When Receiving a False Special Invoice, What Should an Enterprise Do? (Ⅰ)
At the beginning of 2023, a number of enterprises responded that they have received a notice named Notice of Tax Inspection from the local tax authorities, which is what we often say in Chinese, “税务稽查 (Shui Wu Ji Cha)”. There are several points that the tax authorities mainly focus on:
- Whether certain invoices obtained are the false added-value special invoice; (hereinafter referred to as false special invoices)
- Whether the enterprise has deducted the tax amount and calculated it in the Sales Cost;
- Whether the enterprise has real business transactions with the invoicing party;
- Whether the necessary payments for goods have been made, etc.
After receiving the Notice of Tax Inspection, how should an enterprise start to prepare materials to cope with the tax inspection? Through studying, it is clarified as follows:
- Concept of false special invoicing
False special invoicing refers to a kind of bad behavior of not issuing invoices truthfully. When issuing invoices in the course of commodity transactions, the enterprises/taxpayers, to achieve the purpose of tax evasion, adopt bad behaviors leading to the making of fake commodity name, commodity quantity, commodity unit price, and amount, or even fictitious transaction matters, false invoicing through the use of their so-called familiar relationship.
The actions of false special invoicing are mainly listed as follows: false invoicing by others, false invoicing for oneself, having others false invoice for oneself, and introducing others to false invoicing.
In practice, enterprises occasionally receive false special invoices in the course of their normal business activities. Even though they are not maliciously trying to purchase or fraudulently obtain invoices for VAT deduction or for the purpose of raising the company’s operating costs in order to reduce corporate income tax, it can simply happen.
With the advancement of technology and network technology, it is difficult for even experienced financial and accounting personnel to distinguish the authenticity of VAT invoices and therefore, such incidents are inevitable.
- Penalties when accepting false special invoices
According to Article 1 of the «Circular of the State Administration of Taxation on the Settlement of the Taxpayers Obtaining the False Special Invoice of Value-added Tax without Acknowledge», “If the invoice obtained party uses the special invoices falsely issued by others and declares to the tax authorities for a tax deduction, it shall recover the tax in accordance with the «Tax Collection Administration Law of the People’s Republic of China» and its relevant regulations, and impose a fine of up to five times the amount of tax evasion; if the input tax is greater than the output tax, it shall also reduce the input tax amount retained by it.”
Among them, enterprises that are aware the special invoices obtained are falsely issued, or those which let others provide them with falsely issued special invoices should be punished severely.
To summarize, if an enterprise accepts a falsely issued special invoice, not only should all the taxes already deducted be retro-paid and a fine of up to five times should be imposed, but the tax authorities will also focus on whether there is an intentional act of competent will on the part of the enterprise, which is an important factor in the measurement of the fine. If the enterprise has evidence or reason to prove that it has real business dealings with the invoicing party and the enterprise itself has obtained the false special invoice in good faith, the situation will be treated differently.
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References:
«Circular of the State Administration of Taxation on the Settlement of the Taxpayers Obtaining the False Special Invoice of Value-added Tax without Acknowledge»
http://www.chinatax.gov.cn/chinatax/n359/c488/content.html
