This paper explores the impact of judicial interpretations on tax-related crimes on the characterization of false VAT invoices

According to the analysis of this paper, the premise of the crime of false issuance of special VAT invoices is that the act has neither resulted in the loss of national VAT revenue, nor has it formed a dangerous state of damage to national VAT revenue.

The Supreme People's Court and the Supreme People's Procuratorate recently issued the Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases Endangering Tax Collection and Administration (Fa Shi [2024] No. 4, hereinafter referred to as the "Interpretation"), which clarifies the conviction and sentencing standards and handling principles for various types of crimes endangering tax collection and management. The Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Decision of the Standing Committee of the National People's Congress on Punishing the Crime of Falsely Issuing, Forging and Illegally Selling Special VAT Invoices (Fa Fa [1996] No. 30) and other three tax-related judicial interpretations shall be repealed at the same time. After the promulgation of the Interpretation, there has been a lot of heated discussion about its many positive impacts, among which the changes in the determination of the crime of falsely issuing special VAT invoices and fraudulently obtaining export tax rebates and tax deduction invoices (hereinafter referred to as this crime) are the focus of discussion. The author believes that some understandings of the provisions on the limitation of this crime are worth exploring, and the following is an analysis of the impact of the Interpretation on this crime based on the theory of tax law and criminal law.

Truthful invoicing is not false invoicing

Article 1 of the judicial document Fa Fa [1996] No. 30 stipulates that "if actual business activities are carried out, but others are allowed to issue special VAT invoices on their behalf", it is "false issuance of special VAT invoices". However, the Interpretation does not retain the relevant provisions. So, according to the current regulations, is truthful invoicing on behalf of others a fictitious invoice? The author believes that it is not, for the following reasons:

First, the measures for the administration of invoices regard false issuance and issuance on behalf of others as two kinds of illegal acts in parallel. Article 21 of the Measures for the Administration of Invoices stipulates: "No unit or individual shall have the following acts of issuing false invoices: (1) issuing invoices for others and for themselves that are inconsistent with the actual business situation; (2) allowing others to issue invoices for themselves that are inconsistent with the actual business situation; (3) introducing others to issue invoices that are inconsistent with the actual business situation." Article 35 stipulates: "Anyone who violates the provisions of these measures by issuing false invoices shall be confiscated by the taxation authorities; if the amount of false invoicing is less than 10,000 yuan, a fine of not more than 50,000 yuan may be imposed concurrently; if the amount of false invoicing exceeds 10,000 yuan, a fine of not less than 50,000 yuan but not more than 500,000 yuan shall be imposed; and if a crime is constituted, criminal responsibility shall be investigated according to law." Illegal issuance of invoices on behalf of the person shall be punished in accordance with the provisions of the preceding paragraph. "The above-mentioned provisions treat illegal opening and false opening as two illegal acts in parallel, which means that opening on behalf of others is different from false opening.

Second, the relevant provisions recognize the legality of invoicing under the affiliated business model. Under the affiliated business model, the affiliated party operates in the name of the affiliated party. In order to protect the security of national taxation and safeguard the legitimate rights and interests of taxpayers, the Announcement of the State Administration of Taxation on Issues Concerning the Issuance of Special VAT Invoices by Taxpayers to External Parties (Announcement No. 39 of 2014 of the State Administration of Taxation, hereinafter referred to as Announcement No. 39) issued by the State Administration of Taxation in 2014 clearly states that taxpayers issue special VAT invoices to the outside world, and at the same time meet the requirements of "the taxpayer has sold goods to the taxpayer of the recipient of the bill, or provided VAT taxable services and taxable services" and other three circumstances, it does not belong to the false issuance of special VAT invoices. The interpretation of the announcement points out that business activities carried out in the form of affiliation are common in social and economic life, and if the affiliated party sells goods, provides value-added tax taxable services or taxable services to the taxpayer of the drawee in the name of the affiliated party, the affiliated party shall be the taxpayer. As the seller of the goods or the provider of taxable services or taxable services, the affiliated party shall issue a special VAT invoice to the recipient of the invoice in accordance with the relevant regulations, which is not a false issuance. The Reply of the Research Office of the Supreme People's Court on How to Determine the Nature of the Conduct of Carrying out Business Activities in the Name of "Affiliated" Relevant Companies and Allowing Relevant Companies to Issue False VAT Invoices for Themselves (Fa Yan [2015] No. 58, hereinafter referred to as "No. 58 Reply") holds the same view.

Third, the Interpretation's understanding of the nature of truthful invoicing has changed. Prior to the promulgation of the Interpretation, despite the above two reasons, in view of the fact that the judicial document Fa Fa [1996] No. 30 clearly stated that truthful invoicing on behalf of others is false invoicing, there were different views and practices on the handling of truthful invoicing on behalf of others in practice. However, the Interpretation no longer considers that truthful substitution is false, which is to confirm the views in Reply No. 58 in the form of judicial interpretation. As the views of the Supreme Adjudication Authority and the tax administrative authority on truthful issuance become unified, the qualitative differences on truthful issuance in practice will gradually be eliminated.

It should be noted that taxpayers with real transactions should accurately distinguish the difference between legal and truthful invoicing and illegal invoicing: under the affiliated business model, the actual seller allows the affiliated party to truthfully issue invoices to the buyer on its behalf, which is legal issuance, and the buyer asks a third party other than the seller to issue invoices for it, which is illegal issuance.

How to understand the restriction of "purpose + result" of this crime

Article 10 of the Interpretation stipulates: "If the tax is defrauded and the loss is not caused by tax deduction for the purpose of inflating performance, financing, loans, etc., and the tax is defrauded and the loss is not caused by the deduction, it shall not be punished as this crime, and if other crimes are constituted, criminal responsibility shall be investigated for other crimes in accordance with the law." This elevates the opinions of the judicial departments in adjudication practice to judicial interpretations, making them universally applicable.

From the literal analysis, this restriction on this crime has two premises, one is that it is not for the purpose of defrauding taxes, and the other is that there is no result of tax fraud losses caused by deductions. Both are in place for the restriction to apply. This restriction provision is an exceptional provision and has important practical significance.

In practice, to accurately characterize this crime according to this provision, it is necessary to understand the theoretical basis of this provision, and then completely and accurately grasp the essence of this crime, and clarify the boundary between crime and non-crime.

Many people believe that this is because the Supreme People's Court and the Supreme People's Court have clarified the purpose and result elements of this crime in the form of judicial interpretations, and have put an end to the long-standing controversy over whether this crime is committed by an act, a purpose, or a result. In the author's opinion, it is debatable whether the purpose or the result is debatable.

- Is the purpose of tax fraud an element of this crime?

The so-called purpose crime refers to a crime in which the purpose of a specific crime is a necessary condition for the establishment of a crime, that is, a crime in which a specific purpose is a constituent element. In the author's opinion, the purpose of tax fraud is not a constitutive element of this crime. Here's why:

First, the Interpretation does not provide an empirical basis for the doctrine of purpose crimes. According to the basic principle of purpose crime, as long as a specific case lacks a specific purpose, it does not constitute a crime. However, the restriction provisions on this crime in the Interpretation require that the purpose is not to defraud the tax and that there is no tax deception caused by the deduction, which is not in line with the characteristics of the purpose crime.

Second, the specific provisions of the Criminal Law do not stipulate and cannot deduce the elements of a specific criminal purpose. On the one hand, the sub-provisions of the Criminal Law do not include the purpose of tax fraud as a constitutive element of this crime. On the other hand, based on the relationship between the provisions of the Criminal Law and the description of the relevant elements in the Criminal Law Provisions, it is not possible to deduce the purpose of tax fraud to establish this crime.

Thirdly, if the offence is defined as a purpose, it may lead to an unjustified exoneration. For example, the actor makes false statements for the purpose of earning invoicing fees, and the recipient of the invoices underpays the VAT tax or fraudulently obtains a refund after deducting the corresponding input tax. According to the logic of the purpose crime, since the biller does not have the purpose of defrauding the tax, it cannot constitute a crime. However, this illegal act is obviously to use the core deduction function of VAT to endanger the state's tax interests, and should be convicted and punished as this crime.

- Is the result of tax fraud caused by deduction an element of this crime?

The Interpretation's restriction on this crime does not transform this crime into a consequential crime. The so-called consequential crime refers to a crime that is completed by the occurrence of a specific result. According to the provisions of the current criminal law and the Interpretation of the mainland, the loss of state tax fraud caused by deduction is not a prerequisite for the completion of this crime.

Article 205 of the Criminal Law stipulates: "False issuance of special VAT invoices or false issuance for fraudulent export tax rebates, Where other invoices are deducted from taxes, a sentence of not more than three years imprisonment or short-term detention and a concurrent fine of not less than 20,000 yuan but not more than 200,000 yuan shall be given; where the amount of tax falsely issued is relatively large or there are other serious circumstances, a sentence of not less than three years but not more than 10 years imprisonment and a concurrent fine of not less than 50,000 yuan but not more than 500,000 yuan shall be given; and where the amount of tax falsely issued is huge or there are other especially serious circumstances, a sentence of not less than 10 years imprisonment or life imprisonment shall be given, and a fine of not less than 50,000 yuan but not more than 500,000 yuan or confiscation of property. ”

Article 11 of the "Interpretation" stipulates: "Where the amount of tax paid is more than 100,000 yuan, the amount of tax issued by false special VAT invoices or other invoices used to fraudulently obtain export tax rebates or tax deductions shall be convicted and punished in accordance with the provisions of Article 205 of the Criminal Law; The article also considers "the amount of tax that cannot be recovered before the prosecution is instituted" as one of the factors to be considered in "other serious circumstances" and "other particularly serious circumstances".

It can be seen that neither the Criminal Law nor the Interpretation stipulates that "the result of tax fraud losses caused by deduction" is a constitutive element of this crime. Therefore, this sin is not a consequential crime.

This crime shall be an abstract danger to the tax interests of the State

So, what type of crime should this crime be? Since the Criminal Law does not clearly stipulate it, the "Interpretation" only gives specific exceptional provisions, and the answer can be found from the perspective of the essential characteristics of the crime.

The essential characteristic of a crime is that it is a serious harm to society, the circumstances are obviously minor, and the harm is not great, and it is not a crime. The Supreme People's Court and the Supreme People's Court pointed out that the relevant restrictions and regulations of the Interpretation highlight that the target of this crime is the use of the core function of special VAT invoices to deduct taxes, and excludes acts of false issuance such as inflated performance, financing, loans, etc., which are not the core functions of using special VAT invoices to deduct taxes.

Article 205 of the Criminal Law also clearly lists this crime alongside the crime of false invoicing. Obviously, the legislative purpose of this crime is to prevent harm to the national VAT tax by punishing the use of the core function of VAT special invoices to deduct taxes. There are two forms of harm caused by national value-added tax revenue: one is to cause tax losses, and the other is to put tax revenue in a dangerous state.

In reality, false VAT special invoices will cause danger to the national VAT revenue, which is a high-incidence and type-based risk. Based on this, the author believes that this crime is an abstract dangerous offense. The false opening provided for in this offence shall result in the loss of VAT tax or create a dangerous state of tax loss. The boundary of this crime is that there is no social harm to the VAT tax, and there is no result of tax loss, and there is no dangerous state of tax loss.

Therefore, the Interpretation's restrictive provision on "purpose + result" of this crime can be understood as follows: "not for the purpose of defrauding taxes" indicates that the actor subjectively has the intention to control the risk of VAT tax losses, and "there is no tax fraud due to deduction" indicates that the actor objectively controls the risk of tax losses. Then, the conduct that meets the dual elements of "purpose + result" does not result in the loss of national value-added tax and does not form the risk of loss of national value-added tax, so it does not have the social harm to the national value-added tax to be punished by this crime, and thus does not constitute this crime.

To sum up, the author believes that in judging whether an act constitutes this crime, in addition to directly relying on the exceptional restrictions on this crime in the Interpretation, it is also possible to exclude acts that do not cause losses or are not in danger of losing VAT taxes based on whether the act has a type of risk to the state's VAT tax.

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Source of this article: China Tax News, Author: Guo Xiaoliang Chen Jinlin, Author: Guo Xiaoliang is the director of the First Taxation Branch of the Hebei Xiong'an New Area Taxation Bureau of the State Administration of Taxation, a public lawyer, Chen Jinlin is an associate professor at the Law School of Wuhan University.