Editor's note: In recent years, there have been a number of cases of false billing and tax evasion in the flexible employment industry, and some employment enterprises have been subject to administrative or criminal penalties for making false invoices on the Linggong platform in order to reduce labor costs, and some high-income groups such as anchors and executives have also been punished for evading individual income tax and changing the nature of income through flexible employment platforms. On March 18, the Supreme People's Court and the Supreme People's Court issued new tax-related judicial interpretations, and major changes occurred in the provisions of tax evasion and false issuance. At the press conference, the Supreme People's Procuratorate also clearly pointed out that in recent years, tax-related crimes have shown new characteristics such as the use of online platforms to open falsely, "planning" has become the dominant trend, and the problem of tax evasion in new business industries has become prominent. In the future, the eight departments will continue to focus on this and continue to severely punish and crack down. In this context, what changes will be ushered in in the tax-related risks of the three parties of flexible employment, and how should we be vigilant and deal with them?
1. Cases of suspected false opening and tax evasion in flexible employment business are frequent
As an emerging business organization, under the dual influence of the continuous expansion of the sharing economy market scale and the continuous progress of Internet information technology, the flexible employment platform focuses on breaking down the information barriers between employment enterprises and human resources, which not only plays an important role in promoting employment and ensuring people's livelihood, but also helps to solve the problems of high tax burden caused by the inability of employers to obtain invoices for accepting personal services in the process of operation. However, in practice, it is not difficult to see that flexible employment platforms are often used to falsely open or evade taxes, for example, in industries such as online live broadcasts and high-income groups, employers and employees use flexible employment platforms to cooperate with the return or verification policies of "tax depressions" to carry out illegal and criminal acts such as false billing and tax evasion. This is illustrated in the following example:
(1) The employing enterprise uses the flexible employment platform to reduce costs, and the personnel manager is subject to criminal sanctions
In September 2023, the Shanghai High Court announced a case in which the responsible HR manager was sentenced for using a flexible employment platform to issue false invoices to reduce costs for the company. According to the judgment documents, during the period when the defendant Chang was engaged in personnel work in the employing enterprise, in order to reduce the company's operating costs, split wages and avoid taxes for employees and technical personnel, in the name of flexible employment, in the absence of real services, he paid 6.8% of the invoicing fee to let the Linggong platform return to pay salaries, and falsely issued a total of more than 700 yuan of special VAT ticket price tax for the employing enterprise. Defendant Chang X was sentenced to one year and three months imprisonment with a suspended sentence of one year and three months for the crime of falsely issuing special VAT invoices.
(2) The flexible employment platform uses the qualification of entrustment to issue false invoices to the outside world
In July 2023, the Shanghai Baoshan District People's Court issued a judgment on a case of false invoicing by a flexible employment platform. After obtaining the qualification of entrustment and collection, the flexible employment platform allows the original employees of the employing enterprise or self-employed individuals who have long-term cooperation to register as freelancers in its platform and accept targeted tasks. The platform pays salaries on behalf of the employing enterprises and collects service fees from the employing enterprises. Under the circumstance that the platform only provides payroll services, it falsely issues special VAT invoices with the name of various service fees to the employing enterprises, and the invoice amount is the sum of the salaries and service fees issued on behalf of the employer. The platform and the directly responsible supervisor, defendant Liang Moumou, were respectively sentenced to a fine of 500,000 yuan, three years imprisonment, and a five-year suspended sentence for the crime of falsely issuing special VAT invoices.
(3) Online anchors are subject to administrative punishments for evading individual income tax through flexible employment platforms
In May 2023, a case of personal income tax evasion by an online anchor announced by the Guangxi Taxation Bureau showed that Wu, the anchor of the Douyu live broadcast platform, divided the audience tips with the Douyu platform and settled it through 5 flexible employment platforms. Among them, a part of the remuneration for labor services was not declared and taxed, and this part was determined by the tax authorities to be a fine of 1.46 million yuan for failing to declare and pay taxes, and the other part was converted into business income, which was determined by the tax authorities to be tax evasion and fined 1.81 million yuan.
(4) Summary: The tax-related risks of the three parties of flexible employment should not be underestimated
On March 18, 2024, at the "Press Conference on the Judicial Interpretation and Typical Cases of Tax-related Crimes of the Supreme People's Court and the Supreme People's Court", the Supreme People's Procuratorate explained the new characteristics of tax-related crimes in recent years, pointing out that the criminal methods of false opening crimes are constantly changing, online platforms have become new channels for false opening, "tax planning" and black intermediaries have become the dominant trend, new economic formats such as live streaming have developed rapidly, labor relations are complex and diverse, and individual entertainment personnel use "tax depressions" to change the nature of income, etc., and the problem of tax evasion is prominent...... In the future, the procuratorial organs will continue to focus on the new situation and new characteristics of tax-related crimes, and continue to crack down on them strictly. It is foreseeable that in the future flexible employment business, the tax-related risks of the platform, the employing enterprise and the Linggong personnel should not be underestimated, so what changes will occur to the tax-related risks of the three parties in the context of the two high-tech judicial interpretations?
II. Under the background of the two high-tech judicial interpretations, what are the tax-related impacts faced by the three parties of flexible employment?
(1) Employing enterprises: wages and salaries have become "special tickets" for labor fees, and fraudulent deduction of input items clearly constitutes false billing
1. Disputes handled in past cases
The employing enterprise "outsources" its employees to the flexible employment platform, adjusts the status of the employees from laborers to flexible employees, adjusts the wages and salaries paid to "labor fees", and allows the flexible employment platform to "pay wages on behalf of them", and then obtains special VAT invoices issued by the flexible employment platform with the names of "service fees" and "labor fees". In the past, there was controversy as to whether this business model constituted false opening.
The core point of the dispute is that in the past, the case-handling authorities judged whether it constituted false opening from the perspective of "business authenticity", and held that the flexible employment platform only provided "payroll" services in the above-mentioned business, rather than various services provided by labor personnel as recorded on the invoices. The services provided by the labor personnel should go to the tax bureau to issue invoices on their behalf, so the special VAT invoices issued by the flexible employment platform are false issuance of "no real services".
However, the problem with the above understanding is that the business model of the flexible employment platform is to match business, play the role of an intermediary, provide service supply and demand information for employers and flexible employees on the platform, settle service funds, and issue invoices on behalf of labor personnel. In this sense, the flexible employment business is similar to the affiliated business - as long as the labor personnel first establish a spiritual relationship with the flexible employment platform, the labor services provided by the labor personnel after that are of course provided in the name of the flexible employment platform, and the flexible employment platform can issue special VAT invoices. Therefore, it is difficult to say that there is "no real business" for the above-mentioned business.
2. The change of the judicial interpretations of the Supreme People's Court and the Supreme People's Court: from whether there is a business to whether there is a tax fraud
The judicial interpretations of the Supreme People's Court and the Supreme People's Court stipulate that "for businesses that cannot deduct taxes in accordance with the law, special VAT invoices shall be issued through fictitious transaction entities", which is a false issuance of special VAT invoices. The core of the conviction is shifted to "whether the VAT is fraudulently deducted". Therefore, even if the business is true and legitimate, if the business is essentially a business that cannot be deducted according to law, the issuance of special invoices is also a false issuance.
At present, the employing enterprise transforms its employees from a labor relationship to a labor relationship or a flexible employment relationship, and the flexible employment platform carries out the operation of paying wages on behalf of the employee, which in essence is to change the "payment of wages and salaries" to "payment of labor fees" through the flexible employment platform. On the other hand, "payment of wages and salaries" is a business that cannot be deducted from VAT input, while accepting labor services and paying "labor fees" are businesses that can be deducted from inputs. Therefore, it is very likely that the employing enterprise and the flexible employment platform will be convicted under this paragraph in the future, so that there is no need to worry about whether the business "has real services or services".
Of course, it is undeniable that whether an employing enterprise has constituted the crime of false invoicing should be further analyzed by examining the subjective purpose of the employing enterprise and whether it has caused the tax loss defrauded by the state in conjunction with the criminal exculpation clause in Article 10 and Article 2. In addition, since ordinary invoices do not have the function of deduction, the issuance of ordinary invoices for payroll business is not a false issuance.
(2) Linggong platform: The behavior pattern of the crime of false invoicing is more concrete, and the risk of criminalization increases
In the past, for those Linggong platforms that operated normally and did not rely on financial returns, if they were deceived by the employing enterprises and did not participate in the criminal acts of the employing enterprises, they would often not be subject to criminal sanctions, and at most would be fined 500,000 yuan by the tax authorities in accordance with the provisions of the "Measures for the Administration of Invoices". In addition, if the Linggong platform issues ordinary invoices, if the number of service names and other factors issued are inconsistent with the actual occurrence, due to the actual occurrence of the business, the tax authorities will mostly carry out administrative penalties and face low criminal risks.
However, after the promulgation of the two high-tech judicial interpretations, in addition to paying attention to its own issuance of special invoices, the Linggong platform needs to be particularly vigilant against the issuance of ordinary invoices. Article 12 of the two high-tech judicial interpretations makes a specific statement on the act of false invoicing, that is, "there is actual business, but invoices issued for others, for oneself, for others for themselves, and for others to be inconsistent with the actual business name, service name, quantity and amount of goods" is false issuance, in other words, even for those who have actual business and the transaction subject is completely consistent, but the invoice issued is the name, quantity, and quantity of the actual business services. If the amount and other factors do not match, it constitutes the crime of false invoicing, and the criminal risk faced by the Linggong platform is aggravated.
(3) Labor personnel: The new means of false tax declaration are added, and the individual income tax planning is easy to be cracked down
According to the provisions of the Individual Income Tax Law and its implementing regulations, wages and salaries and remuneration for labor services are comprehensive income, and the applicable tax rate is up to 45%, while the tax rate of business income is only 35%. For high-income groups such as online live broadcasts and executives, if they can pay individual income tax according to the business income tax item, their tax burden will be greatly reduced. Therefore, in practice, some flexible employment platforms register sole proprietorships and self-employed individuals for high-income groups in order to achieve the effect of tax savings.
However, the two high-tech judicial interpretations have added the criminal expression of "false tax declaration", and clearly defined the signing of "yin-yang contracts" and other forms of concealment or decomposition of income and property in the name of others as one of the ways of tax evasion, providing a definite basis for judicial organs to handle such cases in the future. Accordingly, if a high-income person splits his income into multiple incomes, and then verifies and reduces the tax burden through different self-employed individuals, it clearly constitutes tax evasion.
Of course, if the flexible employment platform assists high-income people to register as self-employed individuals in some parks before the business is carried out, and has actual office locations and staff in the parks, when conducting business, they can sign contracts with the self-employed and carry out actual performance, bear business risks, and pay individual income tax according to the business income, we believe that such prior arrangements are commercially reasonable and do not belong to malicious planning, let alone tax evasion.
However, it is worrying that in judicial practice in the future, some tax authorities and judicial authorities may mistakenly regard the simple conversion of income as a kind of "yin-yang contract" and "dismantling income", and directly identify it as tax evasion, so the above-mentioned arrangements will also face certain tax-related administrative and even criminal risks.
III. Under the two high-tech judicial interpretations, how can the three parties of flexible employment prevent tax risks?
(1) Improve the awareness of tax compliance and standardize business processes
As mentioned earlier, the flexible staffing industry is still the focus of national regulators. For the three parties, they should start from themselves, strengthen the study of tax-related laws and regulations, and improve their awareness of tax compliance. For the employing enterprise, before the establishment of the enterprise, do a good job in the calculation of manpower, tax burden and other costs, and reasonably arrange the subsequent transaction behavior, and should not go to the Linggong platform to supplement the invoice after the business is carried out. For flexible employment platforms, in the daily operation process, they attach importance to the standardization of business processes, review all kinds of materials submitted by employers and workers, and prevent being deceived or incorrectly issuing invoices for their own reasons, which may lead to the risk of false issuance. For high-income groups such as flexible employment, it is necessary to put an end to the practice of concealing income by signing a "yin-yang contract", and if you want to establish an independent entity, you should pay more attention to substantive business to prevent tax evasion.
(2) Adhere to the authenticity of the business and build a complete "chain of evidence"
The authenticity of the business is the most basic requirement for the three parties, and the business materials can reflect the authenticity of the business to a certain extent, which is the most powerful weapon for handling tax-related disputes in the future. Therefore, the three parties should do a good job of keeping, preserving and archiving business materials in the whole process of business development.
(3) Actively seek professional tax lawyers to resolve tax-related disputes
At present, in practice, there are more or less differences in the understanding of many provisions of the judicial interpretations of the two Supreme People's Courts. In the future, once a tax-related dispute arises between the three parties and the tax authorities, or even is identified by the judicial authorities as a crime of false opening or tax evasion, the three parties should seize the most favorable opportunity at each stage of tax inspection, administrative reconsideration, litigation, criminal litigation, etc., and seek the help of tax lawyers in a timely manner, so that tax lawyers can help taxpayers resolve risks and safeguard the legitimate rights and interests of taxpayers to the greatest extent from the comprehensive perspectives of the legislative purpose, judicial practice, and business model of the industry.