Editor's Note: The export tax refund is an institutional arrangement by which the State encourages foreign trade exports. It should have served as a policy dividend driving the development of foreign trade enterprises, yet it has been distorted by lawbreakers into an unlawful channel for siphoning off state treasury funds. On March 20, 2024, the Supreme People's Court and the Supreme People's Procuratorate issued the Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases Endangering Tax Collection and Administration (Fa Shi [2024] No. 4), which regulates the thresholds for criminalization and the types of conduct constituting the crime of fraudulently obtaining export tax refunds, marking a new stage in the governance of tax fraud crimes characterized by precise identification and severe punishment. Drawing on six cases of fraudulently obtaining export tax refunds recently disclosed in a concentrated manner, this article analyzes the latest developments in tax fraud crimes from four dimensions — case introduction, deconstruction of the methods employed, audit logic, and risk alerts — so as to provide compliance references for relevant enterprises.

I. Case Introduction

(1) The Tax Fraud Case of Shenzhen Shengxiangxing Company

Recently, the First Inspection Bureau of the Shenzhen Municipal Tax Service uncovered a case involving a criminal group that simultaneously manipulated upstream false invoicing and downstream tax fraud. Upon investigation, it was found that between January 1, 2021 and July 31, 2023, lawbreakers, by controlling enterprises such as Shenzhen Shengxiangxing Trade Co., Ltd., fraudulently obtained a total of RMB 53.4214 million in state export tax refunds, of which RMB 29.3096 million related to Shenzhen. In January 2025, the First Inspection Bureau of the Shenzhen Municipal Tax Service rendered a handling and penalty decision in accordance with the law with respect to the tax fraud committed by enterprises such as Shenzhen Shengxiangxing Trade Co., Ltd., and the criminal group concerned has been transferred to the procuratorate for examination and prosecution.

(2) The Tax Fraud Case of Li XX in Ningxiang

Recently, the Ningxiang Court tried and pronounced judgment in a criminal case. The defendant, Li XX, leased the name of a third party in 2020 to serve as the legal representative and thereby actually controlled two trading companies. From 2020 to December 2021, without any genuine export of goods, the two companies fabricated the fact of exporting taxed goods and applied for export tax refunds of more than RMB 18 million by such means as unlawfully obtaining customs declaration information for goods already exported, forging foreign trade sales contracts, falsely issuing input value-added tax special invoices, and effecting false foreign exchange settlement. The court held that Li XX constituted the crime of fraudulently obtaining export tax refunds and the crime of fraud, and sentenced him to 14 years of fixed-term imprisonment and a fine of more than RMB 18 million. The second instance dismissed the appeal and upheld the original judgment, which has now taken legal effect.

(3) The Tax Fraud Case of Hunan Chenrui Company

Recently, acting on leads identified through big data analysis of tax information, the First Inspection Bureau of the Tax Service of the Xiangxi Tujia and Miao Autonomous Prefecture of the State Taxation Administration, together with public security organs, investigated and dealt with, in accordance with the law, the case in which Hunan Chenrui Communication Technology Co., Ltd. and its actual controller, Peng Yu, colluded with tax officials to fraudulently obtain export tax refunds. Upon investigation, it was found that from 2020 to 2021, Chenrui Company and its actual controller Peng Yu colluded with Xiang Feng, an employee of the Tax Service of the Xiangxi High-Tech Zone, to fraudulently obtain RMB 3.3928 million in export tax refunds by such means as signing false sales contracts, falsely issuing value-added tax special invoices, and accepting falsely issued value-added tax special invoices from upstream enterprises. In September 2025, the tax authorities rendered a handling and penalty decision in accordance with the law to recover the export tax refunds and to suspend handling export tax refunds for the company for two years and three months. At present, the case is under further investigation by the public security organs. In October 2025, Xiang Feng, an employee of the Tax Service of the Xiangxi High-Tech Zone, was punished by expulsion from the Communist Party and removal from public office; in December 2025, Xiang Feng was sentenced by the Luxi County People's Court to six years and six months of fixed-term imprisonment for the crimes of accepting bribes and of favoritism and malpractice in selling invoices and handling export tax refunds, among others, and his unlawful gains were recovered.

(4) The Tax Fraud Case of Linyi Qunce Company

Recently, acting on leads transferred by the customs authorities, the First Inspection Bureau of the Linyi Municipal Tax Service of the State Taxation Administration investigated and dealt with, in accordance with the law, the case in which Linyi Qunce International Trade Co., Ltd. fraudulently obtained export tax refunds by falsely declaring commodity categories. Upon investigation, it was found that from 2022 to 2024, in the course of customs declaration for exported goods and application for tax refunds, the company fraudulently obtained RMB 8.1175 million in export tax refunds by such means as falsely declaring the categories of exported commodities and improperly declaring goods otherwise ineligible for tax refunds as goods subject to a 13% tax refund rate. In March 2026, the tax authorities rendered a handling and penalty decision in accordance with the law to recover the export tax refunds, impose a fine of twice the amount involved, and suspend handling export tax refunds for the company for two years. At present, all tax amounts involved in the case have been recovered and turned over to the treasury, the fine is being recovered in accordance with the law, and the case has been transferred to the public security organs for further investigation in accordance with the law.

(5) The Tax Fraud Case of Henan Aimaini Company

Recently, the Inspection Bureau of the Hebi Municipal Tax Service of the State Taxation Administration, together with public security departments, investigated and dealt with, in accordance with the law and on the basis of relevant leads, the case in which Henan Aimaini Seasoning Food Co., Ltd. fraudulently obtained export tax refunds. Upon investigation, it was found that from 2020 to 2024, Aimaini Company fraudulently obtained RMB 12.3095 million in export tax refunds by such means as falsely issuing agricultural product purchase invoices, falsely issuing value-added tax special invoices, and effecting false foreign exchange settlement. In May 2025, the tax authorities rendered a handling and penalty decision in accordance with the law to recover the export tax refunds and to suspend handling export tax refunds for the company for three years. In July 2026, the Hebi Intermediate People's Court of Henan Province rendered judgment in the case, sentencing Zhang Qing, the actual controller of the company, to 13 years of fixed-term imprisonment and a fine for the crime of fraudulently obtaining export tax refunds.

(6) The Tax Fraud Case of Shenzhen Jinsiyu Company

Recently, acting on leads transferred by relevant departments, the Third Inspection Bureau of the Shenzhen Municipal Tax Service of the State Taxation Administration investigated and dealt with, in accordance with the law, the case in which three enterprises with Chen Hua as the actual controller fraudulently obtained export tax refunds. Upon investigation, it was found that from 2020 to 2024, the three enterprises, including Shenzhen Jinsiyu Trade Co., Ltd., with Chen Hua as the actual controller, fraudulently obtained RMB 22.7697 million in export tax refunds by such means as false customs declarations for exports, false foreign exchange settlement, and accepting falsely issued value-added tax special invoices from upstream enterprises, in the absence of genuine goods transactions. In December 2024, the tax authorities rendered a handling and penalty decision in accordance with the law against the three enterprises, including Shenzhen Jinsiyu Trade Co., Ltd., to recover the export tax refunds, impose a fine of one times the amount involved, and suspend handling export tax refunds for them for three years. At present, Chen Hua and five others have been publicly prosecuted before the people's court by the procuratorate.

II. Deconstruction of Tax Fraud Methods

By reference to the typological enumeration of tax fraud methods in Article 7 of the Two-Highs Interpretation (the Interpretation of the Supreme People's Court and the Supreme People's Procuratorate), the six recently disclosed cases cover the overwhelming majority of those methods.

(1) The Aggressive False-Invoicing Type: Shell Enterprises Linked in a Chain to Defraud Tax Through False Invoicing

This corresponds to Item 1 of Article 7 of the Two-Highs Interpretation: using value-added tax special invoices obtained by false issuance, unlawful purchase or other unlawful means, or other invoices usable for export tax refunds, to apply for export tax refunds.

The first case is a typical example. In that case, the lawbreakers controlled enterprises including Shenzhen Shengxiangxing Company; the upstream raw-material enterprises and production and transport enterprises were registered in a concentrated manner in other provinces, while the export enterprise was registered in this province. The tax authorities found that the upstream enterprises in other provinces generally displayed shell-company characteristics — issuing invoices immediately upon commencing business and deregistering immediately upon finishing issuing them — and that the legal representative, finance officer and tax-handling officer of the export enterprise substantially overlapped, forming a complete false chain of invoicing — transport — export: the upstream shell enterprises falsely issued VAT special invoices to create the appearance of taxed goods, and the export enterprise used those invoices to apply for refunds, while both the goods and the transactions were fabricated. The amount of falsely issued invoices is the objective of the tax fraud; absent falsely issued input invoices, the tax fraud could not be carried out at all. Shell enterprises issue invoices and deregister immediately in order to destroy the business entity before investigation and to obstruct further tracing.

(2) The Bill-Purchasing and Invoice-Matching Type: Misappropriating Another's Export Business

This corresponds to Item 5 of Article 7 of the Two-Highs Interpretation — forging or concluding false sales contracts and obtaining customs export declarations by unlawful means in order to fabricate exports — and Item 1 thereof — using falsely issued or unlawfully purchased VAT special invoices to apply for refunds.

Tax fraud of the bill-purchasing and invoice-matching type consists of representing another person's documents and invoices as one's own and fabricating the appearance of refund eligibility by matching invoices. Specifically, it means purchasing the customs declaration information of a third party's genuine export business and falsifying it as one's own self-operated export (bill purchase), then matching it with falsely issued VAT special invoices (invoice matching), thereby ultimately applying for a refund by misappropriating another person's goods export business. The second case is typical: the defendant leased another person's name to act as legal representative in establishing a trading company, unlawfully obtained customs declaration information such as container numbers of goods already exported through domestic customs, forged foreign trade sales contracts, obtained falsely issued special invoices through companies not involved in the case, and fabricated the export of taxed goods in order to apply for refunds. The most salient feature of this method is the combination of the genuine and the fabricated. The goods were genuinely exported, but the invoices and certificates were matched afterwards; the chain appears complete, yet in reality the contract flow, goods flow and fund flow are all misaligned.

(3) The Policy-Arbitrage Type: Misdeclaring Commodity Categories and Overstating the Value of Low-Value Goods

This corresponds to Item 4 of Article 7 of the Two-Highs Interpretation — where an export does occur but the name, quantity, unit price and other elements of the export business eligible for refund are fabricated so as to inflate the export refund amount claimed — and Item 7 thereof — misrepresenting the function, use and other attributes of export products so as to declare products not eligible for refund benefits as refundable products.

Unlike the first two types, which create something out of nothing, this type exploits the differentiated administration of the export tax refund policy, under which different commodities are subject to different refund rates and some commodities do not qualify for refunds at all. In essence, such tax fraud is arbitrage. One method is for the perpetrator to control both the domestic trade and the foreign trade segments: the enterprise's own goods are genuinely declared and shipped abroad, but the declared unit price is artificially raised, the export quantity is inflated and the commodity name is altered, thereby inflating the tax base for the refund, while falsely issued input invoices are used in parallel to inflate the basis for the refund. The other method is to disguise products that do not enjoy refunds or enjoy only low refund rates as products eligible for high refund rates — through simple processing, altered packaging, misdeclared commodity names and the like — and then declare them and apply for refunds. The fourth case is typical: between 2022 and 2024, in the course of customs declaration and refund application, the company falsely declared the categories of export commodities, improperly declaring commodities not eligible for refunds as commodities subject to a 13% refund rate, and thereby fraudulently obtained export tax refunds. Such methods are highly covert and difficult to detect through document review alone; they generally require physical inspection of goods and cross-comparison with supply chain information.

(4) The False Export Declaration Type: A Wholly Fabricated Export Business

This corresponds to Item 5 of Article 7 of the Two-Highs Interpretation: forging or concluding false sales contracts, or obtaining customs export declarations, transport documents and other documents and vouchers relating to export business by forgery, alteration or other unlawful means, and fabricating the fact of export in order to apply for export tax refunds.

Under this type, the perpetrator has no genuine goods export whatsoever, but fabricates an entire export transaction chain out of thin air — by forging or concluding false sales contracts, forging customs declarations and transport documents, and fabricating foreign exchange receipt records — in order to apply for refunds. The fifth and sixth cases both point to this method: the fifth case combined three methods — false issuance of agricultural product purchase invoices, false issuance of special invoices, and false foreign exchange settlement — to defraud tax; in the sixth case, the three enterprises actually controlled by Chen Hua, in the absence of genuine goods transactions, defrauded refunds by means of false export declarations, false foreign exchange settlement and the acceptance of falsely issued special invoices from upstream enterprises. The characteristic of such cases is that the entire chain is falsified — contracts, customs declarations, foreign exchange receipt records and input invoices are all forged — and the only thing genuine is the refund money actually landing in their pockets.

(5) The Circular Export Type: Goods Re-imported and Re-declared

This corresponds to Item 6 of Article 7 of the Two-Highs Interpretation: after goods are exported, bringing them back into the territory, or bringing the same kind of goods from abroad into the territory for circular import and export, and applying for export tax refunds.

The method is as follows: the perpetrator declares the same batch of goods for export and applies for a refund, then brings the goods back into the territory by smuggling or other unlawful means, matches them with falsely issued VAT special invoices and other documents, and declares them for export again and obtains a refund, repeating the cycle to obtain multiple refunds. No typical instance of this type appears among the six recently disclosed cases, but the method is explicitly enumerated in the Two-Highs Interpretation, which indicates that it has entered the regulatory field of vision in practice and is a direction requiring priority prevention in the review of export tax refunds.

III. Changes in Audit Logic

Faced with increasingly covert tax fraud methods, the audit logic of tax authorities is undergoing a shift, and the six cases demonstrate upgraded audit techniques.

First, big-data profiling comes first. The first case, precisely, began with big-data risk analysis: a group of mutually invoicing enterprises were clustered by registration region, upstream enterprises issued invoices immediately upon commencing business and deregistered immediately upon finishing issuing them, and the legal representatives and finance officers of the export enterprises substantially overlapped. When a single anomaly is inconclusive, the superposition of multiple abnormal indicators constitutes a sufficient signal of tax risk.

Second, look-through verification of fund flows. Traditional audits often focus on looking for traces of funds flowing back, and the first case carefully circumvented precisely this point. On the surface, the fund flow disclosed no return; however, look-through tracing of the direction of funds revealed a path of "foreign buyer's payment — export enterprise — production and transport enterprise — raw-material enterprise in another province — other enterprise in this province", disclosing the anomaly that the raw-material enterprise in another province bypassed nearby suppliers to purchase from this province and then routed back to this province for export; ultimately it was confirmed that the other enterprise in this province was the true supplier, and that the transaction funds merely passed through the accounts of the enterprises involved. This shows that the audit approach has been upgraded from examining whether funds flow back to examining whether the trajectory of funds conforms to commercial logic.

Third, coordination between the tax authorities and the public security organs and the closing of the net across the entire chain. Several cases exhibit a coordinated case-handling model in which the tax authorities pinpoint the suspicions and the public security organs carry out arrests.

Fourth, dual investigation of a single case, compelling the performance of duties. In the third case, the criminal judgment against the tax official sends a clear signal that tax fraud necessarily entails investigating the enterprise, and that any failure of duty will necessarily be pursued — thereby compressing, from within the tax authorities, the space in which crimes of internal-external collusion can survive.

IV. Tax Compliance Recommendations for Relevant Enterprises

Taking together the outcomes of the six cases, the risks along the export tax refund chain are not confined to the enterprises directly engaged in tax fraud. At least six categories of entities are exposed to risk: export enterprises directly engaged in tax fraud, which face multiple consequences — recovery of the tax, a fine of one to five times the amount involved, suspension of refund handling for one to three years, and a maximum penalty of life imprisonment; the upstream false issuers, which may independently constitute the crime of falsely issuing special invoices or be found to be accomplices in tax fraud; bill-purchasing intermediaries and customs brokers, which, as suppliers of documents, face criminal prosecution; underground banks and illegal foreign exchange dealers, which are treated as accomplices in tax fraud; the genuine cargo owners whose documents were misappropriated, who run the risk of being held accountable for gaps in document management; and tax officials who colluded internally and externally or who failed in or abdicated their duties, who face disciplinary accountability at the least and criminal liability at the most. Particularly instructive is the third case of internal-external collusion: the actual controller colluded internally and externally with staff of the local tax service and fraudulently obtained refunds by signing false sales contracts, falsely issuing VAT special invoices, accepting falsely issued invoices from upstream parties and other means. Internal-external collusion means that the fraud chain has penetrated the collection-and-administration defense line; its harm lies not only in the loss of tax revenue but also in severe damage to the credibility of tax collection and administration — which is precisely why the mechanism of the dual investigation of a single case (examining the enterprise while at the same time examining the performance of duties by tax officials) has been repeatedly emphasized in recent cases. For foreign trade enterprises operating normally, the risk to be guarded against is being drawn in passively. Where export tax refunds are involved, the core requirement is to ensure the authenticity and consistency of the business. If even one link among the goods flow, fund flow, invoice flow and contract flow runs counter to ordinary commercial sense, tax risk will be triggered.

Compliance recommendations: First, authenticity of the goods flow, that is, the exported goods genuinely exist and the cargo owner is consistent with the declaring entity, and the use of another person's goods information for customs declaration is prohibited. Second, authenticity of the fund flow, that is, the payment and receipt paths for goods payments and tax payments conform to commercial logic and the accounting records are traceable, so as to avoid pass-through of accounts, return of funds and false foreign exchange settlement. Third, authenticity of the invoice flow and the contract flow, that is, invoices, customs declarations, transport documents and sales contracts correspond one-to-one to the actual business, and the commodity name, quantity, unit price and refund rate are declared truthfully. On this basis, enterprises may establish a dedicated prevention mechanism for export tax refunds, conduct due diligence on supplier qualifications and invoices, proactively investigate abnormal transactions, and promptly report risk leads to the tax authorities and cooperate with rectification.