Editor's Note: Article 204(2) of the Criminal Law is a key provision distinguishing the crime of tax evasion from the crime of fraudulently obtaining export tax refunds, yet it has long remained "dormant." In practice, courts have rarely accepted defense arguments based on this provision. Following the implementation of the Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Tax Collection and Administration (Fa Shi [2024] No. 4), the conviction standards for tax-related crimes have undergone significant adjustments. This article conducts an empirical analysis of relevant cases,梳理 the core reasons why courts reject related defense opinions, references authoritative views from the Understanding and Application by the Supreme People's Court and Supreme People's Procuratorate, and proposes the distinction standards and defense paths for "pay first, defraud back" conduct.

I. The "Designed" Provision and Its Dormant Status

It is generally recognized that Article 204(2) of the Criminal Law adopts a "split evaluation" rule: for the same act of fraudulently obtaining export tax refunds, the amount within the scope is characterized as tax evasion, while the amount exceeding the scope is characterized as tax fraud. The legislative logic is not complex: a taxpayer first pays taxes into the state treasury, then defrauds the taxes back through deceptive means such as falsely declaring exports (what we call "pay first, defraud back"). If the amount defrauded back does not exceed the amount already paid, it is essentially equivalent to "not paying" and should be treated as tax evasion; if the amount defrauded back exceeds the amount already paid, the excess portion is truly "defrauding state money" and should be treated as the crime of fraudulently obtaining export tax refunds. The legislator intended to make a distinction: "defrauding back one's own money" and "defrauding state money" differ in nature and should differ in criminal liability.

This design is reasonable in itself, but judges have almost never decided cases according to this logic. Searching case databases with the keyword "Article 204(2) of the Criminal Law," cases citing this provision in public judgment documents are extremely rare. We selected six cases related to fraudulently obtaining export tax refunds for empirical analysis, and the results show: among five cases where defense counsel proactively proposed applying Article 204(2), courts rejected all of them, with an acceptance rate of zero.

Does this mean that the "split evaluation" principle has not actually been recognized by courts? The answer is no. The Fourth Criminal Division of the Supreme People's Court, in its Understanding and Application of the Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Tax Collection and Administration (published in Law Application, Issue 4, 2024, authors Teng Wei, Dong Baojun, et al., hereinafter referred to as "SPC Fourth Division Understanding and Application"), explicitly invokes the spirit of Article 204(2) as a normative reference for distinguishing the crime of falsely issuing VAT invoices from the crime of tax evasion. In the Guo Mou and Liu Mou tax evasion case published by the Supreme People's Court in 2025 (included in Criminal Trial Reference No. 1669), the second-instance court changed the conviction from the crime of falsely issuing VAT invoices to tax evasion. Its adjudicative logic was: based on whether the input tax falsely increased through obtaining falsely issued invoices falls within the taxpayer's scope of tax payment obligation, distinguish whether the actor subjectively acted with the intent to defraud state taxes or the intent to evade tax payment obligations, further confirming the "split evaluation" distinction logic.

The above demonstrates that the "split evaluation" logic is reasonable and has not been negated in tax-related crimes. However, Article 204(2) still faces numerous insurmountable application obstacles, leading to its "dormant" status.

II. Why Is the Provision "Dormant"? From Theoretical, Technical, and Policy Perspectives

The dormancy of Article 204(2) is not accidental, but the result of combined difficulties at three levels: theoretical, technical, and policy. At the theoretical level, there is a fundamental question of "whether tax evasion can be established post hoc"; at the technical level, there is an operational obstacle of "how to calculate the taxes already paid"; at the policy level, there is an institutional dilemma of "whether to apply the administrative pre-procedure." These three levels progress layer by layer, jointly causing the "dormancy" of this provision in the context of fraudulently obtaining export tax refunds.

(A) Theoretical Difficulty: Can Tax Evasion Be Established "Post Hoc"?

The most fundamental theoretical difficulty facing Article 204(2) is: taxes have already been paid into the state treasury, tax payment obligations have been fully performed, so is defrauding the money back at this point still "tax evasion"? In other words, does this "post hoc tax evasion" still meet the constitutive elements of "tax evasion"?

Opponents argue that the crime of tax evasion is premised on "failure to perform tax payment obligations" and cannot be "established post hoc." Since "tax payment obligations" have been fully performed, the premise of "failure to perform tax payment obligations" no longer exists. Ownership of the taxes has already been transferred to the state, and when the taxpayer defrauds the taxes back at this point, the nature is more like "defrauding state property." Opponents further question that artificially splitting one act into two acts of "tax evasion + tax fraud" and imposing concurrent punishment for multiple crimes violates the principle against double evaluation and the theory of crime numbers, and therefore this provision is a "legislative error."

Supporters argue that tax evasion is not limited to "pre-event tax evasion" but also includes "post hoc tax evasion." The Fourth Criminal Division of the Supreme People's Court explicitly states in its Understanding and Application: the core of determining tax evasion in criminal law lies in whether tax payment obligations are evaded. Whether one fails to pay or underpays in advance, or pays taxes first and then defrauds them back, the essence is evading tax payment obligations and should be evaluated as tax evasion rather than tax fraud. This interpretation indicates that the essence of the crime of tax evasion is "evading tax payment obligations," and "post hoc tax evasion" conduct of "pay first, defraud back" should also be evaluated as tax evasion.

(B) Technical Difficulty: How Exactly Should "Taxes Already Paid" Be Calculated?

At the operational level, Article 204(2) needs to overcome the problem of how to calculate "taxes already paid." Regarding "taxes already paid," there are two opposing views in practice and theory: some believe it should be based on the VAT actually declared and paid by the export enterprise to the tax authority; others believe that the VAT already paid at various domestic stages of the exported goods and ultimately borne by the export enterprise constitutes "taxes already paid." In practice, courts' non-application of Article 204(2) is mostly based on the first view:

For example, in the Shi Moujia case ((2023) Min X Xing Zhong No. 207), the defendant Shi Moujia actually controlled Fujian Moumou Company, purchased 82 customs declaration forms without actual goods export, falsely issued VAT invoices, and declared export tax refunds of more than 12.75 million yuan. Defense counsel argued that "Article 204(2) of the Criminal Law should apply," but the court explicitly rejected: "There is no evidence in this case proving that what Shi Moujia defrauded was the taxes already paid by Moumou Company, and Shi Moujia personally is not the taxpayer in this case, which does not fall within the circumstances applicable to Article 204(2) of the Criminal Law."

In the Chen Mou case ((2019) Ji X Xing Zhong No. 16), the defendant Wang Mou actually controlled Yanbian Hongsheng Economic and Trade Co., Ltd., purchased 351 customs declaration forms, falsely issued VAT invoices from Yingnan Fuyuan Crafts Co., Ltd. operated by his mother and Linyi Zuolong Home Furnishing Co., Ltd. registered by himself, declared tax refunds of more than 14.27 million yuan, and actually obtained refunds of more than 12.03 million yuan. Fuyuan Company and Zuolong Company did pay taxes of more than 8.96 million yuan to the tax authority after issuing invoices, and defense counsel argued that "these 8.96 million yuan belong to taxes already paid and should be deducted from the criminal amount." But the court rejected: "Yingnan Fuyuan Crafts Co., Ltd. and Linyi Zuolong Home Furnishing Co., Ltd. had no business dealings with Yanbian Hongsheng Economic and Trade Co., Ltd. Even if the appellant paid corresponding taxes to achieve fraudulently obtaining export tax refunds, it is irrelevant to the conviction and sentencing in this case."

In the Fulton case ((2015) Hang Xi Xing Chu Zi No. 355), the defendant Hangzhou Fulton Industrial Co., Ltd. purchased paper at tax-inclusive prices from the affiliated company Jixin Company (VAT was paid at the procurement stage), and when exporting, knowingly that the goods should be classified under code 4811 (tax refund rate 0), falsely declared them as code 4823 (tax refund rate 13%), fraudulently obtaining export tax refunds of more than 1.84 million yuan. Defense counsel argued that "what was defrauded was taxes previously paid." But the court rejected: "Although the company's VAT tax returns submitted by defense counsel reflect payment of VAT, the VAT it paid to the West Lake District National Tax Bureau was not for the tax-free goods involved in the foreign trade export in this case."

The above cases illustrate that calculating "taxes already paid" presents considerable practical difficulties. For taxes already paid by upstream enterprises and borne by export enterprises, even if what upstream enterprises paid is precisely the tax burden that exported goods should bear in the domestic trade stage, courts also hold that it does not belong to the export enterprise's "taxes already paid," and thus do not deduct it from the criminal amount.

(C) Policy Difficulty: Should the "Administrative Pre-procedure" Clause for Tax Evasion Apply?

If theoretical and technical difficulties are overcome, Article 204(2) still faces a policy issue: should the "administrative pre-procedure" apply? Article 201(4) of the Criminal Law (crime of tax evasion) stipulates: those who, after receiving a recovery notice issued by the tax authority in accordance with law, pay the overdue taxes, pay late fees, and have received administrative penalties, shall not be held criminally liable. This indicates that if Article 204(2) is applied to characterize the "defrauded back taxes already paid" portion as tax evasion, the actor may completely obstruct criminal liability by paying overdue taxes and accepting administrative penalties. However, in recent years, the requirement for cracking down on fraudulently obtaining export tax refunds is zero tolerance. If courts apply this provision and thereby allow actors to escape punishment, they may face considerable pressure, thus leading to the situation of "one-size-fits-all" characterization as the crime of fraudulently obtaining export tax refunds.

III. Defense Space: Under What Circumstances Can One Strive to Apply Article 204(2)?

Of course, we also see signs of the "dormancy" loosening. Judicial organs have begun to emphasize "the compatibility of crime, responsibility, and punishment" and no longer adopt a "one-size-fits-all" approach. In 2025, the Supreme People's Court published the Guo Mou and Liu Mou tax evasion case, explicitly proposing the "scope of tax payment obligation" standard in the false invoicing context. This indicates that the "split evaluation" method of Article 204(2) is gradually being applied, and the provision is gradually being activated from its "dormant" state. To activate this provision in the field of fraudulently obtaining export tax refunds, several key issues regarding subject, amount, subjective purpose, and "administrative pre-procedure" need attention.

(A) The Subject Should Adopt a Substantive Interpretation of "Actual Tax Bearer"

Article 204(2) literally requires the subject to be a "taxpayer," but this should not be mechanically understood as a formal tax payment obligor. As long as the subject actually bears the corresponding taxes and what is defrauded is the taxes borne by itself, Article 204(2) should apply. According to export VAT policies, for foreign trade-type export enterprises, goods within the statutory export scope are subject to tax exemption and refund, meaning exported goods are tax-exempt, while taxes paid at the domestic trade stage of the goods and borne by the export enterprise are refunded, with this portion of taxes evidenced by input invoices obtained by the export enterprise. For production-type export enterprises, the tax exemption, credit, and refund policy applies: domestic sales goods of the export enterprise are subject to taxation policy, exported goods are subject to tax exemption policy, input tax is first credited against output tax generated from domestic sales, and the remaining portion meeting statutory conditions may be applied for refund. It can be seen that foreign trade-type export enterprises have no obligation to pay VAT at all. The VAT burden is passed on layer by layer through the deduction chain, which means that formal taxpayers and actual tax bearers are necessarily separated. If "taxes already paid" are considered to be those paid by the export enterprise, then for foreign trade-type export enterprises, Article 204(2) clearly has no room for application. The focus of reviewing the subject element should not be "whether one is a formal taxpayer," but "whether one actually bears the corresponding taxes" and "whether what is defrauded is the taxes borne by oneself." As long as these two substantive conditions are met, the subject should be recognized as qualified.

(B) The Amount Should Focus on the "Scope of Taxes Already Paid"

The key to applying Article 204(2) lies in accurately distinguishing "defrauding back within the scope of taxes already paid" from "defrauding beyond the scope of taxes already paid." This requires defense counsel to prove that the export tax refunds defrauded by the actor correspond to taxes actually paid by the enterprise, and that the defrauded amount does not exceed the scope of taxes already paid. To this end, during defense, it is necessary to sort out in advance the enterprise's VAT input invoices, tax payment certificates, customs declaration forms, foreign exchange verification records, and other materials, and when necessary, through accounting calculations or external audit certification, conduct corresponding splitting between "taxes already paid" and "defrauded back taxes."

(C) The Subjective Purpose Is "Evading Tax Payment Obligations" Rather Than "Defrauding State Taxes"

The essential difference between the crime of tax evasion and the crime of fraudulently obtaining export tax refunds lies in subjective purpose: the former is "should pay but not pay" (evading tax payment obligations), while the latter is "defrauding state property" (illegally possessing state taxes). The adjudicative reasoning in the Yu Mou and Zhu Mou case (second instance by Huangshi Intermediate People's Court of Hubei Province, specific case number desensitized) is representative: "The subjective aspect of the crime of fraudulently obtaining export tax refunds is that the actor, without actually performing tax payment obligations, obtains illegal benefits from state export tax refunds. The purpose of the crime of tax evasion, on the other hand, is that the actor, under circumstances of having tax payment obligations, fails to pay or underpays taxes, evading tax payment obligations." The problem, however, is that courts often merely presume the intent to defraud taxes based on "the implementation of deceptive acts such as falsely declaring exports," without in-depth examination of the actor's true subjective purpose.

The SPC Fourth Division Understanding and Application reiterates the "principle of unity of subjective and objective elements," and an increasing number of tax law cases also reflect courts applying this principle. The focus of defense counsel's work should be to collect evidence proving that the actor's subjective purpose is "evading tax payment obligations," using objective evidence to refute the court's subjective presumption.

(D) Overcoming Concerns About the "Administrative Pre-procedure"

As mentioned above, case-handling organs tend to holistically characterize the conduct as the crime of fraudulently obtaining export tax refunds to avoid the "administrative pre-procedure" exculpation channel, and defense counsel should proactively overcome concerns about the "administrative pre-procedure." First, defense counsel can proactively advocate for the administrative pre-procedure. The "administrative pre-procedure" is not an exculpation channel for the crime of tax fraud, but rather the legal consequence of the conduct of "defrauding back within the scope of taxes already paid" after being re-characterized as tax evasion. It can be advocated that the tax authority first makes an administrative disposition, and then decides whether to pursue criminal liability based on the administrative disposition result. Second, if the enterprise has already paid overdue taxes, paid late fees, and accepted administrative penalties, it can advocate applying the "administrative pre-procedure" exculpation clause for the crime of tax evasion, and not pursue criminal liability. Third, even if complete exculpation is not possible, remedial loss recovery can serve as an important circumstance for lighter or reduced punishment.