Editor's Note: A Non-Vessel Operating Common Carrier (NVOCC) is a carrier that, without owning its own transport vessels, accepts cargo from shippers, signs contracts of carriage with shipping companies in its own name, and then issues bills of lading or other transport documents to the shippers. NVOCCs originated in international shipping and later expanded to domestic water transport. After February 27, 2019, the administrative approval for NVOCC business was replaced with a filing system, further enhancing market competitiveness. However, compared to the development of digital freight platforms, NVOCC progress has been relatively slow, with an incomplete regulatory system. Particularly, the lack of clear guidance at the tax level has led to questions about some NVOCC practices and repeated involvement in risks related to falsely issued invoices. This article provides a brief analysis.

I. Overview of the NVOCC Business Model
In the typical NVOCC platform model, the platform acts as a carrier between the shipper and the actual carrier, undertaking responsibilities including capacity matching, contract signing, freight settlement, and invoice issuance. The NVOCC model initially emerged from international shipping and has gradually extended to the domestic water transport sector in recent years. The difference between an NVOCC and a freight forwarder lies in the fact that the NVOCC assumes full responsibility for the cargo throughout the journey. This specifically covers cargo handover, in-transit monitoring, and delivery to the consignee at the destination port (or place). In contrast, a freight forwarder acts on behalf of the principal, with a passive role: it does not physically control the goods nor actively assume cargo management responsibility, but rather arranges transportation-related matters as an agent.

However, due to the generally low willingness of individual vessel owners to issue invoices, NVOCC platforms face the practical challenge of high tax costs. To alleviate tax burdens, platforms often resort to methods such as obtaining fuel invoices or seeking local fiscal subsidies/rebates, but these operations often carry inherent tax risks.

II. Compliance Dilemmas and Tax Risks of Domestic NVOCC Models

(A) Doubts about Model Rationality Leading to Risks of False Issuance
According to the definition of "non-vessel carriage business" in Cai Shui [2016] No. 36, this business requires contracting in the capacity of a carrier and assuming carrier liability. In some disputed cases, tax authorities have opined that the essence of the involved NVOCC enterprise's business was closer to intermediary services facilitating transactions rather than genuine non-vessel carriage. Consequently, the shipper should obtain transportation service invoices issued (or re-issued) by the actual carrier (vessel owner). If the platform directly issues such invoices, it might be deemed an inappropriate issuer, thus triggering risks of false issuance. Furthermore, in practice, the shipper could be the actual cargo owner or a transport company. If a transport company acts as the shipper and the platform issues a transport invoice to it, this might lead tax authorities to question the business rationale, again raising the risk of false issuance allegations.

(B) Phasing Out of Non-Compliant Fiscal Subsidies: Business Models Relying on Policy Dividends Becoming Unsustainable
In recent years, to better support the development of a unified national market, policy measures have been implemented. The State Council issued the "Fair Competition Review Regulations," explicitly prohibiting improper tax incentives and fiscal subsidies. Market regulatory authorities formulated and released the "Measures for the Implementation of the Fair Competition Review Regulations," providing more detailed provisions on specific scenarios of improper tax incentives and subsidies. At the beginning of this year, the National Development and Reform Commission issued the "Guidance for Building a Unified National Market (Trial)," again emphasizing that regions must not implement preferential policies for investment attraction involving taxes and fees in violation of regulations. At the implementation level, multiple provinces and cities have held tax work conferences, explicitly stating the continued deepening of governance regarding tax-related issues in improper investment attraction through 2025. One province has mandated a comprehensive review of all existing policies related to fiscal rebates and subsidies for investment attraction implemented directly by local governments or through government-funded entities and institutions. Non-compliant fiscal awards and subsidies must be cleaned up and abolished by the end of August 2025.

Similar to some digital freight platforms, some NVOCC platforms also rely on fiscal subsidies to address tax cost issues. However, in the context of building a unified national market, some fiscal subsidies are being suspended or eliminated for violating the Fair Competition Review Regulations. Platforms relying on these subsidies for survival will face a crisis. Some platforms attempt to pass on operating costs by increasing fee rates, but this is not a sustainable long-term solution. Simultaneously, the traditional path for shipper enterprises to obtain input invoices from such platforms may no longer be viable. In this new context, how to restructure business models and find a balance between compliance and sustainable development has become a shared challenge for both platforms and shipper enterprises.

(C) The Model of Using Fuel Invoices for Input Tax Deduction Also Faces Tax Risks
Article 2 of the "State Administration of Taxation Announcement on VAT Issues Such as Tax Exemption Filing for Cross-Border Services" (SAT Announcement [2017] No. 30, hereinafter "Announcement 30") stipulates:

When a taxpayer, acting in the capacity of a carrier, signs a transport service contract with a shipper, collects freight, and assumes carrier liability, and then commissions an actual carrier to complete all or part of the transport service, if the taxpayer self-procures and provides finished oil products and road, bridge, and toll gate fees for use by the actual carrier, the input VAT thereon is allowed to be deducted from the output VAT, provided the following conditions are simultaneously met: (1) The finished oil products and road, bridge, and toll gate fees are used for the transport service performed by the actual carrier commissioned by the taxpayer; (2) The obtained VAT deduction certificates comply with current regulations.

Based on this, some platforms deduct input tax by obtaining fuel invoices. Announcement 30 requires that the precondition for deducting finished oil product invoices is that the products are used for the transport business. If the platform's technology cannot guarantee the consistency between the "actual carrier - vessel - fuel," the platform becomes vulnerable to questions about the authenticity of the business, consequently facing risks of back taxes, late payment penalties, or even being accused of false issuance or tax evasion. In practice, tax authorities already use methods like calculating the proportion of fuel invoice deductions to identify potential false issuance by platforms.

III. Transmission Mechanism of Tax Risks: Analysis of Risks for Invoice Recipients Regarding False Issuance and Tax Evasion
In tax disputes arising from the NVOCC model, risks exist not only for the invoice issuer but also transmit down the transaction chain to the invoice recipient, exposing them to potential administrative or even criminal liability.

(A) Administrative Liability
In practice, situations where the invoice issuer absconds, becomes untraceable, is classified as an abnormal taxpayer, or is found to have issued false invoices occur frequently. Invoices obtained by recipients are often classified as Abnormal VAT Deduction Vouchers, leading to risks of input tax reversal and back payment of taxes. If the recipient enterprise is found not to have had a real transaction with the issuer, or knowingly obtained falsely issued invoices, the tax authorities can handle it as "false invoicing" according to Article 22 of the "Invoice Management Measures." If the subjective intent is to avoid or reduce tax payment, it may be characterized as tax evasion, facing consequences including back taxes, late payment penalties, and fines. In some cases, tax authorities apply both characterizations ("false invoicing" and "tax evasion") to the same violation and impose penalties based on the principle of "applying the heavier punishment" per Article 29 of the "Administrative Penalty Law," following the stipulation with the higher fine.

(B) Criminal Liability
Regarding criminal liability, if the recipient is deemed to have "obtained [the invoice] in good faith" and promptly pays the owed taxes, criminal liability for crimes related to false invoicing can usually be avoided. Conversely, if the recipient is found to have participated in the false issuance and cannot prove the absence of an intent to fraudulently obtain tax deductions or that no national tax loss occurred, it may constitute the crime of falsely issuing VAT special invoices according to interpretations such as Article 10 of the "Supreme People's Court and Supreme People's Procuratorate Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases Harming Tax Collection and Management." Even if the act of accepting falsely issued invoices is characterized as tax evasion by the tax authorities, the recipient can avoid criminal liability for the crime of tax evasion pursuant to Article 201, Paragraph 4 of the "Criminal Law" if it pays the back taxes, late payment penalties, and fines in a timely manner. However, it is crucial to be aware that in practice, cases have been transferred by tax authorities to judicial organs for the crime of falsely issuing VAT special invoices, or judicial organs have initiated separate criminal investigations after administrative handling. In such scenarios, the recipient faces more severe criminal risks.

IV. Defense Points and Paths for Involved Invoice Recipients

(A) Applying for Verification of Abnormal Vouchers
If the recipient disagrees with the tax authority's classification of a voucher as abnormal, it should, within 20 working days from receiving the "Notice of Tax Matter," apply to the competent tax authority for verification, attaching relevant materials such as business contracts and bank transfer records. The tax authority should complete the verification within 90 days of receiving the application. If no issues are found and the voucher complies with VAT input deduction rules, a notice will be issued allowing the taxpayer to continue the deduction. Notably, taxpayers with a tax credit rating of 'A' can apply for verification within 10 days of receiving the abnormal voucher notice and are temporarily exempt from reversing the input tax. This mechanism is a key channel for enterprises to recover losses; it is essential to adhere to time limits and submit materials promptly to avoid losing recourse opportunities.

(B) Striving for Withdrawal of the "Confirmed False Issuance Notice"
In cross-regional investigation cases, the "Confirmed False Issuance Notice" issued by an upstream tax authority often triggers investigations for downstream recipients. Although some enterprises attempt to challenge such notices through administrative litigation, their justiciability is highly disputed. These documents are essentially internal clues for inter-authority cooperation and do not directly establish taxpayer rights or obligations; hence, courts typically do not accept such lawsuits. A more feasible approach is for the enterprise to make representations and defenses to its competent tax authority, providing evidence demonstrating genuine transactions and consistency between invoice details and reality, striving to persuade the upstream tax authority to withdraw the notice. For example, if Tax Bureau A for Company A issues a "Confirmed False Issuance Notice" to the competent tax bureau of Company B, and Company A has absconded, leaving Company B unable to verify the situation, Company B can raise an objection with its competent tax bureau, arguing that the VAT special invoices received from Company A were not falsely issued. After investigation, Company B's tax bureau might send a "Reply Letter on Assistance in Tax Violation Case" and an "Assistance Report on Tax Audit Case" to Company A's tax bureau, confirming the genuine transaction between the companies, leading Company A's tax bureau to withdraw the notice.

(C) Striving for Characterization as 'Good Faith Acquisition' of Falsely Issued Invoices
Beyond actively seeking a determination that the obtained invoices are not false, an enterprise can strive for characterization as having obtained the invoices in good faith if it meets the following criteria: (1) A real transaction exists between the buyer (recipient) and the seller (issuer); (2) The seller used special invoices from its own province; (3) All details on the special invoice (seller's name, seal, quantity of goods, amount, tax) match the actual transaction; (4) There is no evidence indicating the buyer knew the seller obtained the invoices illegally. Simultaneously, the enterprise should submit explanations regarding the inability to obtain replacement or corrected invoices, striving to avoid the adverse consequence of having its corporate income tax increased due to disallowed deductions.

(D) "Neither Good Faith Nor Malicious" Characterization: Paying Back VAT and Late Payment Penalties
If an enterprise has difficulty fully proving business authenticity, but the tax authority also cannot establish subjective malice, the case might fall into an intermediate "neither good nor malicious" state. According to the "SAT Announcement on Issues Concerning the Levy and Recovery of Tax for Taxpayers Falsely Issuing VAT Special Invoices" (SAT Announcement [2012] No. 33), even if a real transaction existed between the recipient and the issuer, if the invoice itself is deemed false, the enterprise must still bear the legal consequences of reversing input VAT and paying late payment penalties. However, corporate income tax costs can still be deducted before tax based on proof of genuine expenditure.

(E) Timely Intervention at the Administrative Stage to Prevent Escalation to Criminal Risk
If the recipient is characterized as being involved in false issuance, focus should shift to avoiding escalation from administrative to criminal risk. We argue that the legal liability of the issuer and recipient should be determined independently based on their respective transaction substance. There is no necessary connection between whether one constitutes a criminal offense or administrative violation; the recipient's subjective intent to defraud for tax deduction and whether objective tax loss occurred should be considered. Through multi-faceted representations, efforts should be made to avoid transfer of the case to public security authorities for criminal investigation, preventing risk escalation.

V. Summary and Recommendations
The NVOCC model in the domestic water transport sector faces a fundamental compliance dilemma of "lacking legal basis." This ambiguity in legal status directly leads to it being easily characterized as false issuance in tax practice, triggering administrative and even criminal risks. Crucially, these risks are not confined to the invoicing but transmit down the transaction chain, placing even bona fide recipients under multiple pressures including input tax reversal, cost adjustment, and administrative penalties.

For cargo owner enterprises, in the current regulatory environment, "pre-risk control" is far more important than "post-hoc defense." When selecting NVOCC platform services, enterprises must exercise prudent review, focusing on the platform's qualifications, the compliance of its business model, and the rationality of its invoice flow. It is recommended that enterprises integrate tax compliance requirements into their contract review and supplier management processes, clearly define rights and obligations, and properly retain evidence of genuine transactions (contracts, payment proofs, transport tracking, etc.) to maintain initiative in potential disputes.

In the long term, a fundamental solution requires the introduction of clear national regulations providing a definite legal identity and tax treatment guidance for domestic NVOCC businesses. This would standardize market order while allowing the model to truly fulfill its positive role in consolidating capacity and improving efficiency.