I. Case Brief

Zhao was the manager of Company A, responsible for self-sourcing business, self-management, and bearing its own profits and losses. In August 2010, Company A signed a project cooperation and development agreement with XX Group, stipulating that each party would bear 50% of the development costs and expenses, and each would receive two building blocks, with Company A responsible for construction. To solve the construction funding problem, Zhao negotiated with Company B and decided that Company B would finance Company A through trade. The method was: Company A purchased steel from Company B and issued commercial acceptance bills in the name of payment for goods, used Company B's credit at the bank to discount the bills, and then Company B purchased steel from Company C, which was actually controlled by Zhao, in the name of payment for goods to transfer the discounted funds to Company C. After receiving the funds, Company C transferred them to Company A in the name of other receivables or directly purchased steel and handed it over to Company A for construction. After the bill expired, Company A returned the money due to Company B, and Company B returned it to the bank.

In the above trade financing process, because Company C issued more than 120 million yuan of special VAT (input) invoices to Company B, Company C left the corresponding amount of special VAT (output) invoices, and needed to pay the corresponding VAT. To this end, Zhao found Company T and Company N, for which Liu was the legal representative, and Company T issued 103 special VAT (input) invoices to Company C, with a total tax amount of 16.15 million yuan and a total price and tax of 111 million yuan; Company N issued 52 special VAT (input) invoices to Company C, with a total tax amount of 660,000 yuan and a total price and tax of 4.55 million yuan. Company C certified and deducted all the input invoices issued by Company T and Company N. In this process, the funds transferred by Company C to Company T and Company N in the name of payment for goods flowed back after deducting the agreed amount, and Company T and Company N obtained a total of 4.75 million yuan of illegal profits in the transaction process of falsely issuing special VAT (input) invoices to Company C.

The court of first instance held that the defendant units C, T, and N companies and the defendants Zhao and Liu, as directly responsible persons, violated the national tax management system and falsely issued special VAT invoices with a huge amount of tax, all constituting the crime of falsely issuing special VAT invoices. Therefore, each defendant unit was sentenced to a fine ranging from 80,000 to 300,000 yuan, and the two defendants were sentenced to fixed-term imprisonment of ten years and six months each.

The defendant units and defendants refused to accept the first-instance judgment and appealed, arguing that the subjective purpose was trade financing, with the purpose of obtaining money for project construction, and there was no purpose of defrauding national tax revenue. Objectively, it did not cause tax losses to the state. Although it violated the corresponding regulations, it should not be punished as a crime. After hearing the case, the second-instance court revoked the first-instance criminal judgment and changed the judgment to find Company C and Zhao guilty of illegally purchasing special VAT invoices, and sentenced them to a fine of 150,000 yuan and imprisonment of two years and six months respectively; Company T, Company N, and Liu were found guilty of illegally selling special VAT invoices, and were sentenced to fines of 150,000 yuan, 50,000 yuan, and imprisonment of three years respectively, and the illegal income of 4.75 million yuan was confiscated.

The second instance court held that: The collection of VAT is based on the fact that there is an actual flow of goods or taxable labor services and there is an increase in value. Issuing special VAT invoices without real trade is a kind of false issuance. This kind of behavior seriously disrupts the normal management order of special VAT invoices and has constituted an administrative violation. However, the crime of falsely issuing special VAT invoices as a criminal offense should not only grasp whether there is a false issuance of special VAT invoices in form, but also grasp whether the actor has the subjective purpose of defrauding national tax revenue and whether it has caused national tax revenue losses in substance.

In this case, from the perspective of the cause of Company C's false issuance of special VAT invoices to Company T and Company N, it was due to the previous trade financing between Company C, Company A, and Company B. From the perspective of the cause of the matter, Company C's false issuance of special VAT invoices to Company T and Company N was not subjectively for the purpose of defrauding national tax revenue. Although the above-mentioned falsely issued special VAT (input) invoices have all been certified and deducted, considering the large number of output invoices left by Company C for Company B due to the issuance of special VAT invoices, this part of the invoices has no factual basis for paying VAT because no actual flow of goods has occurred and no real increase in the value of goods has occurred. Failure to pay this part of the tax will not cause actual tax losses to the state, and the existing evidence is insufficient to determine that Company C's certification and deduction of the falsely issued special VAT (input) invoices caused national tax losses.

In summary, Company C and its actual controller Zhao do not have the subjective purpose of defrauding national tax revenue, and the evidence to determine that national tax losses have been caused objectively is insufficient. Correspondingly, Company T, Company N, and their legal representative Liu do not constitute the crime of falsely issuing special VAT invoices for the same reason.

III. Tax Lawyer Analysis

Whether the false issuance behavior changes the tax payment result is not only related to the objective fact of whether it will cause national tax losses, but also to the subjective purpose of determining whether the behavior has the subjective purpose of defrauding national tax revenue, and then determining the crime and non-crime, this crime and that crime has a vital role. In this issue, we will focus on whether the false issuance behavior in this case has a factual basis for paying VAT and explore the different views of friends. In addition, how to view the relationship between the transfer of input tax stipulated in the tax law and the loss of national tax revenue, and how to distinguish the constituent elements of the crime of falsely issuing special VAT invoices and illegally selling special VAT invoices will be discussed in the next few issues.

A friend believes that the second-instance court in this case believes that because there is no actual flow of goods, no real increase in the value of goods has occurred, and there is no factual basis for paying VAT, this view has problems. According to Article 19 of the "Provisional Regulations on Value-Added Tax" regarding the time when the obligation to pay value-added tax occurs: If a taxable sales behavior occurs, it is the day when the sales payment is received or the voucher for requesting the sales payment is obtained; if the invoice is issued first, it is the day when the invoice is issued. As long as you issue a VAT invoice, the obligation to pay tax occurs, even if you have not received money, shipped goods, or provided any services, the tax law also requires you to make VAT (output) processing. The unique deduction mechanism of the VAT system determines that special VAT invoices are not only payment vouchers, but also important vouchers for paying VAT, which is equivalent to real money tax. If it is determined according to the court, basically all false issuances do not have real commodity service flows. If there is no factual basis for paying VAT, how can the national VAT be guaranteed? Therefore, for false issuance behaviors, once a special VAT invoice is issued and certified for deduction, it should be regarded as having a factual basis for paying VAT. The author does not agree with this, and the specific reasons are as follows:

1. The deduction of invoices cannot be used as a criterion for determining whether false issuance behaviors should pay VAT

First and foremost, an invoice is a voucher that reflects facts. According to Article 3 of the "Measures for the Administration of Invoices of the People's Republic of China": The term "invoice" as used in these Measures shall refer to the payment and receipt voucher issued and received in the course of purchasing and selling commodities, providing or receiving services, and engaging in other business activities. Article 20 stipulates that: Units and individuals engaged in the sale of goods, the provision of services, and other business activities shall, when collecting payments for external business transactions, issue invoices to the payers; under special circumstances, the payers shall issue invoices to the payees. The above-mentioned basic regulations on invoice management indicate that an invoice is one of the vouchers that should be fulfilled in the payment and receipt behavior during the business transaction process. The issuance of an invoice should rely on the objective fact that a business behavior has occurred. The above regulations do not state that the issuance of an invoice is regarded as the occurrence of a business or transaction fact. Therefore, it cannot be inferred that a business fact must have occurred based on the act of issuing an invoice.

Secondly, the regulations on the time of occurrence of value-added tax obligations have specific contexts. Article 19 of the "Provisional Regulations on Value-Added Tax" concerning the prior issuance of invoices states that the day of issuance of the invoice is the day on which the value-added tax obligation occurs, which is conditional, that is, a taxable sales behavior has occurred. The value-added tax taxable behaviors listed in Article 1 of the "Provisional Regulations on Value-Added Tax" include the sale of goods or processing, repair and replacement labor (hereinafter referred to as labor), the sale of services, intangible assets, real estate, and the import of goods within the territory of the People's Republic of China. If the above behaviors do not occur, there will be no value-added tax obligation, so what time does it occur? If only the issuance of an invoice is used to determine whether a value-added tax obligation has arisen, then if an invoice is issued incorrectly and allowed to be cancelled, can the fact that has already occurred be eliminated? Therefore, the regulation that the issuance of an invoice in advance gives rise to a tax obligation can only be applied if the prerequisite of a value-added tax taxable act is met.

Furthermore, the judicial recognition cannot be obtained only by proving the objective facts of the transaction by issuing a special VAT invoice. According to Article 5, Paragraph 1 of the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Cases Involving Disputes over Sales Contracts" (Fa Shi [2020] No. 17): If the seller only proves that it has fulfilled its obligation to deliver the subject matter with a special VAT invoice and tax deduction information, and the buyer does not recognize it, the seller shall provide other evidence to prove the fact of delivery of the subject matter. That is to say, a special VAT invoice alone cannot be the basis for judging whether there is a real transaction relationship between the parties.

2. The absence of goods and services circulation in the act of issuing invoices cannot be statically and isolatedly equated with the non-occurrence of VAT taxable facts.

Value-added tax is a turnover tax. Through the chain composed of general value-added tax payers, part of the tax is paid in installments, and the company that breaks the chain ultimately bears all the tax. The value-added tax paid by each company on this chain when purchasing goods and services from the upstream company, that is, its own value-added tax (input) tax amount, is essentially a tax payment paid to the tax bureau on behalf of the final consumer, which can be understood as a claim against the tax bureau. The tax bureau will return this money when it receives a new installment payment from the next company; and the value-added tax (output) tax received from the downstream company when selling is part of the installment payment that the downstream company has to pay to the tax bureau on behalf of the final consumer, and it is only handed over to the tax bureau through its own hands, which can be understood as a liability to the tax bureau.

If you want not to owe the tax bureau, you should pay the value-added tax (output) tax, and the tax bureau will refund the value-added tax (input) tax that you paid in advance to you, that is, the tax payable for each period = output tax - input tax. Generally speaking, everyone does not do loss-making business, and goods and services are value-added, so it is normal for output to be greater than input. At this time, there is more money paid to the tax bureau and less money refunded. This difference is the tax payable for each period. If you think carefully about these differences, they are not paid out of your own pocket but by the downstream company. By analogy, until the last company has no one to pay this money for you, you have to bear this money yourself. If the tax payable is negative, it means that your claim against the tax bureau is greater than your debt. The previous practice was that the tax bureau kept it to offset the tax that should be paid in the future. Currently, tax authorities across the country are vigorously promoting the refund of tax credits to help companies in distress, that is, directly refunding the money to companies to alleviate the pressure on working capital.

The principle of value-added tax is that the chain is continuous, and the identity of each company in the middle is the agent for collection and payment. The value-added tax corresponding to the value-added generated by the goods and services in his link is paid to the tax bureau on behalf of the final consumer. In this process, the company at most loses the time value of some funds and does not actually bear the tax. Therefore, a link of issuing a false invoice may intercept the value-added tax actually borne by the final consumer in this link, or it may cooperate with downstream companies to intercept the tax in the subsequent links. We should not only focus on whether the flow of goods and services occurs in the link of issuing a false invoice, but also on the impact on the subsequent value-added tax chain.

3. The key to the fact that the act of issuing invoices in this case does not have the basis for paying VAT is that the entire chain does not cause tax losses.

Combining the case, the following scenario is assumed. Comparing with the general situation of issuing a false invoice will help everyone understand why the second instance court made this conclusion. Assuming that Company C in this case actually sells steel to Company B, and Company B wants to issue a special invoice, Company B will sell it to Company A for use at 0.5 times the price. Company C generated an output tax of 1 million yuan for selling this batch of steel. Because Company C bought all the steel without invoices to save money, the input tax was 0, so it had to pay 1 million - 0 = 1 million yuan of value-added tax; Company B sold it to Company A for use at 0.5 times the price. Even if Company A does not want an invoice, Company B still has to separate the price and tax and truthfully declare the 1.5 million yuan of output tax for the unbilled income, so the output minus the input is 1.5 million - 1 million = 500,000 yuan of value-added tax. From the whole process, C is the starting point of the value-added tax chain, and A is the end point of the value-added tax chain. The steel purchased by A includes 1.5 million yuan of value-added tax that should be paid to the state, but 1 million and 500,000 yuan of which are paid to the tax bureau by Company C and Company B first, and the actual money is also paid out through the price-tax combined payment.

Scenario 1: Using fake to cover up the real cannot change the real tax obligation. Intercepting the tax payable by issuing false (input) invoices is a typical act of having others issue false invoices for themselves.

In order not to pay the corresponding tax, Company C then falsely issued 1.2 million yuan of value-added tax (input) invoices to Company T and Company N. With the output tax unchanged, 1 million - 1.2 million = -200,000. Company C not only does not have to pay a penny to the tax bureau, but also obtains a 200,000 yuan tax refund from the tax bureau. The chain continues to A. The purchase price remains unchanged, and the amount paid by A still includes 1.5 million yuan of value-added tax that should be paid to the state. As mentioned above, the input tax of each company on the chain is essentially the value-added tax paid in advance by the end user A. Therefore, the 1.2 million yuan of value-added tax input tax falsely issued by C falsely offsets the 1.5 million yuan of value-added tax that A has paid through the price-tax combined payment and should be paid to the state. The state only receives 300,000 yuan, of which 500,000 yuan is paid by B, and 200,000 yuan is paid to Company C, for a total loss of 1.2 million yuan of value-added tax.

Scenario 2: Hiding income and evading taxes with a mixture of truth and falsehood, selling surplus value-added tax (output) invoices and collecting tax points, is a typical act of issuing false invoices for oneself and for others.

Some people say that T and N companies are not shell companies. Now invoices need to be certified for deduction. If they falsely issue 1.2 million yuan of output tax, don't they have to pay taxes? So why do T and N companies sell invoices? The biggest possibility is that they have real purchase and sale business. They have input invoices when purchasing, but many customers do not want invoices when selling. Anyway, it is necessary to declare VAT output for un-invoiced income. Some people need to take it to issue to the other party, which can not only sell invoices to collect some points, but also conceal the real sales revenue.

Suppose T and N companies legally obtained 1 million input in the past, and the output tax corresponding to the real sales of un-invoiced income is 2 million. They should declare and pay 2 million - 1 million = 1 million VAT. After falsely issuing a VAT (output) invoice with a tax amount of 1.2 million to Company C, they concealed the real income and falsely declared and paid 1.2 million - 1 million = 200,000 VAT. On the VAT chain of T, N companies and the actual sales object, they paid 1 million yuan less VAT to the state. This is a typical false issuance for themselves in the four forms of false issuance.

Since T and N falsely issued special invoices to Company C, they also joined the latter's VAT chain. At this time, the chain is completed when it flows to A. The state should receive 1.7 million VAT, of which T and N companies have paid 200,000, Company C has obtained a refund of 200,000 from the tax bureau, and Company B has paid 500,000. The state has actually received 500,000 VAT, and 1.2 million VAT is still intercepted by Company C. Generally speaking, T and N will not help C profit for nothing, and they will have to collect some tax points according to industry rules. In this case, T and N are falsely issuing for others under the four forms of false issuance.

In the third case, using fake to cover up fake is always fake. It is impossible to generate a real tax obligation. At the same time, the VAT (output) tax amount and the VAT (input) tax amount are falsely increased. After the input and sales are offset, the VAT chain does not cause a loss of state tax, which is a typical false issuance behavior that is not intended to defraud state tax.

In this case, for the needs of trade financing, A, B, C, N, and T fabricate steel purchase and sale behaviors. The contract and invoice flow chain are complete, but no real VAT taxable behavior occurs on the entire VAT chain, that is, the last batch of steel does not reach A's hands, but N and T have already or are preparing to sell it to the real user, then the VAT of this batch of steel should be borne by the real user, and paid by N, T and the taxpayers on their chain, and the state's VAT is guaranteed. Of course, N and T cannot have the aforementioned situation of falsely issuing for themselves, otherwise N and T will independently constitute a crime of false issuance.

Whether the false issuance behavior of N, T and C will cause tax losses to the state, the key here is whether the output tax amount is real and sufficient to cover the falsely issued input. Since there is no actual steel purchase and sale, there is no need to pay VAT, but in order to cooperate with the financing review, the output is fabricated, that is, the false debt to the tax bureau is increased; in order to pay less tax that should not be paid, the input is falsely issued, that is, the false creditor's right to the tax bureau is increased. After the output is reduced by the input, A will eventually bear less VAT that should be borne by the final consumers on other chains. In this process, the state not only does not lose tax, but also collects more of A's 'false issuance tax'. Of course, if too much force is used, the falsely issued input is greater than the fabricated output, and the nature of taking advantage of the state is transformed into the aforementioned first case, forming the fact that others falsely issue for themselves to defraud and intercept state tax.

The Second Instance Court fully reflected the above content in the process of evaluating the evidence in this case. The judgment held that the evidence that Company C's falsely issued VAT special (input) invoices caused state tax losses was insufficient because, on the one hand, the existing evidence could not rule out the possibility that the falsely issued VAT special (input) invoices obtained by Company C were used to deduct the above-mentioned falsely issued VAT special (output) invoices; on the other hand, it was also insufficient to prove that the VAT special (output) C invoices deducted contained the situation where VAT should be paid due to the existence of real transactions. That is to say, the existing evidence cannot rule out the reasonable suspicion of using fake to cover up the fake tax obligation, that is, there may be the aforementioned third situation, and it is not enough to prove the situation of using fake to cover up the real tax obligation, that is, to identify the aforementioned first situation. To determine that Company C has a real tax obligation, resulting in the interception of tax and causing state losses, it does not meet the criminal trial standard of clear facts and sufficient evidence.

In summary, the author believes that to consider whether a false issuance behavior has a factual basis for paying VAT, it cannot be determined by whether an invoice is issued, nor can it be mechanically equated with not having to pay VAT simply because there is no real flow of goods and services and no increase in value, but it should be extended to the VAT chain to see whether this false issuance behavior affects the state's VAT receivable. If it causes a loss of state VAT, of course, the corresponding VAT should be paid, which has a factual basis for paying VAT; otherwise, if no VAT taxable fact occurs on the entire chain, and it does not affect the real chain of goods and services, and does not cause a loss of state VAT, the behavior does not have a factual basis for paying VAT.

IV. Reference Cases