invoices, contracts, and consistency. If the four flows are not consistent, it may be deemed by the tax authorities that there is no real business transaction, and there is suspicion of issuing false invoices and tax evasion. Therefore, after selecting a supplier, pay increased attention to the contract, payment of funds, flow of goods, and issuance of invoices in the procurement process.

Firstly, when signing a contract, clearly define the rights and obligations of both parties, including goods prices, delivery periods, logistics transportation, invoicing, and dispute resolution methods, to isolate the risk of tax evasion. Secondly, choose a dedicated person to control logistics, record supplier shipments, container loading, and seal information and provide real-time tracking reports. Establish a standardized system for checking and loading inspections if necessary. Thirdly, avoid signs of fund flow backflow, make public-to-public payments according to the contract, and eliminate payments to private accounts. Finally, pay attention to the factors such as the quantity, amount, and tax rate of goods on invoices issued by suppliers, whether the invoice is printed clearly, and whether there is any proxy issuance.

(IV) Management of the Export Customs Declaration Process: Strengthen Control of Foreign Customers and Forex Risks

One of the necessary conditions for the export tax refund of exported goods is customs declaration for export and receipt of foreign exchange. Therefore, enhancing risk control in the export process is an important measure to prevent illegal elements from using the "fake self-employment, real agency" scheme.

Firstly, verify the authenticity of foreign customers to prevent collusion between suppliers and foreign customers. Secondly, pay attention to the receipt of foreign exchange for customs declaration and export of goods, prohibit under-collection and non-collection, and be vigilant against inconsistencies in forex payments. Finally, throughout the entire process of customs declaration and export of goods, comprehensively review whether the goods' codes are accurately classified to prevent tax evasion risks.

(V) Management and Risk Control of Filing Documents: Comprehensive Preservation of Filing Documents and Self-Examination

Observing the data on major tax-related violations and dishonesty, false filing of filing documents is one of the explicitly listed illegal behaviors, and the management of filing documents is also an important aspect of tax inspections. Therefore, in addition to making a directory of documents according to the prescribed time, specifying the storage.

V. Conclusion: Self-Examination and Self-Correction to Guard Against Risks

The multitude and rapid updates of export tax refund policies, coupled with various non-standard export tax refund practices within foreign trade enterprises and external risk transmission factors, have led some enterprises not only unable to accurately apply export tax refund policies but also facing administrative penalties. This has resulted in economic losses, damaged reputations, and even allegations of criminal activities, with individuals involved facing legal consequences. Therefore, foreign trade enterprises urgently need to implement a series of self-examination and self-correction measures, establish a compliant tax refund system, and thereby prevent administrative and criminal risks associated with tax evasion.