Supreme Court's Guiding Case Suggests That Fictitious Issuance of Invoices in Industries Like Renewable Resources, Coal, and Agricultural Products Does Not Constitute the Crime of Falsely Issuing VAT Special Invoices

Editor's Note: On November 24, 2025, the Supreme People's Court released its latest batch of guiding cases concerning tax-related crimes. Among them, Case No. 1, the case of Guo and Liu involving tax evasion, has attracted significant attention. This case clarifies that when an entity-engaged enterprise uses false input tax credits to offset genuine output tax, the act constitutes tax evasion and does not constitute the crime of falsely issuing Value-Added Tax (VAT) special invoices. The adjudication rule established by this guiding case has a crucial impact on the exoneration of offenses in industries such as renewable resources, coal, and agricultural products, which commonly face difficulties in obtaining input invoices and consequently resort to acquiring falsely issued ones. It also significantly influences the statute of limitations for pending cases and even undiscovered cases with similar behavioral patterns. This article provides an analysis from the perspectives of defense in the relevant industries and for pending cases.

01 The Adjudication Rule Embodied in the Supreme Court's Guiding Case No. 1

Based on the facts of the guiding case published by the Supreme Court, we conduct a specific analysis of the core adjudication rule of Case No. 1. In February 2018, Guo and Liu registered and established Company S in Tianjin. Between February and December 2018, without engaging in genuine transactions with several companies including a company in Luzhou, Sichuan, and a company in Shanghai, they obtained VAT special invoices from these companies to use for tax credit. The total price and tax amount involved in these invoices was 1.6 billion yuan, with a tax amount exceeding 230 million yuan. From these facts, it can be concluded that this 230 million yuan tax amount constitutes the false input tax credits that Company S claimed without real transactions with the invoicing parties. Subsequently, the statement in the case details, "upon investigation, Company S declared output tax exceeding 52 million yuan for the 2018 tax year, and declared VAT input tax credits exceeding 50.25 million yuan," is crucial and key to interpreting the adjudication rule.

First, an analysis from the data perspective. The declared input tax credits exceeding 50.25 million yuan by Company S consist of two parts: genuine input tax credits and false input tax credits. The false input tax credits amount to the aforementioned 230 million yuan. Accordingly, the genuine input tax credits can be calculated as 50.25 million - 23 million = 27.25 million yuan. Combined with the understanding of the Supreme Court's "scope of tax payable obligation," its essence is the VAT payable amount, derived by subtracting input tax from output tax. Specifically for this case, the company's scope of tax payable obligation for the 2018 tax year was 52 million - 27.25 million = 24.75 million yuan. Clearly, the involved false input tax amount of 23 million yuan did not exceed the scope of tax payable obligation of 24.75 million yuan for that year.

Second, the judgment standard regarding the time scope. Typically, general taxpayers declare VAT monthly. However, Case No. 1 clarifies that determining whether false input tax credits exceed the scope of tax payable obligation should be examined on an "annual" basis. This can be seen from the court's focus on the company's input and output tax amounts for the "2018 tax year," rather than judging monthly whether they exceeded the scope of tax payable obligation. It can be said that this adjudication approach more accurately captures the essence of the perpetrator's subjective intent and objective harm, and closely corresponds to the provisions of Article 4 of the judicial interpretation on tax-related crimes issued by the Supreme People's Court and the Supreme People's Procuratorate (the "Two Supremes"). That article clarifies that the term "amount of tax payable" in the first paragraph of Article 201 of the Criminal Law refers to the amount of tax that should be paid in accordance with tax laws and administrative regulations during the tax year in which the taxable acts occurred; the "percentage of evaded tax amount to the total tax payable" refers to the ratio of the total amount of tax evaded across all tax types by the perpetrator in a tax year to the total tax payable for that tax year. It is evident that the judicial interpretation itself establishes a tax year-centered review standard. The adjudication practice in Case No. 1 is precisely the implementation and refinement of this provision, ensuring coherence in judicial application.

To illustrate further with an example: Suppose a company is a general taxpayer. In January, it purchases a batch of goods for external sale, but the upstream supplier fails to issue an invoice, so there is no genuine input tax credit for that month. In the same month, the company sells all the goods, issuing output invoices corresponding to an output tax amount of 1.5 million yuan. At this point, the scope of tax payable obligation for that month is 1.5 million - 0 = 1.5 million yuan. If, to balance the tax burden, the company obtains falsely issued input tax credit invoices corresponding to a tax amount of 1.2 million yuan in that month, it does not exceed the scope of tax payable obligation for that period. In February, the company again purchases goods without obtaining an invoice, sells them externally, and issues output invoices corresponding to a tax amount of 1.5 million yuan. The scope of tax payable obligation remains 1.5 million - 0 = 1.5 million yuan. If in that month it obtains falsely issued input tax credit invoices corresponding to a tax amount of 1.6 million yuan, looking solely at February, the 1.6 million yuan indeed exceeds the scope of tax payable obligation of 1.5 million yuan for that month. Does this mean the company's act in February constitutes the crime of falsely issuing VAT special invoices? The answer is clearly negative, because one must judge whether the total amount of falsely claimed input tax credits throughout the entire year exceeds the scope of tax payable obligation for that year. For instance, if the company only had business activities in January and February for the whole year, with a total genuine output tax of 3 million yuan for the year and no genuine input tax credits, the annual scope of tax payable obligation would be 3 million yuan. The total falsely claimed input tax credits for the year would be 1.2 million + 1.6 million = 2.8 million yuan. Since 2.8 million yuan does not exceed the annual scope of tax payable obligation of 3 million yuan, it should be determined as the crime of tax evasion, not the crime of falsely issuing VAT special invoices. Case No. 1, through this long-cycle, holistic perspective, provides clear guidance at the technical level for the characterization of similar cases in practice.

The first-instance trial of this case determined it constituted the crime of falsely issuing VAT special invoices, while the second-instance trial changed the conviction to tax evasion. The court's reasoning clearly stated, "The distinction between the crime of falsely issuing VAT special invoices and the crime of tax evasion lies in whether the perpetrator's subjective intent is based on the intent to defraud state tax revenue or the intent to evade tax obligations. Where a person obligated to pay tax, within the scope of their tax payable obligation, inflates input tax credits to pay less tax, and this constitutes a crime, even if the means involve false invoicing for credit, the subjective intent is still to not pay or to pay less tax. In accordance with the principle of unity of subjective and objective aspects, it should be punished as the crime of tax evasion." This change in conviction at the second instance is closely related to the issuance of the Two Supremes' judicial interpretation on tax-related crimes and the guidance provided in the Supreme Court's interpretive articles. Based on accurately understanding and applying the Two Supremes' judicial interpretation, the court determined that Guo and Liu's act of falsely claiming input tax credits through falsely issued VAT special invoices constituted "deceptive means" under the crime of tax evasion, and their act of making false tax declarations using deceptive means constituted the crime of tax evasion.

02 The Positive Impact of the Supreme Court's Guiding Case on Industries Such as Renewable Resources, Coal, and Agricultural Products

The release of the Supreme Court's Case No. 1 essentially provides guidance, in the form of a guiding case, for the exoneration of certain manifestations of false invoicing crimes. It simultaneously clarifies the adjudication approach of deducing subjective state from objective facts, i.e., through reverse presumption towards a lesser crime, directly presuming that when falsely claimed input tax credits do not exceed the scope of tax payable obligation, the perpetrator's subjective intent is to evade tax obligations, not to defraud state tax revenue. Although this rule does not fundamentally resolve the distinction between the crime of falsely issuing VAT special invoices and the crime of tax evasion at the level of taxation principles, it objectively prevents cases that were previously handled as the crime of falsely issuing VAT special invoices from being treated as such. This will have a positive impact on industries with difficulties in obtaining input invoices, such as renewable resources, coal, and agricultural products. The application logic for each specific industry is as follows:

First, the renewable resources industry. Represented by scrap steel and waste paper processing enterprises, their raw material supply mostly comes from individual waste suppliers. Although policies allow "reverse invoicing," this policy is difficult to implement in practice due to high operational thresholds and strict tax audits, leading to a widespread gap in input tax credits for enterprises. In practice, some processing enterprises obtain invoices issued by third parties to use for tax credit. According to the adjudication rule of Case No. 1, if an enterprise can prove the existence of genuine transactions—for example, by providing procurement documents such as weighing slips, logistics documents, warehouse receipts, settlement records for scrap steel or other renewable resources, as well as materials documenting raw material usage and finished product processing, production, and sales—and if the tax amount credited through invoices obtained from third parties does not exceed the annual scope of tax payable obligation, then the enterprise's subjective intent should be determined as evading tax obligations, not defrauding state tax revenue. Consequently, it should be characterized and handled as the crime of tax evasion.

Second, the coal industry. In this industry, procurement links involving upstream trading entities often face practical problems such as sales by individual coal traders without invoices, lack of formal invoices under quota control systems, and difficulty in obtaining logistics invoices. To complete input tax credits, some enterprises also obtain input invoices through third parties. Combining this with the adjudication rule of Case No. 1, if an enterprise can prove genuine coal procurement facts—for example, by providing supporting materials such as weighing slips, transportation records, warehouse receipts, and procurement contracts—and if the total falsely claimed input tax credits for the year do not exceed the annual scope of tax payable obligation, then even if there are inconsistencies between the invoice flow and goods flow, or fund recycling, it should be determined as the crime of tax evasion, not the crime of falsely issuing VAT special invoices.

Third, the agricultural products industry. The upstream of this industry mostly involves scattered planting and sales by farmers. When enterprises purchase agricultural products from farmers, the farmers cannot issue VAT special invoices. To resolve the credit issue, some enterprises obtain input invoices through other channels. According to the adjudication rule of Case No. 1, if agricultural product processing enterprises, such as those involved in primary fruit processing or grain processing, can provide genuine purchase records such as purchase lists, farmers' identity proofs, payment records, and weighing slips to prove the authenticity of the purchase transactions, and if the falsely claimed input tax credits do not exceed the annual scope of tax payable obligation, then the subjective intent should be determined as evading tax obligations, constituting the crime of tax evasion.

It can be seen that the aforementioned industries commonly face invoice dilemmas, and enterprises are forced to seek invoicing from third parties to balance their tax burden. From a value-oriented perspective, the adjudication rule reflected in Case No. 1 has positive significance for nurturing tax sources and avoiding overly severe punishment for entity enterprises. This is by no means "exonerating" false invoicing behavior, but rather providing a certain margin for error for entity enterprises with genuine business backgrounds in the process of obtaining input invoices. As long as their act of falsely claiming credits does not exceed the scope of tax payable obligation generated by their overall genuine output tax within the year, it should be determined as the crime of tax evasion, rather than the more socially harmful crime of falsely issuing VAT special invoices. Enterprises applying this rule are mostly entity enterprises with genuine production and operations. Compared to the crime of falsely issuing VAT special invoices, the criminal liability for tax evasion is lighter. Furthermore, enterprises can remedy their faults by paying back taxes and late payment fees, thereby preserving their ability to continue operating and serving society.

03 Handling Approaches and Defense Strategies for Current Similar Pending Cases

With the implementation of the Two Supremes' judicial interpretation on tax-related crimes and the release of the Supreme Court's guiding case, how to adjust the review and defense directions for similar cases currently under trial, as well as for cases where the first instance already convicted for false invoicing and are now in the second-instance procedure, has become a focal point in judicial practice and defense work.

For cases where the prosecution has charged the crime of falsely issuing VAT special invoices, if the first-instance court, after trial, finds that the case facts align with the situation established by the Supreme Court's guiding case—meaning the enterprise has a genuine business background and the falsely claimed input tax credits do not exceed its annual scope of tax payable obligation—then the court, based on recognizing that the alleged facts are established, can directly change the charge in accordance with the Criminal Procedure Law and relevant judicial interpretations, and render a judgment for the crime of tax evasion. This requires the court not to limit itself to reviewing the charged crime but to actively grasp the nature of the act to achieve accurate characterization.

For appeal cases where the first instance has already convicted for the crime of falsely issuing VAT special invoices, the focus of the second-instance court's review lies in whether the original judgment was accurate in characterization. If the second-instance trial finds the facts clear but the application of law erroneous, meeting the constitutive elements of tax evasion, it can directly change the judgment according to law. In practice, it is also highly possible for the second-instance court to determine that the facts are unclear or the evidence insufficient, revoke the original judgment, and remand the case for retrial. For the defense, remand for retrial often signifies a new procedural opportunity. Defense can be further developed around aspects such as the genuine transaction background, the annual scope of tax payable obligation, and subjective intent, striving for a favorable determination.

In handling such cases, a core and unavoidable issue is the application of Paragraph 4, Article 201 of the Criminal Law. This provision states that if a taxpayer, after receiving a recovery notice lawfully issued by the tax authorities, pays the tax payable and late payment fees, and accepts administrative penalties, criminal liability shall not be pursued. In practice, the application of this provision mainly involves two scenarios:

The first scenario is when the tax authorities have issued a recovery notice but the taxpayer has not complied. In this situation, the administrative procedure has been initiated, and the taxpayer has relinquished the statutory remedial opportunity by not fully paying the tax payable and late payment fees within the prescribed time limit or the approved extension or installment payment period, and not fully fulfilling the administrative penalty decision made by the tax authorities. Therefore, the condition for precluding criminal liability is not met. The court, upon determining that the act meets the subjective and objective elements of tax evasion, can convict and punish for the crime of tax evasion according to law.

The second scenario is more complex: where the tax authorities have never issued a recovery notice, can the court directly determine the crime of tax evasion? Different views exist in practice on this matter. One view holds that the tax authorities issuing a recovery notice is a prerequisite procedure for pursuing criminal liability; without this procedure, conviction should not occur, and a direct not guilty verdict should be rendered. Another view advocates using the administrative-criminal reverse linkage mechanism, transferring the case to the tax authorities for preliminary administrative handling, and only entering criminal procedure if the taxpayer refuses to comply afterward. There is also a view that as long as the act substantially meets the constitutive elements of tax evasion, even if the tax authorities did not initiate recovery in a timely manner due to concealed means, difficulties in cross-regional investigation, or procedural transitions, it does not affect the determination of tax evasion in the criminal procedure.

From the perspective of defense strategy, the handling of individual cases requires a comprehensive assessment of the litigation stage the client is in, the evidence situation, and possible sentencing outcomes, choosing the path most favorable to the client. In some circumstances, striving to change the charge from falsely issuing VAT special invoices to tax evasion, even if complete acquittal is not possible, may achieve a suspended sentence or even exemption from criminal liability due to tax repayment. This is also a pragmatic and favorable outcome.

04 The Impact of the Supreme Court's Guiding Case on the Criminal Statute of Limitations

The criminal statute of limitations system aims to no longer prosecute criminal acts that exceed the statutory time limit, thereby maintaining the stability of social relations. The Supreme Court's guiding case characterizing certain false invoicing acts as tax evasion also directly affects the statute of limitations for cases, potentially resulting in acts that occurred long ago exceeding the statute of limitations and no longer being subject to criminal prosecution.

The significant difference in statutory penalties between the crime of falsely issuing VAT special invoices and the crime of tax evasion leads to different statutes of limitations. According to Article 87 of the Criminal Law, "Crimes shall not be prosecuted if the following periods have elapsed: (1) five years, when the maximum statutory punishment is fixed-term imprisonment of less than five years; (2) ten years, when the maximum statutory punishment is fixed-term imprisonment of not less than five years but less than ten years; (3) fifteen years, when the maximum statutory punishment is fixed-term imprisonment of not less than ten years; (4) twenty years, when the maximum statutory punishment is life imprisonment or the death penalty. If after twenty years it is considered that prosecution must be undertaken, the matter shall be submitted to the Supreme People's Procuratorate for verification and approval." The maximum penalty for the crime of falsely issuing VAT special invoices is life imprisonment, resulting in a statute of limitations of up to twenty years. In contrast, the maximum penalty for the crime of tax evasion is seven years of fixed-term imprisonment, resulting in a statute of limitations of only ten years. Therefore, for an act of falsely claiming input tax credits that occurred over a decade ago, if prosecuted as the crime of falsely issuing VAT special invoices, it might still be within the twenty-year statute of limitations. However, if, according to the new adjudication rule, it is determined as the crime of tax evasion, the ten-year statute of limitations may have already expired, and judicial authorities can no longer pursue criminal liability. For example, if an enterprise in the 2014 tax year committed an act of tax evasion by using falsely issued invoices to falsely claim input tax credits, and this is only discovered after 2025, then treating it as tax evasion would have exceeded the ten-year statute of limitations, and prosecution cannot be pursued according to law.

Of course, the statute of limitations in criminal procedure is not immutable. Article 89 of the Criminal Law stipulates, "The limitation period for prosecution is counted from the date the crime is committed; if the criminal act is of a continual or continuous nature, it is counted from the date the act is terminated. If another crime is committed during the limitation period for prosecution, the limitation period for prosecution for the prior crime is counted from the date the subsequent crime is committed." Specifically, for a one-time criminal act, the limitation period is counted directly from the date the crime is completed or ceases. For criminal acts of a continual or continuous nature, the limitation period should be counted from the date the last act is completed. For example, if an enterprise repeatedly issued false invoices between January and October 2018, the limitation period would be counted from the date the last false invoicing act terminated in October 2018. Furthermore, if the perpetrator commits another crime during the prosecution limitation period, the limitation period for the prior crime is interrupted and recalculated from the date the new crime is committed. For instance, if the person responsible for an enterprise committed a tax-related crime in 2014 and then committed another crime in 2018, the limitation period for the 2014 tax-related crime would be recalculated from the date the new crime was committed in 2018.

In summary, the adjudication rule established by the Supreme Court's guiding Case No. 1 not only provides clearer criteria for distinguishing between false invoicing and tax evasion acts substantively but also affects the calculation of the statute of limitations for related cases procedurally. Facing potential risks, enterprises should proactively review their business processes and, when necessary, seek support from professionals to exert effective strength in compliance system construction, handling tax-related disputes, and criminal case defense, thereby fortifying their defenses against tax-related legal risks.