Coal Industry Tax Compliance Report(2024)

Introduction

The characteristics of China's energy resources, with abundance in coal, scarcity in oil, and limited natural gas, have shaped a predominant energy consumption structure centered around coal. Coal, as a fundamental energy source in China, accounts for over half of the energy consumption and holds a crucial strategic position in the national economy. In the realm of taxation, recent years have witnessed diverse and multi-stage tax risks in the coal industry. Tax-related issues during the operation of coal enterprises have become increasingly prominent, leading to numerous challenges in tax compliance.

Against the backdrop of coal mining quotas, coal enterprises often resort to off-the-books operations to sell coal extracted beyond the allocated quotas. Downstream coal trading enterprises, when purchasing coal from these enterprises, face challenges in obtaining value-added tax (VAT) special invoices for VAT input deduction and as evidence for corporate income tax prepayment. Simultaneously, the frequent mergers and acquisitions in the coal industry in recent years have limited the quantity of coal that trading enterprises can purchase from officially authorized large mines within the quotas. To meet the coal demand of downstream enterprises, coal trading companies are compelled to procure over-quota coal from small mines, intensifying the invoicing challenges in the coal industry due to macroeconomic fluctuations. In an attempt to address the insufficient deduction of input invoices, some coal enterprises have revamped their business models, utilizing methods such as affiliation and outsourced invoicing to obtain input invoices. However, due to the diversity and complexity of these models, coupled with differing interpretations by tax authorities, there is a significant risk of false invoicing. With the intensification and institutionalization of the "anti-fraud and anti-deception" special campaign, the coal industry has experienced a surge in cases involving fraudulent invoicing and tax evasion. Companies and their executives face administrative and even criminal liabilities.

Beyond invoicing issues, the coal industry has witnessed numerous cases of resource tax evasion during the extraction process, consumption tax evasion during processing, and income tax evasion during equity changes in recent years. The tax risks in the coal industry are gradually extending to multiple stages and tax types.

In judicial practice, publicly disclosed cases of coal enterprises engaging in fraudulent invoicing in 2023 reveal instances where recipient enterprises were penalized for tax evasion without being referred to public security authorities, as well as cases where retrials resulted in acquittal for circular invoicing and counter-invoicing behaviors. As the nationwide reform of the criminal compliance mechanism by the procuratorate unfolds, several local courts are conducting compliance pilot programs during the trial phase. These changes present new opportunities for legal defense in tax-related criminal cases in the coal industry. Based on these developments and our extensive observation of the coal industry, as well as our experience in representing coal enterprises in tax-related criminal cases, Huatax has prepared this report. The report delves into the tax environment of the coal industry under the new tax administration situation, consolidates the latest tax-related criminal and administrative cases involving coal enterprises in 2023, elucidates the current status, causes, and recent changes in tax-related criminal risks in the coal industry. Furthermore, based on this analysis, the report provides recommendations for enterprise management compliance, aiming to assist coal enterprises in proactively managing tax risks, strengthening internal risk control and external risk isolation, and effectively addressing and mitigating tax-related legal risks.

Jan. 15, 2024, 2:11 p.m.

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Pharmaceutical Industry Tax Compliance Report (2024)

Pharmaceutical industry refers to the research and development, production and sales of pharmaceutical products such as biological drugs, chemical drugs and traditional Chinese medicines. The upstream participants of the pharmaceutical industry chain include manufacturers of pharmaceutical raw materials such as basic chemical materials, animal and plant materials, and medicinal excipients; the midstream subjects of the industry chain are pharmaceutical R&D, production and sales enterprises; and the downstream subjects of the industry chain are the pharmaceutical sales terminals, which mainly include medical aesthetics, health service organizations, retail pharmacies, hospitals, and primary healthcare terminals, etc, and ultimately reach the consumers. With the accelerated aging of the population, people's health awareness, the growing demand for medical care, China's pharmaceutical industry is in a golden period of rapid development. According to statistics, since the "14th Five-Year Plan", China's pharmaceutical industry, the average annual growth rate of income from main business is 9.3%, the average annual growth rate of total profit is 11.3%, the industry continues to improve the scale of efficiency. On the one hand, this is related to the gradual stabilization of the pharmaceutical industry's "two-ticket system" and other policies, and on the other hand, thanks to the support of the policy environment, such as the "Healthy China 2030" Outline of the Plan. However, the rapid development of the pharmaceutical industry also hides hidden worries.

For a long time, in the field of purchase and sale of medicines, the problem of low efficiency and high cost of drug transportation and distribution persists, and at the same time, it faces the problem of corruption such as doctors and medical representatives accepting kickbacks, and pharmaceutical enterprises "selling with gold", which forms an interlocking grey chain, and the profits of pharmaceutical enterprises are further compressed due to rebates and kickbacks, and thus become Pharmaceutical industry false opening, tax evasion behavior repeated motive. The "two-ticket system" reform and the "4+7" centralized purchasing model seek to eliminate the problem of excessively high drug prices caused by multiple distribution links in the past from the sales chain of pharmaceutical enterprises, but because the existing distribution of benefits and drug distribution model has not been completely changed, the costs of pharmaceutical enterprises remain high and have begun to rise. However, due to the lack of radical changes in the distribution of benefits and the drug distribution model, pharmaceutical enterprises, with high costs, have started to extract funds through bills from other areas such as drug production, marketing and advertising, resulting in the invoice violations in the pharmaceutical industry, which remains a serious problem.20 With a number of cases of false invoicing in the pharmaceutical industry erupting across the country since 2023, the pharmaceutical industry is in urgent need of strengthening tax compliance to prevent tax risks.

Based on the in-depth observation of the pharmaceutical industry, HUASHUI Team has prepared this "Pharmaceutical Industry Tax Compliance Report (2024)". This report focuses on the development trend and tax regulation of the pharmaceutical industry, focuses on the typical tax-related cases in the pharmaceutical industry in 2023 and the practice of non-prosecution compliance system in the pharmaceutical industry, analyzes the causes of tax-related risks in the pharmaceutical industry, summarizes the main types of tax-related risks in the pharmaceutical industry on the basis of the aforementioned and puts forward targeted suggestions to deal with them, with the hope of contributing to the construction of tax compliance in the pharmaceutical industry.

This report is divided into eight sections, and the full text is about 25,000 words.

Jan. 12, 2024, 2:07 p.m.

9467Views

Land Value Added Tax (LVAT) Compliance Report for the Real Estate Sector (2024)

Since the beginning of 2018, tax authorities across the country have begun large-scale bidding and procurement of land value-added tax clearing and auditing services from third-party intermediaries. After the merger of state and local taxes, a large number of real estate projects across the country have reached the liquidation conditions and need to be processed for land value-added tax clearance, ushering in a batch of centralized liquidation. Due to the poor fiscal management of many real estate enterprises prior to the liquidation of the project, the cost of land value-added tax liability for active liquidation was abnormally high, which to a certain extent resulted in the low motivation of real estate enterprises to take the initiative to liquidate. In recent years, the real estate market is no longer as prosperous as it was before 2020. Under the influence of the economic downtrend, local governments objectively have the demand to accelerate the liquidation of land value-added tax. Local governments are not only promoting the liquidation of real estate projects that meet the conditions for liquidation as soon as possible, but also strengthening the collection and management through the application of tax big data. Against this backdrop, a large number of real estate enterprises are caught in tax arrears and face severe land VAT risks.
Land Value Added Tax (LVAT) Compliance Report for the Real Estate Sector (2024) is a legal research report compiled based on Hwuason's in-depth observation of the real estate industry and profound summarization of its experience in representing land value-added tax (LVAT) cases in the real estate industry, aiming to reveal the current situation of land value-added tax (LVAT) cases in the real estate industry and trends of investigation, to bring together and consolidate the focuses of LVAT settlement-related tax-related disputes, to analyze the risk of land value-added tax (LVAT) in the real estate industry and to put forward professional strategies of resolving tax-related disputes and proposals of complying with the operation, with a view to providing useful guidance for real estate enterprises in preventing and responding to the risk of land value-added tax.

Jan. 11, 2024, 1:11 p.m.

6052Views

《Resources Recycling Industry Tax Compliance Report》（2024）

The orderly operation of the resources recycling industry is of great significance in improving the level of resource recycling, enhancing the ability of resource safety and security, and promoting green, low-carbon and recycling development. In terms of taxation, the policies in the field of recycling and comprehensive utilization of renewable resources are constantly changing, and in order to promote compliant operation and increase profit margins, the business model of the resources recycling industry is constantly adjusted, which is accompanied by a number of tax compliance issues.
In 2008, the State Administration of Taxation (SAT) issued the Circular on Value-added Tax Policies for Renewable Resources (Caishui [2008] No. 157), which abolished tax exemption and deduction policies for renewable resources recycling industry. The tax burden of renewable resources recycling enterprises has increased dramatically, and the problem of invoices for waste enterprises has been highlighted again. In order to make up for the shortfall of input items and obtain compliant pre-tax deduction vouchers for enterprise income tax, some enterprises obtained VAT invoices by changing their business model, seeking third-party issuance or even purchasing them. With the further development of the campaign against tax violations, a large number of cases of false VAT invoices have erupted in the resources recycling industry, and the enterprises and their persons-in-charge have been facing administrative and even criminal liabilities.
In order to promote the sustainable and healthy development of the resources recycling industry, the State Administration of Taxation (SAT) issued the Announcement on Improving VAT Policies for the Comprehensive Utilization of Resources on December 30, 2021, which clarifies that general VAT taxpayers engaging in the recovery of recycled resources can choose to apply the simplified tax calculation method to calculate the VAT payment in accordance with the 3% levy rate for the sale of recycled resources they have acquired, and clarifies that fiscal refund should be strictly regulated.Circular No. 40 alleviates to a certain extent the problem of excessive VAT burden of the enterprises engaged in recycling of renewable resources, but has not yet effectively responded to the issue of the vouchers for deduction of pre-tax deduction of EIT.
In terms of judicial practice, during the handling of criminal cases of false invoicing by recycling industry enterprises in the past two years, there have been cases in which the invoiced enterprises have been punished for the crime of illegally purchasing VAT invoices; the reform of criminal compliance mechanism of the procuratorate has been pushed forward nationwide, and the courts of many places have carried out compliance pilots at the trial stage, and the above changes have brought a new opportunity for the defense of tax-related criminal cases in recycling industry. Based on this, in order to enable the majority of enterprises in the resources recycling industry to carry out tax management in a compliant and legal manner, strengthen internal risk prevention and control and external risk isolation, and effectively cope with and resolve tax-related legal risks in their future business operations, Huashui combines the continuous research of the resources recycling industry with the experience of acting in the latest tax-related cases to write this report, which provides an in-depth analysis of the tax environment of the resources recycling industry under the new situation of tax levy and administration, causes of the tax risks, major tax risks and their manifestations, key points of dispute and defense in the criminal case of false invoicing, as well as the management of tax compliance. This report analyzes the tax environment of the recycling industry under the new situation of tax administration, the causes of tax-related risks, the main tax-related risks and their manifestations, the focus of disputes and key points of defense in criminal cases of false invoicing, as well as the management of tax compliance, with a view to providing useful references and reference for enterprises in the resources recycling industry.

Jan. 8, 2024, 4:04 p.m.

5976Views

Foreign Trade Industry Tax Compliance Report（2024）

Export tax rebate refers to a tax system in which the State refunds to export enterprises the import tax on raw materials for exported goods, as well as indirect taxes such as value-added tax (VAT) and consumption tax, which have been paid at various stages of domestic production and circulation, so that exported goods can enter the international market at a price that does not include indirect taxes and participate in international competition. In recent years, the country's export tax refund processing time has been speeding up and efficiency has been accelerated, coupled with the successive implementation of customs paperless clearance, reform of the foreign exchange underwriting system, and facilitation services for RMB settlement of cross-border trade, which have played an important supportive role for export enterprises in generating foreign exchange.
In 2023, China's foreign trade continued to run smoothly. As of the date of the report, the General Administration of Customs released data showing that the total value of China's imports and exports in the first 11 months of 2023 amounted to RMB 37.96 trillion, unchanged from the same period last year. However, along with the steady and continuous development of foreign trade exports, illegal and criminal behaviors such as tax fraud and false invoicing have emerged one after another, impacting the orderly development of China's foreign trade business. In order to protect the orderly development of foreign trade industry and regulate the order of export tax rebates, the state has continued to crack down on illegal and criminal behaviors such as fraudulent export tax rebates with high pressure, and to curb the illegal and criminal behaviors of tax cheating and false invoicing in the foreign trade industry. In addition, under the concept of "who exports, who collects foreign exchange, who refunds tax, who is responsible", the export enterprise bears most of the tax risk, the light is due to the non-compliance of the documents can not be refunded, the heavy is involved in the case of fraudulent invoicing, tax fraud. Therefore, export enterprises need to strengthen tax compliance in 2024.
Based on the in-depth observation of the foreign trade industry and the profound summarization of the experience of representing foreign trade enterprises in tax-related cases in recent years, HUASHUI team has prepared this "Foreign Trade Industry Tax Compliance Report (2024)". This report summarizes the five common types of tax-related risks in the foreign trade industry, the four major areas of high incidence, analyzes the six major causes of tax-related risks by observing the dynamics of tax regulation in the foreign trade industry and the data of tax-related cases, and captures the typical administrative and criminal cases of export tax refunds for in-depth analysis, and puts forward the key points of administrative remedies and criminal defense strategies on the basis of the foregoing in a targeted manner, in order to provide suggestions for the tax compliance in the foreign trade industry, and to make contributions to the sustainable and healthy development of the foreign trade industry. This report is divided into nine sections.
This report is divided into nine sections, and the full text is about 35,000 words.

Jan. 5, 2024, 1:56 p.m.

5282Views

Petrochemical Industry Tax Compliance Report (2024)

In recent years, with the severe investigation and punishment of invoice changing cases in the petrochemical industry, the traditional means of invoicing and the new type of invoicing methods derived from the on-line invoicing module of refined oil products are difficult to play a role, and the phenomenon of evasion of consumption tax through invoicing has gradually faded away. No. 11 of 2023), which included a large number of chemical products into the scope of collection of refined oil products, making the chemical products consumption tax controversy of the special remediation work on refined oil products since August 2022 settle down, while some chemical products manufacturers still have the legacy consumption tax risk. In addition, since 2023, another major feature of the petrochemical industry tax collection and management is the special audit of gas stations and the investigation and handling of new business models in the field of refined oil products circulation, which can be seen from the various typical cases that have broken out this year, the petrochemical industry has shown a wave of unsettled and a wave of "strict investigation and hard hitting" a consistent regulatory posture.
The "Petrochemical Industry Tax Compliance Report (2024)" is a legal research report compiled based on Hwuason's in-depth observation of the petrochemical industry and the profound summarization of its experience in representing petrochemical industry in tax-related criminal and administrative cases, aiming at revealing the current situation of the petrochemical industry in the handling of tax-related criminal and administrative cases and the trend in the judicial investigation and handling, analyzing the risky business model of the petrochemical industry and its evolution, and proposing defense strategies and compliance recommendations, so as to help petrochemical enterprises to prevent and protect themselves from tax-related criminal and administrative cases. The report also proposes defense strategies and compliance recommendations, with a view to providing reference for petrochemical enterprises in preventing and weakening tax risks.

Jan. 2, 2024, 4:03 p.m.

3800Views

Real Estate Industry Tax Compliance Report (2023)

Since the beginning of 2018, tax authorities across the country have begun large-scale bidding and procurement of land value-added tax clearing and auditing services from third-party intermediaries. In Beijing, for example, before 2018, the government centralized the procurement of land VAT clearing and auditing services for 19 projects, and in the first three quarters from 2018 to 2022, the number was 667. The surge in the number of government procurement of land value-added tax clearing and auditing services reflects three aspects: first, in recent years, a large number of real estate projects across the country have reached the conditions for clearing and are required to make land value-added tax clearing, ushering in a batch of centralized clearing after the merger of state and land taxes; second, the land value-added tax tax burden cost of active clearing is abnormally high due to the mismanagement by many real estate enterprises of the fiscal management of their projects prior to the clearing of the land value-added tax liability. This has, to a certain extent, resulted in the low motivation of real estate enterprises to take the initiative to liquidate; and thirdly, due to the impact of the economic downtrend, the local governments objectively have the demand to accelerate the land value-added tax liquidation. Against this background, real estate enterprises faced severe land VAT risks.
The Land Value-Added Tax Compliance Report for Real Estate Industry (2023) is a legal research report compiled based on Hua Shui's in-depth observation of the real estate industry and profound summarization of its experience in representing land value-added tax cases in the real estate industry, aiming to reveal the current situation of land value-added tax cases in the real estate industry and the trend of investigation and handling, analyze the risk of land value-added tax in the real estate industry, and put forward professional strategies for tax-related dispute resolution and compliance recommendations, with a view to providing real estate enterprises with preventive measures against land value-added tax.

Nov. 22, 2023, 4:53 p.m.

2670Views

High Net Worth Individual Tax Compliance Report (2023)

Along with China's economic development, the number of high net worth individuals in Mainland China continues to grow. According to the Hurun Report on HNWIs 2022, "HNWIs" are defined as those with disposable assets of more than $6 million. Among them, "disposable assets" include deposits, insurance, stocks, debts, investment trusts and other financial commodities, precious metals, etc. held by the entire household, but not including real estate currently residing. According to statistics, by 2020, there will be 805,350 "high net worth households" with disposable assets of RMB10 million to RMB100 million. With the rapid growth in the number of HNWIs in Mainland China, there is an increasing demand for tax planning to save tax. At the same time, tax authorities around the world have tightened their control over individual income tax, and HNWIs have become an area of continuous attention and focus of tax supervision and investigation. In practice, there are numerous cases in which HNWIs are recognized as tax evaders or have their taxes adjusted. This report is compiled by China Tax based on the analysis and research of tax administration policies for HNWIs, combined with the typical tax-related cases of HNWIs in which China Tax has participated in recent years, with the aim to base on the characteristics of tax administration of HNWIs, reveal the major tax risk points of HNWIs both inside and outside the country, and put forward the targeted and feasible compliance suggestions on the basis of which, in order to provide guidance and reference for HNWIs in terms of tax compliance.

Nov. 22, 2023, 5:49 p.m.

3070Views

Internet Platform Tax Compliance Report (2023)

In 2022, driven by Internet technology and supported by national policies, Internet platforms show a more vigorous development trend. Meanwhile, due to the slowdown in the growth rate of consumer demand, the investment and operation business of platform enterprises showed a pace of tilting towards the production field. For example, the flexible labor platform opens up the information barriers between employing units and talent resources, activating and releasing talent vitality; the Internet tax agency platform reduces the tax compliance costs of real enterprises and empowers small and medium-sized enterprises. Relying on information technology, the platform economy is able to improve the resource allocation efficiency of the whole society, fully drive employment, and solve many difficulties and pain points of real enterprises in the operation process, which is deeply concerned by the national policy.
On December 26, 2022, the Central Economic Work Conference explicitly proposed "to vigorously develop the digital economy, improve the level of normalized supervision, and support platform enterprises to make a big difference in leading development, creating employment, and international competition." With the advancement of technology and the further development of the platform economy, the ability of the platform to help industry will be higher, promoting the informationization, technologization and digitalization of traditional industries, and the platform economy is increasingly becoming a new driving force for economic growth. However, the Internet platform is still in the period of rapid development, the national policy is still in the process of further follow-up, and the tax regulation is still imperfect; some platform enterprises are oriented to business and profit, ignoring the tax compliance construction of enterprises, and there are loopholes and deficiencies in the business model; there are unscrupulous elements who take advantage of the insufficiency of regulation and platform enterprises, and intentionally implement illegal and criminal behaviors such as tax cheating and false invoicing, which results in part of the platform enterprise

Nov. 22, 2023, 6:06 p.m.

3499Views

Coal Industry Tax Compliance Report (2023)

Coal occupies a dominant position in primary energy production and consumption, and is the pillar of China's traditional industry and an important support for the development of the national economy. In recent years, the tax-related problems in the operation of coal enterprises have become more and more prominent, and triggered the risk of administrative and criminal liability, which not only led to the enterprise into the operation of the situation, but also put a number of entrepreneurs behind bars.
February 28, 2020, Inner Mongolia to carry out special rectification of the coal field of 20 years of action, followed by a number of other provinces, including Shanxi, Yunnan, Sichuan, Xinjiang and other provinces also launched the coal field of self-correction. Multi-departmental coordination has led to the investigation and prosecution of a number of cases of tax violations by coal enterprises, which has led to further fermentation of tax-related and criminal risks of coal enterprises.
In March 2021, the Central and State Offices of the People's Republic of China issued the Opinions on Further Deepening the Reform of Taxation Levy and Administration, which explicitly treats coal and other industries as a key area of concern, and severely cracks down on illegal and criminal behaviors of false invoicing, fraudulent tax evasion and other tax-related violations of the coal and other industries. income tax evasion and other tax-related illegal behaviors, making the tax-related and criminal risks of coal enterprises the focus of attention and crackdown. In October 2021, the fight against the three counterfeits was taken to a higher level, with the Supreme Prosecutor and the OFTA joining in, the four ministries upgraded to six departments, the special action upgraded to a regularized crackdown, the various departments sharing data, joint operations, and cracking down on various types of false invoicing and tax fraud and the related enterprises, and the tax police jointly investigating and dealing with a number of major cases of false invoicing and tax fraud in the coal field, so that the criminal risk of tax-related risks of the coal enterprises was triggered at the first sight.
In 2022, with the continuous promotion of the pilot program of "all-electric invoice" and the completion of the development of "Golden Tax IV", the tax supervision is completing the transition from "controlling tax by votes" to "ruling tax by numbers". Tax supervision is completing the transformation from "tax control by invoices" to "tax control by numbers". Relying on big data to realize precise and classified supervision, the risk of false invoicing can be effectively investigated and can be further traced upstream and downstream along the invoice chain, and the risk of tax-related risks of coal enterprises is further aggravated.
Looking at the outbreak of tax-related criminal cases in recent years, not all the subjects involved in the case have the subjective intention of false invoicing, tax fraud, tax evasion, but due to some non-compliance operations in the business process, resulting in the objective appearance of tax-related criminal behavior. It is worthwhile for enterprises and entrepreneurs to be alerted to such cases. The Research Report on Tax Compliance in Coal Industry (2023) is a special report based on Huatax's in-depth observation of the coal industry and profound summarization of the experience in representing coal enterprises in tax-related criminal cases. It summarizes and analyzes the latest data on tax-related criminal and administrative cases of coal enterprises in 2022, reveals the status quo of the coal industry's tax-related criminal risks, causes and latest changes, and puts forward suggestions for enterprises to manage compliance on such basis, with a view to providing a better solution for enterprises and entrepreneurs. The report summarizes and analyzes the latest data on tax-related criminal and administrative cases of coal enterprises in 2022, revealing the current situation, causes and latest changes of tax-related criminal risks in the coal industry, and on the basis of which, it puts forward suggestions on corporate management compliance, with a view to providing reference for coal enterprises to avoid tax-related legal risks.

Nov. 22, 2023, 6:17 p.m.

2597Views