In March 2024, the Judicial Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate Concerning Criminal Cases Involving Tax-Related Crimes introduced major revisions to the statutory constitutive elements of the crime of defrauding export tax rebates. It consolidated the two categories of false export declarations and other tax fraud conduct into a single enumerated provision, while deleting the wording “for the purpose of fabricating facts of taxable goods being exported” under the clause governing false export declaration tactics. Compared with the previous provisions, this revision has led some case-handling authorities to instinctively presume that any deceptive tactic listed in the dual-high judicial interpretation automatically constitutes the crime of defrauding export tax rebates, sharply elevating criminal risks related to export tax rebate fraud.

According to incomplete statistics, 13 publicly reported cases involving export tax rebate fraud emerged in the first half of 2026 alone, among which six involved low-value goods declared at inflated prices. These cases feature enormous sums involved and severe criminal liabilities. With regard to such cases, the author holds that conduct of declaring low-value goods at inflated prices does not invariably amount to the crime of defrauding export tax rebates. This article briefly analyzes three typical cases of inflated-value declarations for low-value exports, summarizes the common characteristics of such cases, and interprets inflated-value declaration conduct from the fundamental mechanism of export tax rebates for readers’ reference.

I. Case Overview: Surge in Cases of Low-Value Goods Declared at Inflated Prices in 2026

(I) Case 1: Inflating Shiitake Mushroom Prices to Defraud Export Tax Rebates

According to information disclosed by Guizhou Provincial Tax Service on February 27, 2026, Huidafeng Company operated by Xu resorted to declaring low-value goods at inflated prices to fraudulently obtain export tax rebates totaling RMB 54.6509 million. The principal offender Xu was sentenced to fixed-term imprisonment of 13 years and confiscation of all personal property for the crime of defrauding export tax rebates.

Facts of the case: First, Huidafeng contacted agricultural cooperatives producing shiitake mushrooms to issue falsely invoiced agricultural product invoices as its upstream suppliers. Second, the upstream suppliers produced shiitake mushroom concentrate using leftover shiitake scraps as raw materials and sold the concentrate to Huidafeng. The actual production cost stood at RMB 9 per kilogram, yet the cost was artificially inflated to RMB 90 per kilogram in accounting records, followed by the issuance of special VAT invoices to Huidafeng at RMB 180 per kilogram. Finally, Huidafeng signed sham contracts with overseas buyers at artificially marked-up prices, fabricated export transaction records, and falsified cross-border foreign exchange receipt records via underground banks, all for the purpose of unlawfully claiming export tax rebates.

(II) Case 2: Inflating Prices of Feather Handicrafts to Defraud Export Tax Rebates

On April 16, 2026, the People’s Court of Changchun Jingyue High-Tech Industrial Development Zone issued a press release on its trial of a case concerning export tax rebate fraud. As alleged by the public prosecution organ, between 2017 and 2024, the defendant, the actual controller of three enterprises—Jilin Xinhang Handicraft Manufacturing Co., Ltd., Jilin Xinhui Handicraft Manufacturing Co., Ltd., and Changchun Xunchun Economic and Trade Co., Ltd.—defrauded state export tax rebates through tactics including falsely issuing agricultural product purchase invoices, falsely listing input tax amounts, and exporting goods lacking reasonable commercial purposes.

The defendant issued agricultural product purchase invoices under the product name “fine velvet”, while the actual purchased goods were cheap ordinary poultry feathers. The exported crude handicrafts were declared at prices three times the market price, constituting obvious inflated-value declarations for low-value goods. Investigation revealed that the defendant falsely issued agricultural product purchase invoices by impersonating the identity information of 21 natural persons, with cumulative falsely invoiced amounts exceeding RMB 50 million, against a true transaction volume of merely RMB 80,000. After export, the goods were never genuinely sold overseas; instead, they were shipped back to domestic warehouses via a company under the defendant’s spouse’s name and ultimately destroyed. The foregoing illegal acts resulted in fraudulent export tax rebates of RMB over 5 million.

(III) Case 3: Inflating Silk Quilt Prices to Defraud Export Tax Rebates

As disclosed by Hunan Provincial Tax Service on June 23, 2026, the Tax Inspection Bureau Stationed in Chongqing of the State Taxation Administration, in conjunction with Hunan tax authorities and public security organs, investigated and penalized a criminal gang led by Tang XX and Tang XX engaged in export tax rebate fraud.

Investigation confirmed that Tang XX and Tang Hao, actual controllers of Fenghua Textile Company, registered multiple individual industrial and commercial households under the names of their relatives and shareholders’ relatives to obtain input invoices. All these individual households were shell entities with no genuine business operations, which issued false invoices for “silkworm cocoons” totaling RMB 116 million to Fenghua Textile at prices 15 times the market rate. Fenghua Textile only possessed simple processing equipment including cocoon boiling pots, cocoon stripping bows and quilt grinding machines, with a small workforce, lacking capacity for large-scale production. After obtaining massive false invoices to create a false impression of large-scale silk quilt manufacturing, the company filed false customs declarations for exports to Hong Kong at prices ten times the actual production cost, then conducted sham foreign exchange settlement through underground banks to defraud export tax rebates worth RMB 11.5979 million. The case has been transferred to public security organs for case filing and criminal investigation.

(IV) Summary of Case Characteristics

Based on publicly disclosed judgments and notices, cases involving inflated-value declarations for low-value exports share the following core common features:The perpetrator controls both domestic trade and foreign trade links. On the domestic side, the perpetrator either directs agricultural cooperatives to issue overpriced agricultural product sales invoices to domestic trading companies, or operates domestic trading companies to issue inflated agricultural product purchase invoices by themselves, after which domestic firms issue overpriced special VAT invoices to foreign trade enterprises. On the foreign trade side, the foreign trade enterprise signs high-priced foreign trade contracts with overseas buyers, arranges customs export clearance of goods, and issues commercial proforma invoices. The perpetrator then submits the special VAT invoices acquired from domestic suppliers and customs declaration forms to tax rebate authorities to apply for export tax rebates.

II. Conduct of Foreign Trade Enterprises Declaring Low-Value Goods at Inflated Prices Shall Not Be Routinely Characterized as the Crime of Defrauding Export Tax Rebates

(I) Revisions to Provisions on Inflated-Value Export Declarations in the Dual-High Tax-Related Judicial Interpretation

Under the former judicial interpretation governing export tax rebate fraud, the provision stipulated that “where goods are exported but the name, quantity, unit price and other elements of such exported goods are fabricated to defraud export tax rebates corresponding to portions of taxes not actually paid”. This wording clearly established that classifying inflated-value declarations as the crime of defrauding export tax rebates required a prerequisite: the fraud targeted export tax rebates for taxes the domestic circulation link had not actually borne. It mandated judicial authorities to verify whether input VAT had actually been paid in domestic trade links when determining liability for export tax rebate fraud.

The revised dual-high judicial interpretation restates the clause governing inflated-value declaration fraud as: “where goods are exported yet the name, quantity, unit price and other elements of taxable export business eligible for tax rebates are fabricated to file export tax rebate applications with artificially inflated tax rebate amounts”. The phrase “defraud export tax rebates corresponding to portions of taxes not actually paid” was deleted. This revision has prompted some case-handling authorities to overlook the material element of actual loss of state tax revenue required for the crime of export tax rebate fraud, leading to mechanical application of statutory provisions. They routinely deem any fabrication of export goods’ names, quantities or unit prices sufficient to establish the crime of defrauding export tax rebates, and even characterize portions of claimed rebates backed by genuinely paid domestic taxes as fraudulent gains, without assessing whether such conduct actually causes losses of state export tax rebate revenue. This practice improperly expands the scope of criminal liability under this offense.

(II) Analysis of Inflated-Value Declaration Conduct Based on the Mechanism of Export Tax Rebates

The export tax rebate system is designed to exempt exported goods from domestic VAT so as to boost the international competitiveness of domestic products. Its two core pillars are: first, genuine physical export of goods; second, the goods have borne VAT in domestic circulation links. Actual losses of state export tax rebate revenue can only arise from two categories of conduct:

No genuine export of goods whatsoever;

Goods are genuinely exported yet bear no VAT, or the VAT borne is lower than the claimed tax rebate amount.

To execute the first category of fraud (no genuine exports), perpetrators must adopt auxiliary tactics such as purchasing third-party customs declaration forms for unrelated goods and fabricating input invoices through false invoicing to satisfy tax rebate document requirements. These auxiliary tactics merely serve the core fraudulent act of nonexistent exports.

By contrast, inflated-value declarations always involve genuine physical export of goods, with only artificially inflated declared prices. For such conduct to constitute export tax rebate fraud, it must fall under the second category: exporting low-tax-burden goods while applying for rebates calculated at an artificially high tax burden. Claiming inflated rebate amounts requires overpriced input invoices, which in turn forces domestic suppliers to pay additional domestic VAT on the inflated sales value. The excess rebate claimed by the foreign trade enterprise exactly equals the extra VAT remitted by domestic suppliers. The offsetting increase and decrease in state tax revenue means no net loss of overall fiscal interests occurs.

Returning to the three cases outlined above:The author submits that Case 2 satisfies the constitutive elements of export tax rebate fraud and causes state tax losses, as the exported goods were shipped back domestically and destroyed rather than genuinely sold overseas, failing the genuine export requirement.In Cases 1 and 3, the foreign trade enterprises calculated claimed tax rebates based on input invoices. Even with inflated export price declarations, the excess rebates claimed correspond to additional VAT remitted by domestic suppliers on overpriced invoices, generating no net loss of state tax revenue at this stage. If domestic suppliers offset the output VAT generated by overpriced special VAT invoices issued to foreign trade firms by falsely inflating input VAT via overpriced agricultural product invoices, state tax losses may arise—but such losses are limited to the falsely inflated input tax portions, not the full VAT amount listed on the input invoices.

Two critical reminders are warranted:

Judicial authorities shall not arbitrarily invalidate pricing records absent credible evidence proving prices drastically exceed prevailing market rates for agricultural products.

Where agricultural products are genuinely purchased directly from farmers with only irregular surrogate invoicing, agricultural products are statutorily deemed pre-taxed goods; such surrogate invoices shall not be automatically categorized as falsely issued agricultural product invoices for illicit input tax deductions.

(III) Conduct of Merely Declaring Low-Value Goods at Inflated Prices in Foreign Trade Links Without Falsified Domestic Input Invoices Shall Be Characterized as Tax Evasion

Paragraph 2 of Article 204 of the Criminal Law provides a critical statutory standard to distinguish tax evasion from export tax rebate fraud: “Where a taxpayer, after paying taxes, adopts the deceptive means prescribed in the preceding paragraph to fraudulently recover the taxes already paid, the case shall be convicted and punished in accordance with the provisions of Article 201 of this Law; where the fraudulently recovered amount exceeds the taxes already paid, the excess portion shall be punished in accordance with the preceding paragraph.” This provision has long been underutilized in judicial practice.

If domestic suppliers issue overpriced special VAT invoices to foreign trade enterprises without falsifying input invoices to offset their output VAT liabilities, even where objective evidence confirms inflated export price declarations, the foreign trade enterprise at most fraudulently recovers the excess VAT already remitted by domestic suppliers—conduct that amounts to tax evasion, not export tax rebate fraud. Judicial authorities must rigorously examine and calculate the actual tax burden borne by foreign trade enterprises, strictly demarcate the boundary between tax evasion and export tax rebate fraud, and avoid imposing disproportionate severe criminal penalties for lesser offenses.

III. Conclusion

Certain enumerated deceptive tactics under the dual-high judicial interpretation governing export tax rebate fraud diverge from the legislative purpose of the offense. For instance, falsely issuing invoices to claim export tax rebates implicitly presupposes the exported goods bear no domestic tax burden. In practice, however, scenarios exist where goods are genuinely exported and have borne domestic VAT, yet taxpayers obtain irregular surrogate invoices from third parties solely to satisfy tax rebate documentation requirements. Such conduct involves genuine exports and fully taxed goods, carrying far less social harm than fraud involving nonexistent exports or untaxed exported goods, and should not be classified as export tax rebate fraud.

Another example concerns circular cross-border cargo shipments: the statutory provision targeting such conduct implicitly targets goods smuggled back into China post-export to be re-exported without bearing domestic VAT for repeated fraudulent rebate claims. By contrast, cases where goods are exported, formally imported back into China via customs and then re-exported, while commercially irrational, generate no state tax losses and thus cannot be evaluated as export tax rebate fraud.

When applying the judicial interpretation, judicial authorities must reconcile statutory language with legislative intent and the fundamental mechanisms of VAT and export tax rebate systems to restore the original meaning of provisions. No criminal liability shall be imposed for conduct that fails to cause actual losses of state export tax rebate revenue.

For market participants, export tax rebate fraud cases rank among the most complex tax-related criminal matters, requiring expertise in VAT rules, export tax rebate mechanisms and agricultural product tax policies, with fact patterns varying widely across individual cases. Parties involved in such disputes are advised to retain specialized tax lawyers at an early stage to reconstruct objective case facts, assist judicial authorities in accurate statutory application, realize proportional punishment matching criminal culpability, and prevent unwarranted criminal liability.