Editor's Note: In the article "Eight Cases Reveal Series of Tax Risks of Tax Evasion, False Opening and Tax Fraud in Agricultural Products Industry", we summarized the types of tax-related cases in the agricultural products industry, and analyzed and revealed the risks of tax evasion, false opening and tax fraud in the agricultural products industry. In this issue, we will analyze in detail the common manifestations of the criminal risk of false opening in agricultural products from the perspective of VAT input credit policy for agricultural products, and put forward the defense strategies to deal with the crime of false opening in conjunction with the tax-related judicial interpretations of the two high courts for readers' reference.

I. Limitations of the VAT input credit policy for agricultural products

Article 25 of the Measures for the Implementation of the Pilot Measures for Changing Business Tax to Value-added Tax stipulates that "the following input taxes are allowed to be deducted from the output taxes ...... (ⅲ) Purchase of agricultural products, in addition to obtaining the special VAT invoice or the special VAT payment certificate for customs imports, calculated in accordance with the purchase price of agricultural products as stated on the purchase invoice or the sales invoice and the 13% deduction rate.Input tax calculated according to the purchase price of the agricultural products stated in the purchase invoice or sales invoice and a deduction rate of 13%. The formula is: input tax = purchase price × deduction rate. Except for the purchase of agricultural products and offsetting of input tax in accordance with the Implementation Measures for Pilot Scheme of Approved Deduction of Input Tax for Value-added Tax on Agricultural Products". Meanwhile, according to the Announcement on Relevant Policies on Deepening VAT Reform (Announcement No. 39 of 2019 by the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs), the deduction rate for agricultural products has now been adjusted to 9% and 10%.

Accordingly, there are three ways of VAT input deduction for agricultural products: firstly, direct deduction with special VAT invoice or special VAT payment letter for customs import; secondly, calculated deduction with agricultural products sales invoice or purchase invoice, accordingly, the agricultural products sales invoice is issued by the agricultural producers, and the agricultural products purchase invoice is filled in by agricultural products purchasing enterprises; and thirdly, authorized deduction. It can be seen that, compared with other products, the VAT input deduction for agricultural products has two more ways of calculating deduction and authorized deduction. The reason is that the tax policy stipulates that the sales of self-produced agricultural products by agricultural producers are exempted from tax, but it also interrupts the chain of VAT deduction, in order to maintain the integrity of the VAT chain and avoid the insufficiency of deduction of agricultural products purchasing enterprises, the state has given agricultural products purchasing enterprises the right to fill in the agricultural products purchasing invoices by themselves. Meanwhile, in order to further strengthen the management of VAT deduction for agricultural products, it is stipulated that the pilot taxpayers can no longer deduct the input VAT amount by virtue of the vouchers for the purchase of agricultural products, but they can deduct the input VAT amount by using a certain input VAT approval method. In addition, in order to curb the problem of false invoicing and false offsetting in practice as much as possible, and to take into account the differences in the agricultural development of each province, the scope of filling out invoices for the purchase of agricultural products and the authorized deduction has been restricted. Specifically:

i.The restrictions on the purchase of agricultural products invoices: First, the object of the restrictions on the purchase of agricultural products must be self-produced agricultural products of agricultural producers; second is the geographical limitations, cross-provincial procurement of agricultural products to fill their own purchase of agricultural products invoices are restricted; third is the amount of the restrictions, some regional tax bureaus provide for the purchase of agricultural products invoices for the implementation of the limited number of times to purchase; fourth is the limitations of the invoice, some regional tax bureaus require that When filling out invoices for the purchase of agricultural products, enterprises purchasing agricultural products should fill in the name, detailed address, identity card number, contact telephone number and bank card number of the agricultural producer, and should not summarize the invoices.

ii.Restrictions on the scope of authorized deductions: regional and industry restrictions. The Ministry of Finance State Administration of Taxation on expanding the scope of approved deduction of input tax on value-added tax for agricultural products in the pilot industry notice (Cai Shui [2013] No. 57) provides that ...... provinces, autonomous regions, municipalities directly under the Central Government, municipalities with separate plans, the tax department can discuss the same level of the finance department,... ...Combining the characteristics of the province (autonomous region, municipality directly under the central government, and municipality separately listed in the plan), select some industries to carry out the pilot work of authorized deduction. In practice, each province has different regulations on the scope of authorized deductions for agricultural products.

II. Specific manifestations of the risk of false starts arising from policy limitations

With the development of the market economy, in the operation of the county procurement of a single, small amount of agricultural products has been unable to meet the needs of agricultural enterprises to expand their business, agricultural enterprises need to purchase a large number of agricultural products from all over the country, a variety of types of agricultural products, and agricultural products purchase invoices to fill out and approved the scope of the deduction of the limitations of the agricultural products enterprises to cause insufficient input tax credit, which triggered the risk of agricultural industry, and the practice of false opening, the main In practice, it is mainly manifested in three forms:

The first is the false filling of invoices for the purchase of agricultural products. Agricultural enterprises directly purchase agricultural products from agricultural producers or agents, etc., and then falsely fill in information about other agricultural producers on their own.

In this form, the tax authorities will often verify the authenticity of the purchased agricultural products with the agricultural producer stated in the invoice, go to the location of the agricultural producer to check whether the agricultural producer has the ability to produce such agricultural products, ask the agricultural producer whether he/she knows the agricultural products enterprise, etc., which will lead to the risk of fraudulent invoicing in the event of discrepancies with the actual situation.

The second is the truthful issuance of special VAT invoices. Agricultural enterprises purchase agricultural products directly from agricultural producers, and then look for a third-party company to issue VAT invoices on behalf of the VAT deduction. As shown in the figure:

In this form, the investigation of agricultural enterprises by tax authorities and public security authorities is triggered by the return of funds between agricultural enterprises and third-party companies, and the investigation of false opening by third-party companies, which in turn triggers the investigation of agricultural enterprises by tax authorities and public security authorities.

Thirdly, a multi-layer trading model for agricultural products. Agricultural enterprises introduce agricultural producers to third-party companies, which purchase agricultural products from agricultural producers, solve the problem of value-added tax (VAT) input deduction for agricultural products on their own, and then sell the agricultural products to agricultural enterprises, forming a business chain of "agricultural producer -third-party company - agricultural enterprise". At the same time, in order to save transportation, storage and labor costs and improve business efficiency, agricultural enterprises often adopt the delivery method of instructions, allowing agricultural producers to deliver agricultural products directly to their designated locations. As shown in the figure:

In this form, because the third-party company in the intermediate link is not involved in the possession of agricultural products, it is often challenged by the tax authorities and public security organs, which believe that the intermediate trading link is only for the purpose of false invoicing, and that the transaction of agricultural products does not have authenticity, and then determine that the agricultural products enterprises are suspected of false invoicing.

Ⅲ. The two high tax-related judicial interpretations, the agricultural industry suspected of false opening defense ideas?

In March last year, the two High Court Judicial Interpretations on Taxation were issued, which made significant changes to the offense of falsely issuing VAT invoices or other invoices used for tax deduction (hereinafter collectively referred to as the "offense of falsely issuing VAT invoices"), and stipulated the exculpatory provisions, which provided opportunities for the defense of the offense of false invoicing, in particular:

i. False filling of invoices for the purchase of agricultural products in the case of genuine procurement of agricultural products is not a criminal act of false invoicing

Paragraph 1 of Article 10 of the Tax-related Judicial Interpretations of the Two High Commissions stipulates that "Anyone with one of the following circumstances shall be deemed to have 'falsely issued VAT special invoices or falsely issued other invoices used for fraudulently obtaining export tax refunds or tax deductions' as stipulated in Paragraph 1 of Article 205 of the Criminal Law.

(i) Without actual business, issuing special VAT invoices, other invoices used to fraudulently obtain export tax refunds and tax credits;

(ii) There is actual business to be offset, but the issuance of special VAT invoices that exceed the tax corresponding to the actual business to be offset, or other invoices used for fraudulently obtaining export tax refunds or offsetting tax;

(iii) Issuing special VAT invoices and other invoices used to fraudulently obtain export tax refunds and tax credits through fictitious transaction subjects for operations that cannot be tax-deductible in accordance with the law;

(ⅳ) Illegally tampering with electronic information related to VAT special invoices or other invoices used for fraudulent export tax refunds or tax credits;

(ⅴ) False opening by other means in violation of the regulations".

Accordingly, the two high tax-related judicial interpretations summarize the type of false opening of VAT special invoices into four categories: first, "false opening without goods", i.e., there is no real business at all, and the VAT tax is deducted through the false opening of VAT special invoices; second, "high opening with goods". That is, although there is real business, the tax amount on the VAT special invoice exceeds the tax amount that can be deducted from the actual business; Third, "fictitious transaction subject type false opening", that is, for the business that cannot deduct VAT input tax according to the law, VAT special invoices are issued to a fictitious third party subject to deduct VAT tax, such as the goods are sold to individuals, and the invoices are issued to the enterprises that buy the invoices, and the invoices are issued to the enterprises that buy the invoices. The fourth is "fictitious opening by tampering with electronic information of invoices", i.e. tampering with electronic information of VAT special invoices to offset VAT.

Agricultural products enterprises really buy agricultural products from agricultural producers and agents of agricultural producers and pay the price to them, which is not false invoicing without goods; the amount of filling out the invoice is exactly the same as the actual amount paid, which does not exceed the corresponding tax amount of the actual business to be deducted, which is not high invoicing with goods; according to the book of Operational Guidelines for Comprehensively Pushing Out the Camp Reform and Increase in the Business Prepared by the State Administration of Taxation, " Farmers produce agricultural products purchased fuel, agricultural machinery and other production materials are paid VAT, the price of agricultural products contains a part of the VAT, that is to say, taxpayers who purchase tax-exempted agricultural products to a certain extent 'burdened' with the VAT. At this time, if taxpayers who purchase tax-exempt agricultural products are not allowed to calculate input tax deduction, it will result in a certain degree of double taxation, and may also lead to agricultural products purchasing units to use this as a means to depress the price of agricultural products, thus reducing the income of farmers and jeopardizing the interests of farmers". In other words, the agricultural products produced by agricultural producers are naturally "taxable goods", and agricultural enterprises purchasing agricultural products from agricultural producers are naturally burdened with VAT, which is a business that can be deducted according to the law, and does not belong to the type of false invoicing by fictitious transaction subjects; agricultural enterprises have not tampered with the invoices' electronic information either.

In summary, we hold that falsely filling out an invoice for the purchase of agricultural products is not a criminal act of false invoicing in the case of a real purchase of agricultural products by an agricultural business, and that the agricultural business may be fined for the administrative offense of false invoicing.

ii.Truthful issuance without the purpose of fraudulently offsetting taxes or causing tax losses does not constitute the crime of false issuance.

Since the agricultural products enterprises cannot obtain sufficient amount and quantity of agricultural products purchase invoices, they have no choice but to look for a third party company to issue VAT invoices on their behalf in order to realize the deduction of VAT input tax. In this case, assuming that the agricultural products enterprise is not restricted by the issuance of agricultural products purchase invoices, it can calculate the VAT deduction based on the agricultural products purchase invoices at a tax rate of 9% or 10% . Now, since it is not possible to obtain the purchase invoice for agricultural products, the agricultural products enterprise pays a handling fee to purchase a special VAT invoice from a third-party company, and deducts VAT on the basis of the special VAT invoice according to the amount of tax recorded in the invoice as well. If the amount of the agricultural products purchase invoice is 100 yuan, the tax amount of 9 yuan can be deducted, and the total amount of the VAT special invoice price and tax is 100 yuan, the tax amount of 8.25 yuan (100/1.09*0.09) can be deducted. It can be seen that, in both cases, the agricultural enterprise obtains the VAT special invoice from the third party company to offset the VAT input tax instead of leading to less VAT deduction, and there is no fraudulent loss of VAT tax due to obtaining the VAT special invoice from the third party company. The purpose of doing so is that the legal right of VAT deduction can be realized. According to the second paragraph of Article 10 of the Tax-related Judicial Interpretations of the Two High Commissions, if the purpose is not to fraudulently offset the VAT for the purpose of falsely increasing the performance, financing, loan, etc., and no fraudulent loss of VAT is caused by the offsetting, it shall not be punished by this crime, and the agricultural products enterprise does not constitute the crime of fraudulently issuing VAT special invoices.

We believe that if the judicial authorities insist on determining that criminal liability should be pursued as long as the VAT invoices have been issued fraudulently and have reached the filing standard, the agricultural enterprises can adopt the defense strategy of changing the crime. According to the second paragraph of Article 10 of the Tax-related Judicial Interpretation of the Two High Commissions, "if the purpose is not to fraudulently offset the tax, and no fraudulent loss of tax is caused by offsetting, ...... if it constitutes other crimes, criminal responsibility shall be pursued in accordance with the law for other crimes", and Article 208 of the Criminal Law, "Illegal Purchase of VAT Invoice". "Illegal purchase of VAT invoices ...... shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention, and a fine of not less than 20,000 yuan and not more than 200,000 yuan shall be imposed concurrently or singly". As long as there is an act of purchasing invoices, the crime can be incriminated without considering the subjective purpose and loss of tax, therefore, in this case, the agricultural enterprise can claim that it constitutes the crime of illegally purchasing VAT invoices.

ⅲ.The business chain "agricultural producer - third party company - agribusiness", which does not result in a loss of value added tax (VAT).

As mentioned earlier, due to the many restrictions on the issuance of purchase invoices for agricultural products, agricultural enterprises have resolved the problem of not being able to issue purchase invoices for agricultural products by structuring the trade chain at the front-end of the transaction. We believe that structuring the trade chain for agricultural products is reasonable and authentic and will not result in a loss of VAT. Specifically:

In terms of reasonableness, the agricultural enterprise purchases large quantities and varieties of agricultural products, and the province in which it is located cannot meet its business needs, so it needs to purchase agricultural products from all over the country, but due to the restriction on issuing invoices for the purchase of agricultural products, it is unable to obtain purchase invoices for agricultural products in full amount. In order to ensure the compliance of the invoices, the agricultural enterprise grafts a third-party company from the front-end, which is responsible for the purchase of agricultural products from all over the country and then sells them to it. In order to ensure compliance with the invoice, the agricultural enterprise engages a third-party company at the front end, which is responsible for purchasing agricultural products from all over the country and then selling them to the third-party company.

In terms of authenticity, in terms of business flow, the third-party company establishes a purchase and sale relationship with the agricultural producer by signing a written purchase and sale contract or forming a verbal contract, and the agricultural enterprise establishes a purchase and sale relationship with the third-party company by signing a purchase and sale contract; in terms of financial flow, the transfer of funds is made by the agricultural enterprise to the third-party company, and the third-party company transfers money to the agricultural producer; in terms of invoice flow, the third-party company purchases the agricultural produce from the agricultural producer agricultural products and issues its own invoice for the purchase of agricultural products, and issues a special VAT invoice for the sale of agricultural products to the agricultural products enterprise; in terms of the flow of goods, it adopts the method of instructed delivery under the Civil Code, whereby the agricultural products are transported by the agricultural producer directly to the agricultural products enterprise. The business flow, financial flow, invoice flow and cargo flow are completely consistent, which can prove the authenticity of the agricultural products procurement business.

From the viewpoint of the principle of VAT calculation, as long as each transaction subject in the chain issues invoices according to the amount of actual sales of agricultural products, confirms the output tax amount according to the tax amount recorded in the actual invoices issued, obtains invoices according to the amount of actual purchases of agricultural products or fills out invoices of agricultural products acquisition, confirms the input tax amount according to the tax amount recorded in the invoices or calculates the offsetting input tax amount according to the invoices of agricultural products acquisition, and declares and pays the VAT truthfully, no matter how long the chain is, it will not result in fraudulent loss of VAT. No matter how long the chain is, it will not result in fraudulent loss of VAT.

ⅳ.Some agricultural enterprises are eligible for VAT exemption on sales of agricultural products, and obtaining special VAT invoices will not result in VAT losses at all.

In practice, there is a situation where an agricultural enterprise, which is itself an agricultural producer, enjoys VAT exemption on the sale of its own agricultural products. For example, chicken and poultry farming enterprises do not have to pay VAT on the sale of chicken and other agricultural products. At the same time, such agricultural enterprises also have the need to purchase other kinds of agricultural products, for example, agricultural chicken and poultry farming enterprises need to use corn and other grains as raw materials to raise chickens and poultry. For them, the sales end does not need to pay VAT, and there is no need to deduct VAT on the front end. However, due to the requirements of the enterprise financial system norms, they must use VAT special invoices as compliant vouchers for financial processing, prompting them to have to obtain VAT special invoices from a third-party company as a matter of fact or by way of structuring the business model. In this case, the acquisition of VAT invoices by the agricultural products tax-exempt enterprises will not cause VAT tax loss at all, and belongs to the crime of object incapable of committing the crime, and the subjective purpose of acquiring the invoices is to achieve financial compliance, which does not constitute the crime of falsely issuing VAT invoices. Such enterprises may submit to the judicial authorities materials on the enjoyment of the tax exemption policy and VAT declaration forms to prove that there is no demand for VAT deduction and that they have not committed the act of VAT deduction.