Editor's note: Recently, "China Tax News" published an article "The Sword Rises to Handle the Iron Case, so that the "fake self-employed, real agent" tax fraud has nothing to hide". Among them, Company Z was found to be subjectively at fault by the tax authorities and the third-level judicial authorities for the implementation of "fake self-employment and real agency", which constituted tax fraud. Based on this, this article starts from this practical case to analyze whether the implementation of "fake self-employment and real agency" is equivalent to tax fraud, and whether the subjective elements of tax fraud at the level of administrative punishment are "knowing" or "subjective fault", so as to warn foreign trade enterprises to be vigilant against the risk of passive involvement in tax fraud in the course of conducting business, for readers' reference.
1. Company Z's implementation of "fake self-management and real agency" was finally found to be tax fraud by the Supreme People's Court
(1) The circumstances of the case that have been 7 years long
1. The course of the case
Founded in June 2000, Z Company is a foreign trade enterprise, mainly engaged in self-management and agency import and export business. In July 2017, the former State Tax Inspection Bureau of Zhejiang Province received a letter of assistance from the foreign tax authorities, which showed that the special VAT invoices obtained by Company Z from Companies A and B were found to be falsely issued. Based on this, the inspection bureau investigated Company Z and found that Company Z used the special VAT invoices obtained from Companies A and B to apply for export tax rebates. At the same time, the cooperation agreement between Company Z and Companies A and B stipulates that Company Z will first declare the export and then obtain the VAT invoice. In summary, the inspection bureau determined that Company Z was suspected of tax fraud and cooperated with the public security organs to handle the case.
After collecting and fixing the evidence by the case-handling authorities, the tax task force determined that between May 2015 and April 2016, Company Z applied for customs declaration, false invoicing, and false foreign exchange settlement in the name of self-operation by Xu, the actual controller of companies A and B, who provided information on export goods without documents from others, and applied for tax rebates from the tax authorities accordingly, and obtained more than 16 million yuan of export tax rebates. The Tax Inspection Bureau submitted the case to the Grand Plenum for trial, and finally determined that Company Z had fraudulently obtained export tax rebates, recovered the tax rebates of Company Z, and issued the Notice of Tax Administrative Penalties. As a result, Company Z and the tax authorities launched several rounds of confrontation over whether Company Z constituted tax fraud.
2. Legal Remedy Process
Company Z was dissatisfied with the above-mentioned Notice of Tax Administrative Penalty Matters and applied to the tax authorities for a hearing, and the tax authorities decided to retry the case and further improve the evidence, and obtained the judicial documents that Xu, a related person in this case, had been convicted of the crime of defrauding export tax rebates. Accordingly, in October 2019, the tax authorities issued the Tax Treatment Decision and the Tax Penalty Decision to Company Z, determining that Company Z had committed tax fraud, recovering the tax and imposing a fine of double the tax fraud, and at the same time, transferring the clues of the tax-related crimes to the public security.
Dissatisfied, Company Z applied to the State Administration of Taxation for reconsideration in December 2019, and the State Administration of Taxation upheld the penalty decision. In November 2021, Company Z filed an administrative lawsuit with the Hangzhou Intermediate People's Court, which upheld the penalty decision. Company Z appealed to the Zhejiang Provincial High Court in June 2022, and in December 2022, the High Court rendered a final judgment rejecting the appeal and upholding the original judgment.
Company Z filed a request for retrial with the Supreme People's Court in May 2023. In November 2023, the Supreme People's Court held a hearing on the case and finally rejected Company Z's application for retrial. So far, the case has gone through administrative reconsideration, first-instance, second-instance and retrial litigation procedures, and finally ended with the result that Company Z constituted tax fraud.
(2) The focus of the dispute in this case
1. Company Z's point of view
Company Z argued that it had dereliction of duty in the process of carrying out export agency business in the name of self-operated export, but it did not have the subjective motive and intention to cheat taxes, and should not be found to be tax fraud.
2. The view of the State Administration of Taxation
As a foreign trade enterprise specializing in export business, Company Z still packaged its agency business as its own business and obtained export tax rebates when it knew that the agency export business could not be declared in the name of self-management, which was subjectively wrong, and the Inspection Bureau of the Zhejiang Provincial Taxation Bureau determined that it was not improper for Company Z to constitute tax fraud.
3. The views of the Hangzhou Intermediate People's Court and the Zhejiang Provincial High Court
Company Z, as the "supplier" in the false transaction and the "taxpayer" clearly recorded in the declaration materials, objectively committed the illegal act of tax fraud and should be punished in accordance with the law.
4. The opinion of the Supreme People's Court
As a company that has been engaged in foreign trade business for a long time and has rich experience, Company Z asked Xu to handle export and tax rebate business in the name of Company Z, and the relevant procedures were completed by Xu, which violated the express prohibition of the Notice of the State Administration of Taxation and the Ministry of Commerce on Further Standardizing the Order of Foreign Trade Export Operations and Effectively Strengthening the Administration of Tax Refund (Exemption) of Export Goods (hereinafter referred to as "Guo Shui Fa (2006) No. 24"), and there is no room for fault in law. Company Z, on the premise that its staff had suspected that the export business involved in the case was collecting foreign exchange very quickly, and the foreign businessmen personally came to urge the remittance and other abnormal behaviors, did not take corresponding risk prevention measures, but still calculated the amount of invoices based on the amount of foreign exchange collected and notified Xu to issue a large number of invoices, which was illegal and punishable in terms of tax collection and management regulations.
(3) Summary and analysis of the focus of the dispute
From the above point of view, it can be seen that Company Z believes that even if it implements the act of "fake self-employment and real agency", it does not constitute tax fraud if there is no intention to defraud tax. However, the tax authorities and judicial authorities believe that foreign trade enterprises that have been engaged in export business for a long time must know that "fake self-employed and real agents" cannot declare tax refunds, and their declaration of export tax rebates for businesses that cannot be refunded shows that they have subjective faults and are punishable. In the author's view, there are two issues that require further analysis before it is possible to resolve the above disputes. First, is the implementation of "fake self-employment and real agency" equivalent to the objective act of tax fraud? Second, is the subjective element of fraudulent export tax rebate at the level of administrative punishment "knowing" or "subjective fault"? Next, we will discuss these two issues.
2. The behavior of "fake self-management and real agency" carried out by export enterprises does not belong to tax fraud
(1) Specific performance of "fake self-employment, real agency".
Guo Shui Fa (2006) No. 24 and the Notice on Value-Added Tax and Consumption Tax Policies on Exported Goods and Services (Cai Shui [2012] No. 39, hereinafter referred to as "Cai Shui [2012] No. 39) clearly stipulate the behavior of "fake self-employment and real agency", as follows:
According to the above provisions, it can be seen that the essence of "fake self-management and real agency" is that the export enterprise does not actually implement or participate in the export business, lacks supervision and review of the export business, and appoints a third party to control the business development with full authority. At the same time, from the perspective of the supervision of the tax authorities, due to the deviation between the "subject of export tax rebate declaration" and the "actual export entity" in the above-mentioned business, it is difficult for the tax authorities to supervise them, and to a certain extent, the phenomenon of tax fraud cases due to the lack of supervision is prone to occur. Therefore, based on the consideration of preventing and controlling the occurrence of tax fraud, the state prohibits the behavior of "fake self-employment and real agency".
In the above-mentioned case, Company Z exported in its own name, but the actual export business was completed by Xu, which was in line with the regulations of Guo Shui Fa (2006) No. 24 and Cai Shui [2012] No. 39, in other words, Company Z's behavior was "fake self-management, real agency". However, whether Company Z inevitably constituted tax fraud due to the implementation of the "fake self-employment, real agency" behavior needs to be further explored.
(2) The direct legal consequences of "fake self-employment and real agency": the refund of the tax refund will be regarded as domestic sales and taxation
Guo Shui Fa (2006) No. 24, Cai Shui [2012] No. 39 and other documents stipulate the legal consequences of the implementation of "fake self-employment and real agency", namely:
It can be seen that the legal consequences of the implementation of "fake self-management and real agency" are divided into three levels: violations, violations of the law, and crimes, and have a progressive relationship. At the same time, according to the above provisions, the direct legal consequence of the implementation of the behavior of "fake self-employment and real agency" is to return the tax refund, which is regarded as paying VAT for domestic sales. This expression just shows that simply carrying out the act of "fake self-employment and real agency" is not one of the acts of defrauding export tax rebates, and whether it constitutes tax fraud still needs to be judged whether the subjective and objective aspects meet the constitutive elements of tax fraud.
(3) The implementation of "fake self-employment and real agency" is not equivalent to tax fraud, and should be cut off
From the above-mentioned legal consequences, it can be seen that although the export enterprise has carried out the behavior of "fake self-management and real agency", it may only be subject to tax administrative penalties or criminal penalties if it "defrauds export tax rebates". Therefore, the implementation of "fake self-employment and real agency" is not equivalent to tax fraud. The author believes that it is necessary to find the answer from the existing legal provisions.
At present, Article 66 of the Law on the Administration of Tax Collection and Article 204 of the Criminal Law does not stipulate the specific acts of tax fraud, but only stipulates in principle "false export declarations or other deceptive means". Although the Interpretations of the Supreme People's Court and the Supreme People's Court on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Tax Collection and Administration (Fa Shi [2024] No. 4, hereinafter referred to as the "Judicial Interpretations of the Supreme People's Court and the Supreme People's Court"), although they provide for "false exports" and "other deceptive means", they do not involve the behavior of "fake self-employment and real agency". Only in the original Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Fraudulent Export Tax Rebates (Fa Shi [2002] No. 30, hereinafter referred to as the "Judicial Interpretation on Tax Fraud") made specific provisions on "fake self-employment and real agency". Therefore, although the judicial interpretation on tax fraud has become invalid, it can still guide the handling of administrative and criminal cases in the future by exploring its legislative purpose and original intent.
Article 6 of the Judicial Interpretation on Tax Fraud stipulates that "a company or enterprise with the right to operate import and export clearly knows that others intend to defraud the state of export tax rebates, but still violates the state's regulations on import and export operations, allows others to bring their own customers, their own sources of goods, their own bills of exchange and declare their own customs, and defrauds the state of export tax rebates, shall be convicted and punished in accordance with the provisions of Article 204, Paragraph 1 and Article 211 of the Criminal Law."
Article 6 actually confirms the author's point of view, that is, "fake self-employment and real agency" does not belong to the specific acts of tax fraud, and whether an export enterprise constitutes tax fraud still depends on whether the actual exporter has committed tax fraud. Therefore, according to the theory of joint crime, only when the export enterprise subjectively "knows" the act of helping constitutes the original crime of the assisted criminal act, that is, the crime of defrauding export tax rebates. Accordingly, the bridge between "fake self-employment and real agency" and tax fraud is based on the subjective element of "knowing", that is, tax fraud = "knowingly" + "fake self-employment and real agency".
Since the State Administration of Taxation has not made specific provisions on fraudulent export tax rebates at the administrative level, in practice, tax authorities at all levels refer to the judicial interpretations on tax fraud and the judicial interpretations of the Supreme People's Court and the Supreme People's Court and the Supreme People's Court in the future. At the same time, since tax fraud is an "administrative offense", administrative offenses and criminal offenses can be converted into each other, so there is consistency in composition. Accordingly, the logic and viewpoint of the above-mentioned judicial interpretation on tax fraud should be applied to the act of defrauding export tax rebates at the level of administrative violations.
To sum up, "fake self-management and real agency" is not a specific act of tax fraud, and the implementation of "fake self-management and real agency" by an export enterprise cannot be considered as a tax fraud.
3. The implementation of "fake self-employment and real agency" constitutes tax fraud, and it is necessary to "know" that others are defrauding taxes
(1) In this case, the tax authorities and the judicial authorities only determined that Company Z had committed tax fraud based on "subjective fault", which improperly expanded the subjective constitutive elements of tax fraud
Article 66 of the Law on the Administration of Tax Collection and Collection clearly stipulates that tax fraud is "false declaration of export or other deceptive means", and according to the literal interpretation, it can be seen that whether "false declaration" or "deception" can only be subjective intention, and the scope of subjective intention is "false declaration of export or other deceptive means", and the purpose of subjective intention is to defraud the state of export tax rebates.
In this case, the tax authorities and judicial authorities avoided talking about the subjective intention of tax fraud and turned to discuss "subjective fault", but the scope of subjective fault is greater than the subjective intention of tax fraud, and fault also includes negligence.
In addition, in its ruling rejecting the complaint, the SPC turned to discuss Company Z's violation of "fake self-management and real agency" and its failure to take corresponding risk prevention and control measures, which "is illegal and punishable in terms of tax collection and administration norms", which in fact also avoided the issue of subjective intent, turned to the purpose of legislation and the position of objective attribution of responsibility, and did not strictly follow the judgment and analysis of the constitutive elements of tax fraud one by one, which unduly derogated the rights and interests of Company Z.
(2) Whether the act of "fake self-employment and real agency" constitutes tax fraud shall be strictly determined whether it subjectively "knows" the occurrence of tax fraud
The act of "fake self-employment and real agency" is an act of helping tax fraud on the premise that tax fraud occurs. Regardless of whether it is the old judicial interpretation on tax fraud or the new judicial interpretation of the Supreme People's Court and the Supreme People's Court, there is no "fake self-employment or real agency" in the tax fraud methods listed in it. In the judicial interpretations of tax fraud, the act constitutes tax fraud only if it is "knowingly", and in the judicial interpretations of the Supreme People's Court and the Supreme People's Court, this provision is deleted and the more principled theory of joint crime is applied. Obviously, the views of the Supreme People's Court and the Supreme People's Court have made it clear that "fake self-employment and real agency" is only an act of help, and in order to be identified as tax fraud, there must be an intention to jointly carry out export tax rebate fraud, and this intention is at least an intention to let go.
The "knowingly" stipulated in the judicial interpretation on tax fraud refers to the fact that the foreign trade enterprise subjectively has at least the intention to allow the actor to defraud the export tax rebate. That is to say, the foreign trade enterprise realizes that the perpetrator has forged or signed a false sales contract, illegally obtained export tax rebate documents such as customs declarations, and falsely issued special VAT invoices and other acts of tax fraud, but still helps it declare the tax refund and share the benefits of the tax refund, resulting in the loss of national tax revenue.
Returning to this case, the tax authorities and the judicial authorities held that Company Z had committed the act of "fake self-employment and real agency" and declared it, that is, there was subjective fault, which constituted tax fraud, and the logical derivation of its verdict was deficient. In other words, the tax authorities and the judicial authorities grafted an "act of assistance" with a broad "subjective fault", and thus came to the conclusion that it constituted fraudulent export tax rebates. Obviously, this assertion violates the statutory principles of taxation and administrative punishment, unduly broadens the constitutive elements of tax fraud, and also violates the principle of administrative legality.
(3) Summary: There are various subjective factors for export enterprises to carry out the behavior of "fake self-employment and real agency", which should be accurately identified
In practice, export enterprises clearly know that the "fake self-management, real agency" behavior is a violation of the State Administration of Taxation clearly stipulates that export tax rebates are not allowed to be declared, but still carry out relevant business, mostly for the purpose of pursuing export turnover growth and trade profits, a small number of foreign trade enterprises are jointly colluded and defrauded by upstream and downstream enterprises, which is not subjectively for the benefit of export tax rebates, at the same time, some foreign trade enterprises have also fulfilled the obligation of audit in the process of carrying out business, but due to the limitation of their own audit capabilities, failed to discover tax fraud. In these cases, the perpetrators of the relevant tax frauds have been criminally punished and fined 1-5 times the amount of the tax fraud, and the state tax revenue has been recovered and compensated, and the relevant offenders have also been subject to criminal sanctions. Therefore, in the author's opinion, for these enterprises, it is actually a practice of punishing multiple penalties for one thing, and it is not in line with the principle of proportionality of punishment and liability in administrative law.
In the author's opinion, as to whether it constitutes fraudulent export tax rebates, since the "fraudulent export tax rebate act" stipulated in the Administrative Law and the Criminal Law is consistent and convertible, the determination should be consistent, and in this case, the tax authorities still transferred Company Z to the public security for handling after imposing an administrative penalty. Therefore, in determining whether an export enterprise that engages in the act of "fake self-employment and real agency" constitutes tax fraud, the tax authorities need to accurately identify its subjective intentions, and cannot adopt a one-size-fits-all approach of objective attribution, otherwise it will violate the principle of tax fairness.
Fourth, foreign trade enterprises must be vigilant against the risk of tax fraud, strengthen internal management to prevent the three major business risks
Although the author believes that the implementation of "fake self-employment and real agency" constitutes tax fraud, and it is necessary to "know" that others have cheated on taxes, in practice, there is indeed a phenomenon of unduly expanding the subjective elements, and if the result of export tax rebate fraud occurs, even if the real perpetrator of tax fraud is investigated for criminal liability, most tax authorities will not only recover the export tax rebates of the foreign trade enterprises, but also prefer to determine that the foreign trade enterprises also constitute tax fraud and impose penalties on the enterprises, just like the tax authorities in this case. Therefore, for foreign trade enterprises themselves, in the process of conducting business, it is necessary to improve the awareness of risk prevention, put an end to the business model of "lump sum" by others, and be vigilant against the three major business risks, specifically:
(1) Risk 1: The intermediary recommends, and there is a risk of fixed fee "drought and flood protection".
In the course of handling the case, there were many enterprises involved in tax fraud cases who stated that the purpose of carrying out the business was not to obtain tax refunds, and even some enterprises were to complete the turnover targets of local or higher authorities, not to make profits. However, because these enterprises have no way to open up the market, "coincidentally" at this time there is an intermediary introducer to promote the business, and to ensure that the enterprise will not lose money, charge a fixed proportion of "agency fees" or "profits", foreign trade enterprises only need to go away funds, go to the account, and declare export tax rebates.
Some enterprises are also aware of the risk of tax fraud in the process of business development, and take the method of sending people to the manufacturer and foreign businessmen to verify on the spot to prevent it, but because they do not understand the business and are deceived by others, the case finally breaks out, and the enterprise suffers huge losses and even faces criminal liability.
(2) Risk 2: The real owner of the goods came to the door and took the initiative to ask for cooperation, and there is still a risk of tax fraud in the real goods
In another type of case, the real exporter is unable or unwilling to declare the export by himself for various reasons, so he takes the initiative to contact the foreign trade enterprise and request to export in the name of the foreign trade enterprise. Due to the fact that the agent export in the field of foreign trade requires certain qualifications, and the agent export is not profitable for foreign trade enterprises, some foreign trade enterprises have a fluke mentality, thinking that the real owner and goods have been audited to ensure that there is no problem with the goods, and it will not constitute tax fraud. But in fact, the element of export tax rebate is the "tax payment" of goods. Many real exporters do not export in their own names, and it is very likely that they cannot obtain compliant VAT invoices, so many of the input invoices they provide to foreign trade enterprises are false invoices.
Among them, the identities of these real cargo owners or introducers are different, and in some cases, the introducer is even relatives and friends of the foreign trade enterprise, and the foreign trade enterprise has carried out relevant business for the sake of face, and after the export tax rebate is declared, the real exporter has lost contact after obtaining the export tax rebate benefits. Foreign trade enterprises have become the main body responsible for these false input invoices. In these businesses, some foreign trade enterprises have been characterized as fraudulently obtaining export tax rebates; some foreign trade enterprises have been able to provide evidence that there are indeed genuine goods, and subjectively do not have the intention to cheat taxes, and have escaped criminal responsibility, but they are still subject to administrative punishment.
(3) Risk 3: Customs brokers and freight forwarding companies take the initiative to provide information on export goods, which will inevitably lead to the risk of tax fraud
In some land transport ports on the mainland, there are some small customs brokers, freight forwarding companies, and warehousing companies, and some of them will set up some "information departments" to transmit information about goods, and contact foreign trade companies, requesting exports in the name of foreign trade companies, and sharing tax rebates.
In these businesses, some real exporters know that their goods are being used for peddling and participate in the sharing of export tax rebates; some real exporters may not know that their goods information has been leaked, and the benefits of export tax rebates are intercepted by customs brokers, freight forwarding companies, and warehousing companies. If the foreign trade company does not resist the temptation of profit and agrees to export these goods in its own name, it will inevitably fall into the risk of tax fraud. If the real exporter is lucky, it will say that it is actively providing information about the goods, and may be dealt with as "fake self-management and real agent", and the responsibility may be lighter; if the bad luck cannot find the real exporter, it will be handled according to the false export report of "buying orders and matching tickets", and the criminal liability is extremely high.
(4) Summary
All in all, foreign trade enterprises must strengthen the compliance of export business, and do not hand over the contact production enterprises, foreign businessmen, customs declaration export business, domestic cargo transportation and other businesses involved in procurement, transportation, customs declaration, customs declaration, and foreign exchange settlement to others. If a foreign trade enterprise does not strictly regulate its own business, does not personally participate in contacting production enterprises and foreign businessmen, and negotiates with them, and relies solely on intermediaries to build bridges, it is very likely that they will fall into the risk of being cheated, and will be used by criminals to apply for tax refunds and obtain tax refunds without knowing it, in this case, the possibility of being identified as tax fraud by the tax authorities will be greatly increased, resulting in them becoming victims of tax fraud.