Editor's Note: On December 8, 2025, the State Taxation Administration held a press conference, mentioning that "it will further strengthen monitoring and inspection of local governments' illegal tax introduction and rebates to create 'policy depressions' and illegal recruitment of 'shell companies' to engage in 'invoice economy'. Once problems are discovered, they will be handled promptly, and relevant local governments and their competent departments will be urged to abolish or revise illegal tax-related clauses in investment promotion agreements. We will resolutely resist acts that undermine the unity of the tax system and resolutely prevent and control the disruption of market order by 'invoice economy'." In recent years, tax authorities and judicial organs across the country have investigated and handled a large number of cases involving the establishment of shell companies in tax havens to issue false invoices, including major cases with involved amounts ranging from billions to tens of billions of yuan. Not only do the invoice issuers face imprisonment, but a large number of invoice recipients are also implicated and held legally responsible. With the introduction of the new judicial interpretation on tax-related matters in 2024, the crime of illegally selling special VAT invoices has returned to judicial perspective, providing a powerful legal weapon for cracking down on the invoice economy. Now, the State Taxation Administration has once again named the "invoice economy", indicating that industries highly dependent on invoice issuance platforms will still face severe tax-related risks. This article intends to analyze the tax-related issues in relevant industries to provide reference for readers.
I. Basic Logic of the Operation of "Invoice Economy"
(i) Detachment from Real Business as the Essential Feature
The invoice economy refers to an economy where invoice issuance is the main business activity. Its essential feature is detachment from real business, or most businesses lack authenticity, with profits basically generated solely through invoice issuance. Detachment from real business manifests in two specific forms: first, the complete absence of real business, where false business content is fabricated by signing fake contracts and creating false fund flows for accounting purposes, thereby issuing invoices. This situation generally constitutes the act of "issuing false invoices without actual goods". Second, the existence of real business, but artificially fabricating transaction subjects by adding parties not involved in the business to the transaction links, thereby obtaining invoices. This situation generally constitutes the act of "issuing false invoices by fabricating transaction subjects".
(ii) Illegal Recruitment and Surplus Invoices as the Basic Profit Drivers
Since the invoice economy is detached from real business and does not profit from actual goods or service transactions, it is determined that the operation of the invoice economy is based on embezzling national tax interests and earning "tax spreads". Specifically, invoice-issuing enterprises issue invoices to help invoice-receiving enterprises deduct VAT and claim pre-tax deductions for corporate income tax. The invoice-receiving enterprises pay invoice fees to the invoice-issuing enterprises. As long as the invoice fees are lower than the tax benefits obtained by the invoice-receiving enterprises, the latter will profit from this. At the same time, although invoice-issuing parties engage in false invoice issuance and artificially increase their tax obligations, they reduce their actual tax burden through other means, making the invoice fees exceed the actual tax burden incurred by issuing invoices. The difference constitutes the profit of the invoice-issuing parties. At present, the means to reduce the actual tax burden can be basically divided into two models: one relies on illegal investment promotion policies, that is, after artificially increasing tax obligations, the invoice-issuing parties fully perform their tax payment obligations, but directly offset the tax costs through illegal fiscal rebates; the other relies on surplus invoices accumulated by retail enterprises, that is, the invoice-issuing parties first purchase invoices from retail enterprises to accumulate surplus input tax, which can be used for deduction and pre-tax deduction when issuing false invoices, enabling them to issue invoices without actually bearing tax costs.
(iii) Illegal Agency Issuance as a New Means of Embezzling Funds
For the act of "issuing false invoices without actual goods", since the business content is purely false invoice issuance, the relevant funds flow solely for the purpose of accounting and invoice issuance, thus there must be fund reflux. In the past, invoice-issuing parties generally used the name of shareholder loans to embezzle funds and return them to invoice-receiving parties, but this model is relatively crude and carries high tax risks. In recent years, with the popularization and development of personal invoice agency policies, most invoice-issuing parties embezzle funds by falsely issuing invoices for themselves through fraudulently using personal identity information to apply for agency issuance. According to the requirements of the agency issuance policy, the types of invoices that can be issued through agency mainly include agricultural product purchase invoices and ordinary VAT invoices. Among them, agricultural product purchase invoices have become the preferred choice for illegal agency issuance in the agricultural product industry due to their characteristics of reverse invoicing and self-issuance and self-deduction, while other industries mainly rely on agency issuance of ordinary invoices. For the act of "issuing false invoices by fabricating transaction subjects", since the fabricated transaction links are artificially added to the real business chain, and the false invoicing chain is grafted with the real business chain, there is usually no fund reflux.
II. Why Has the "Invoice Economy" Become an Industry Dependency?
The invoice market is also a supply and demand market. Due to the different tax issues existing in various industries, different degrees of industry-wide dependence on the invoice economy have been formed, spawning various types of invoice issuance industrial chains. The specific demands of invoice-receiving parties can be divided into four categories:
(i) Making Up for the Lack of Source Invoices
This type of demand is more common in the transportation and logistics industry, renewable resource recycling industry, and agricultural product purchase industry. These industries are characterized by being at the front end of the industrial chain, with most suppliers being individuals. The transportation and logistics industry needs to organize a large number of individual transport capacities to undertake transportation tasks; the renewable resource recycling industry needs to connect with freight yards, where the main suppliers of waste are individual waste suppliers; the agricultural product purchase industry needs to go deep into rural areas to purchase goods from farmers and rural economic organizations. Due to the fact that suppliers are individuals with insufficient tax awareness and lack the willingness to apply for agency invoice issuance from tax authorities, and in the past, the process of agency invoice issuance was relatively cumbersome in some remote areas due to backward economic development, various reasons have led to the lack of source invoices. Enterprises not only cannot meet their deduction needs, but also cannot obtain compliant financial vouchers for bookkeeping and cost recording. Although agricultural product purchase invoices have the characteristics of self-issuance and self-deduction, at present, tax authorities in various regions basically require that purchase invoices be used within the province or even the city, and do not allow self-issuance of purchase invoices for cross-provincial agricultural product purchase businesses. In addition, many places have certain restrictions on the invoicing limit of purchase invoices, which cannot meet the daily needs of enterprises. Furthermore, purchase invoices are only applicable to transactions of purchasing self-produced agricultural products from farmers, not to transactions of purchasing from intermediaries, which also leads to the problem of lack of source invoices.
(ii) Evading Personal Income Tax
This type of demand is more common in labor-intensive industries, financial industry, internet technology industry, and live streaming industry. These industries are characterized by being asset-light, creating value through personal labor services, and having a very high proportion of labor costs. Since most laborers have established labor relations with enterprises, although labor costs can be claimed as pre-tax deductions, personal income tax must be paid in accordance with comprehensive income. In some industries, the per capita labor cost is high, which may directly push the tax rate up to 45%, resulting in a heavy personal income tax burden. If the employing enterprise converts the labor provided by individuals into VAT taxable services and obtains special invoices, it can still fully claim the deduction at the corporate income tax level, completely avoid the personal income tax liability, and also deduct more VAT.
(iii) Restrictions Imposed by Industry Unspoken Rules
This type of demand is more common in the pharmaceutical industry and industries supplying goods and services to government organs and institutions. These industries are characterized by long-standing unspoken rules, requiring cooperation with specific suppliers to obtain projects from customers and sell products. However, some suppliers do not actually provide real businesses, but build business structures by improperly transferring interests to customers or having kinship relations with customers. If the supplier is exposed, the relevant invoices are likely to be identified as false invoices, implicating the invoice-receiving party.
(iv) Evading Consumption Tax
This type of demand is more common in the energy industry, including two major fields: petroleum refining and coal chemical industry. These industries are characterized by products mainly being consumption tax taxable consumer goods such as gasoline, diesel, and naphtha, or including taxable consumer goods. The consumption tax on refined oil products is levied based on quantity, independent of pricing. However, the market pricing of gasoline and diesel is regulated by the National Development and Reform Commission, and it is not a completely free pricing market. This makes it difficult to fully pass on the consumption tax burden. In the past, the consumption tax burden accounted for as high as 1/3 of the gasoline price, and the energy industry generally needed to bear a relatively heavy consumption tax liability. Taking refining and chemical enterprises as an example, state-owned refining and chemical enterprises not only have to strictly implement national pricing, but also assume many additional social responsibilities, such as building gas stations in remote areas. Many projects have social attributes and may be unprofitable economically. However, state-owned enterprises also have profit assessment indicators, and if they fully bear the consumption tax burden, they will be unable to complete the indicators. For private local refining enterprises, after the partial liberalization of crude oil import quotas in 2015, local refining enterprises began to widely participate in the refining and chemical industry. However, their cost control cannot compete with state-owned enterprises, and their upstream and downstream industrial chains are far less mature than the state-owned system. Therefore, they can only reduce costs and increase efficiency through consumption tax. Special VAT invoices not only serve the functions of VAT deduction and pre-tax deduction for corporate income tax, but also assume an important function of inputting refined oil product inventory since the launch of the refined oil invoice module in 2018, and are considered as consumption tax deduction vouchers. For the purpose of evading consumption tax, the energy industry also has a strong demand for special invoices.
III. Criminal Liability Faced by All Parties in the "Invoice Economy"
In the past, most invoice-issuing parties and invoice-receiving parties that met the conviction standards were convicted of the crime of falsely issuing special VAT invoices. In 2024, with the issuance of the new judicial interpretation on tax-related matters by the Supreme People's Court and the Supreme People's Procuratorate, as well as the subsequent writing of the understanding and application of the judicial interpretation by the Supreme People's Court, the characterization of invoice-issuing parties and invoice-receiving parties has begun to change.
(i) Invoice-Issuing Parties: Coexistence of the Crime of Falsely Issuing Special Invoices and the Crime of Illegally Selling Special VAT Invoices
For the act of "issuing false invoices without actual goods", according to the interpretation of the Supreme People's Court, the invoice-issuing party issuing special invoices in exchange for invoice fees is essentially equivalent to trading invoices as commodities, which first constitutes the act of illegally selling special VAT invoices. Since the crime of illegally selling special VAT invoices is a behavioral offense, this act can be characterized as such, which is the basic principle for characterizing this type of act. In practice, invoice-issuing platforms represented by flexible employment platforms and online freight platforms have a wide range of downstream customers, and the risk of being identified as illegal sales is extremely high. The sentencing grades for illegal sales and false issuance are basically the same. At the same time, as a behavioral offense in the usual sense, conviction for the crime of illegal sales does not require bearing the burden of proof such as whether there is the purpose of defrauding tax deductions or whether tax losses have been caused, and the threshold for conviction is lower than that for false issuance.
Of course, there are exceptions to the principle. A basic feature of illegal invoice trading is that the invoice-issuing party is a shell company with no or basically no real business, no intentional collusion with the invoice-receiving party, and engages in the invoice-selling business solely to earn invoice fees, usually accepting any invoice-purchasing demand. Therefore, if the evidence in the case can prove that the invoice-issuing party is not an "open-to-all" false issuer but has specific invoice-receiving objects, and at the same time has a comprehensive understanding of why the invoice-receiving party accepts false invoices, the purpose and harmful consequences of the invoice-receiving party after obtaining the false invoices, and does not obtain illegal interests, it can be considered that the two parties have pre-conspiracy, and the invoice-issuing party issues false invoices based on the pre-conspiracy. In this case, the invoice-issuing party does not have the intention to earn invoice fees but has the intention to assist the invoice-receiving enterprise. In such cases, the invoice-issuing and invoice-receiving parties constitute a joint crime, and the invoice-issuing party cannot be characterized separately, but should rely on the characterization of the invoice-receiving party.
For the act of "issuing false invoices by fabricating transaction subjects", there has always been a factual dispute in the past: does fabricating a transaction link equal a false transaction link? What is the standard for judging whether a business is real or false? First of all, it should be clarified that fabrication is not forgery. Issuing false invoices by fabricating transaction subjects does not mean forging a transaction in the absence of a real transaction, but adding a subject that is not involved in the transaction link to the transaction link. Since the subject has been added to the transaction link, there is a great dispute as to whether the authenticity of the business can be directly denied. Especially since the Civil Code recognizes the way of constructive delivery, the authenticity of the business cannot be judged solely based on the physical flow of goods. Therefore, there have been many obstacles in the characterization of such acts in the past. Taking the refined oil retail industry as an example, gas stations legally obtain invoices when purchasing gasoline and diesel, but when selling, because consumers do not need invoices, gas stations will generate surplus input tax. Gas stations cooperate with shell companies and adjust their business model to a model where gas stations sell oil to shell companies, and shell companies then sell oil to consumers, allowing shell companies to participate in the transaction link. Shell companies purchase goods from gas stations and obtain invoices, but do not issue invoices to consumers, concealing their income, thereby forming surplus input tax, and then issuing false invoices to the outside world for profit. Of course, the transaction chain can be infinitely extended to include the downstream enterprises of shell companies. In this case, it can be said that the transaction link of the shell company is fabricated, but it seems impossible to directly conclude that the business of the shell company obtaining invoices is false.
To solve this problem, the new judicial interpretation specifically adds a provision that "issuing special VAT invoices by fabricating transaction subjects for businesses that are legally not eligible for tax deduction..." constitutes a false issuance act. Consumers' purchase of oil is a business that is not eligible for tax deduction. In such a business, fabricating a shell company as the transaction subject and obtaining special invoices can be directly characterized as a false issuance act. This resolves a factual dispute through legal provisions. Therefore, most acts of "issuing false invoices by fabricating transaction subjects" can be directly characterized as false issuance acts. For retail enterprises, if they are unaware of the downstream structure, they are considered to have their invoices maliciously embezzled by downstream parties and do not constitute a crime. For shell companies, their acts can be identified as false issuance, and further analysis should be conducted to determine whether they meet the conditions for exemption from criminal liability for false issuance and confirm their criminal liability.
(ii) Invoice-Receiving Parties: Transformation from the Crime of Falsely Issuing Special Invoices to Minor Crimes Such as the Crime of Illegally Purchasing Special VAT Invoices and the Crime of Tax Evasion
Due to the different demands and harmful consequences of invoice-receiving parties, their characterization is not uniform. However, the new judicial interpretation generally shows the guiding spirit of protecting entity enterprises, and the criminal liability of entity invoice-receiving enterprises has been reduced. In particular, the criminal act of tax evasion has added an item of "tax evasion by falsely deducting input tax", providing an important legal basis for converting false issuance into tax evasion. Under the guidance of this opinion, the liability of invoice-receiving parties has gradually transformed from false issuance to minor crimes.
First of all, at the level of falsely deducting VAT, according to the understanding and application of the Supreme People's Court, the so-called tax evasion by falsely deducting input tax does not exclude the situation of false invoice issuance. Regardless of whether the invoice-receiving enterprise has actual procurement business, as long as the false invoices obtained do not exceed the scope of its tax liability, it can be considered that its subjective purpose is to evade tax payment, and it should not be convicted of false issuance, but should be identified as the act of tax evasion by falsely deducting input tax. For the part of underpaying corporate income tax, consumption tax, etc. by obtaining false invoices, all belong to the tax evasion act of falsely listing expenses and making false tax declarations, and should be characterized as tax evasion acts. At the same time, the crime of tax evasion applies the administrative pre-procedure. If the invoice-receiving party fully pays the arrears of taxes, late payment fees, and fines within the time limit determined by the tax authority, criminal liability will no longer be pursued.
On the other hand, even if the obtained false invoices exceed the scope of tax liability, it does not mean directly constituting the crime of false issuance. It is also necessary to analyze in combination with the exemption clauses for the crime of false issuance, that is, whether the invoice-receiving party has the purpose of defrauding tax deductions and whether tax losses have been caused due to the deduction. If there is no such purpose or loss, the act of the invoice-receiving party paying invoice fees to purchase invoices can be convicted solely of the crime of illegally purchasing special VAT invoices. If it also results in underpayment of corporate income tax and other taxes, it is an act of achieving the purpose of tax evasion by illegally purchasing special VAT invoices, and should be characterized as tax evasion. For example, if an enterprise sets up its own shell small-scale taxpayer to falsely issue special invoices to itself for the purpose of embezzling funds, since small-scale taxpayers adopt the simple tax calculation method and cannot deduct input tax, the small-scale taxpayer must pay VAT in full according to the output tax regardless of the amount of invoices issued. The VAT deducted by the invoice-receiving party is the additional VAT paid by the invoice-issuing party. The increase and decrease offset each other, and it is impossible to cause VAT losses. Even if the falsely increased input tax obtained by the invoice-receiving party through false invoices is higher than its tax liability, it is impossible to cause tax losses due to fraud. Therefore, if it results in underpayment of corporate income tax, it can be convicted of tax evasion.
IV. Administrative Liability Faced by Invoice-Receiving Parties in the "Invoice Economy"
For invoice-receiving parties, although the criminal risk has been reduced, the administrative liability cannot be ignored. First of all, they need to pay the arrears of taxes and late payment fees. In addition, both issuing false invoices without actual goods and agency issuance are considered as false issuance under administrative law in accordance with tax law regulations, and can be handled as tax evasion. The invoice-receiving party also needs to bear a fine of 0.5 to 5 times the underpaid tax. In terms of paying the arrears of taxes, for invoice-receiving parties that obtain falsely issued special VAT invoices and agricultural product purchase invoices, they cannot use the invoices as vouchers for input tax deduction and pre-tax deduction. They usually need to pay the arrears of VAT and add late payment fees. For other taxes and the act of obtaining falsely issued ordinary invoices, the obligation to pay the arrears shall be determined according to different circumstances:
First, for invoice-receiving parties that obtain false invoices due to the lack of source invoices, if they have actually incurred true, reasonable, and relevant expenses and obtained false invoices for cost recording, it is essentially an act of agency invoice issuance. According to tax law regulations, they can require the real seller to issue supplementary invoices. If the real seller cannot be contacted and the conditions specified in the tax law are met, they can use self-made vouchers specified by law for pre-tax deduction without making tax adjustments to corporate income tax.
Second, for invoice-receiving parties whose main purpose is to evade personal income tax, since salary expenses are already eligible for pre-tax deduction, converting them into invoice-based expenses does not falsely increase the scope of pre-tax deduction. Therefore, no further adjustment to corporate income tax shall be made for invoice-receiving parties that do not overstate costs. However, such invoice-receiving parties reduce their personal income tax withholding obligations through false invoice issuance. In many cases of tax evasion of personal income tax investigated and handled in recent years, the method of converting income nature has been adopted, that is, converting comprehensive income with a maximum tax rate of 45% into operating income, and combining with local verified collection policies for operating income to reduce the actual tax rate to less than 10%. The prerequisite for converting to operating income is to package laborers into third-party subjects and convert labor into VAT taxable services, which requires an invoice-issuing party to issue invoices on their behalf. The invoice-issuing party then embezzles funds by splitting income and fraudulently using personal identity information to apply for agency invoice issuance, pays salaries to laborers, and fails to fully perform the withholding obligation. Therefore, the invoice-receiving party shall also bear the responsibility of supplementary withholding of personal income tax. If the invoice-receiving party fails to perform the withholding obligation, the laborers need to declare and pay the arrears of personal income tax by themselves.
Third, for invoice-receiving parties that obtain false invoices due to industry unspoken rules, there is great dispute in practice. The main reason is that under the influence of the industry background, many invoice-issuing parties use information asymmetry or their positional advantages to package themselves as channel partners. At the same time, the funds for accounting basically do not form reflux, but are directly withdrawn by the invoice-issuing party and used for the final purpose. For the invoice-receiving party, in order to obtain business, they have to cooperate with the invoice-issuing party, entrust the invoice-issuing party to carry out marketing or provide other services, and cannot judge the authenticity of the invoice-issuing party's business. From the perspective of the invoice-receiving party, their main demand is to obtain cooperative projects, and they subjectively believe that they have actually paid marketing and service fees. Objectively, the relevant funds have indeed been disbursed without reflux, forming the real cost of the enterprise. There is a cognitive deviation between the invoice-issuing and invoice-receiving parties. If the invoice-issuing party provides services through illegal means such as interest transfer when it can provide legal services, this should not be directly attributed to the invoice-receiving party, and it is inappropriate to impose penalties on the invoice-receiving party.
Fourth, for invoice-receiving parties whose main purpose is to evade consumption tax, if there is no corresponding real business in the invoice issuance chain, they also need to pay the arrears of corporate income tax. In addition, for the consumption tax excessively deducted due to falsely increasing inventory by obtaining false invoices, they also need to bear the obligation to pay the arrears. Furthermore, since most of such invoice-receiving parties aim to evade consumption tax, some invoice-receiving parties, after inputting the falsely obtained invoices into the inventory, consume the falsely increased input tax and costs through falsely increasing unissued income. In this special case, since the invoice-receiving party falsely enters and exits goods, it does not actually cause excessive VAT deduction or excessive corporate income tax deduction, and no adjustment to VAT and corporate income tax shall be made.

Editor's Note: Recently, the Director of the Investigation Bureau of the State Taxation Administration stated in an article that recent cases investigated and handled by tax audit departments have focused on industries such as internet-based freight transport platforms, which also signals the key directions for tax audits in 2026 and beyond. This article will analyze the regulatory trends concerning tax-related risks in the internet-based freight transport industry based on newly introduced policies this year and explore the feasibility of implementing "reverse invoicing" in this sector.

Editor's Note: Not having a reasonable commercial purpose is one of the main bases for tax authorities to adjust civil legal relations, restore the essence of transactions, and levy taxes on real transactions. In recent years, tax authorities in many places have exposed tax evasion cases in which related subjects are used to split income in order to defraud tax preferences, and the rationality of the existence of related subjects has been denied. Based on the typical cases published by the tax authorities, this paper analyzes the boundaries of reasonable business purposes and provides tax compliance suggestions for enterprises to adjust their structure in their operations.

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.

Editor's Note: Recently, the State Taxation Administration (STA) and the Supreme People's Court (SPC) jointly issued the Announcement on Several Issues Concerning the Administration of Taxes and Fees in the Enterprise Bankruptcy Process (No. 24 of 2025), aiming to further standardize the administration of taxes and fees in the enterprise bankruptcy process and improve the certainty and uniformity of law enforcement. The Announcement responds to long-standing controversial issues such as the nature of tax and fee claims and the priority of repayment for newly incurred taxes, reflecting the joint efforts of the judicial and administrative authorities to regulate tax-related matters in bankruptcy proceedings. However, some provisions still have ambiguous expressions, which may lead to differences in understanding in practical operation. Based on the provisions, combined with judicial cases and practical scenarios, this article combs and interprets the key contents of the Announcement item by item, analyzes the relevant tax risks from the perspective of bankruptcy administrators, and puts forward suggestions for properly resolving tax-related disputes.

Editor's Note: Recently, the Supreme People's Court (SPC) released eight typical cases of criminally punishing crimes endangering tax collection and administration, aiming to unify judicial standards and clarify the boundaries of legal application through judicial samples. Among them, the judgment result and key points of Case 1, the tax evasion case involving Guo and Liu, have triggered extensive discussions in practice on issues such as the understanding of the scope of tax liability, the distinction and necessity of subjective intent between tax evasion and tax fraud, and the application of the administrative pre-procedure. This article intends to explore the aforementioned issues in combination with the case.

Editor's Note: Recently, the Supreme People’s Court released eight typical cases of crimes harming tax collection and management, three of which involve fraudulently obtaining export tax rebates. The methods employed in these cases include circular imports and exports, buying export documents and matching them with invoices, and misdeclaring exports, sending a strong signal of continued strict enforcement. To gain a deeper understanding of the current judicial stance, this article will use these three cases as examples to analyze the key legal issues in depth, systematically outline the current judicial consensus on export tax rebate fraud, and, based on this, forecast regulatory trends for 2026 against the backdrop of deepening "data-driven tax governance."

Editor's Note: Recently, the Supreme People's Court released eight typical cases of punishing crimes endangering tax collection and management according to law, involving crimes endangering tax collection and management, such as tax evasion, evading the recovery of tax arrears, defrauding export tax rebates, and falsely issuing special invoices for value-added tax, which effectively responded to new situations and problems in tax-related criminal practice and provided typical judicial samples for the practical application of tax-related judicial interpretations of the two universities. This paper analyzes two cases of tax evasion and one case of tax evasion.