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2022 Internet platform tax related criminal risk report

Release Time: 2023-10-04

Release Time:2022-01-27
The combination of Internet and real industry has gradually become the trend of the digital economy era, especially under the influence of COVID-19. For example, the integration of logistics and the Internet gave birth to online freight transportation. As an emerging business form, it has made an important contribution to the cost reduction and increased efficiency of the whole logistics industry. Another example is the flexible employment platform, which has become one of the hot spots in the current market. According to the research of third-party institutions, as soon as flexible employment platform was born, its market size reached 648 billion yuan in 2020 and over 870 billion yuan in 2021. However, as a emerging market, the industrial laws, regulations, and the supervision was not in place. Some enterprises failed to operate within the legal boundaries, or even found themselves engaged in illegal acts for temporary interests, which led to tax related criminal risks, economic punishment, and personal confinement. It also has negative effect on the sustainable and healthy development of the whole industry. In 2021, major and important tax related cases broke out on the three Internet platforms, affecting thousands of platform’s downstream customers. In order to better prevent tax related risks and resolve tax related problems in the three types of Internet platforms, the Huasuhi team wrote this special report to help enterprises operating legally and better cope with tax related criminal risks.
Table of Cotents
A. Overview of major tax-related cases on Internet platforms in 2021
B. The Tax Dilemma Facing Internet Platforms
C. Tax related risks of Internet platforms and their causes
D. Analysis of tax-related risks in the business model of Internet platforms
E. Key points of defense in Internet platform tax-related criminal cases
F. How should the downstream ticket receivers respond to the qualitative false opening of the Internet platform?
G. Tax-related risk compliance recommendations for Internet platforms and their users in 2022
A. Overview of major tax-related cases on Internet platforms in 2021

1. Overview of Internet Platform Tax-Related Cases in 2021

Online freight, flexible employment, and Internet finance and taxation platforms are emerging markets in recent years. They not only have the background of traditional industries (such as logistics, labor dispatch, subcontracting, fiscal and taxation agency, planning, etc.), but also empower themselves through the Internet, becoming a special existence that is different from traditional industries. Because of their special traits, it is unclear whether the regulatory measures and means of traditional industries will be applicable to them as well, or whether it is necessary to revise or impose new regulatory methods based on the characteristics of the Internet. Therefore, during 2019 to 2021, the national regulatory authorities did not issue many specific instructions awaiting to gather more information regarding the new industry. As a result, the tax-related issues of the three major Internet platforms were not exposed in the early stage, and official channels such as Judgment Documents Network did not publicly expose relevant tax-related illegal and criminal cases, making it difficult to provide effective reference for the enterprises.
However, since 2021, tax-related issues related to online freight platforms, flexible employment platforms, and Internet finance and taxation platforms have gradually become severe. Local taxation and police have investigated and handled some cases, affecting a huge number of downstream customers and end users involved in the three major platforms. People began to have doubts about the legitimacy and rationality of the platform, which hinders the development of the new industry.
Relying on the firm’s influence and years of experience, Huashui collected and sorted out a number of major tax-related cases and important cases on the three major Internet platforms that are still being processed and have no judicial conclusion. A brief analysis is provided for reference of relevant enterprises.
2. Introduction to tax-related cases of online freight platforms
(1) An online freight platform in Zhejiang is suspected of falsely issuing tax invoices
Zhejiang S Logistics Technology Co., Ltd. is the first logistics platform in Zhejiang Province to obtain an online freight license. The platform offers individual owners to register as a driver and being matched for applicable jobs, or the shipping company will contact driver by itself and register the driver’s information on the platform in order to obtain legal invoices after the job is complete. In Sep 2021, the taxation department and police department of Lishui City, Zhejiang Province suspected the S platform for falsely issuance of special VAT invoices and filed to start the investigation. So far, after inquiries, the Lishui Municipal Taxation Bureau has announced that the amount of taxes owed by the S platform has exceeded 267 million yuan, and more than 2,700 downstream enterprises have accepted invoices issued by the S platform and its branches. The tax authority sent a letter of assistance for investigation to all downstream enterprises, which led to a large number of enterprises facing the risk of tax rebates, late payment fines, fines and even transfer to the public security for criminal responsibility.
(2) A freight group in Guangxi is suspected of falsely issuing tax invoices
L Group is an Internet company who signed an investment agreement with the government and started its business as the car-free carrier in 2019. L Group helps the customer to enter the relevant transportation documents into the platform system and the verifies the authenticity of the vehicle according to the requirements of the Ministry of Transportation. In April 2021, the Fangchenggang police took criminal coercive measures against the core members and business personnel of L Group. In Nov 2021, Fangchenggang police submitted information on L Group's suspected false issuing VAT invoices case to the shared policy information system, causing hundreds of downstream enterprises to face criminal risks.
3. Introduction to tax-related cases on flexible employment platforms
(1) A technology company in Beijing is suspected of falsely issuing tax invoices
Beijing Technology Co., Ltd. is a "one-stop flexible employment platform", providing customers with flexible employment consulting and taxation solutions. On Jan 18, 2021, the Yantai Municipal police publicly announced that authorities are investigating Beijing Technology Co., Ltd. for falsely issued special VAT invoices. According to public news reports, this case is the first case of false invoicing using an Internet sharing economy service platform after the "business tax to value-added tax" tax system reform.
(2) A flexible employment platform in Huangshi, Hubei Province is suspected of  falsely issuing tax invoices
In April 2021, the joint task force of the tax police of Huangshi City went to Zhejiang, Jiangsu and other places to carry out a operation against a flexible employment platform in Huangshi, Hubei, and arrested 3 suspects and 2 other suspects surrendered. According to the press conference of the Hubei Provincial Government Information Office, the gang purchased a large amount of ID card information by building a flexible employment platform, signed false labor contracts, fabricated platform employment business, information service business, etc., and falsely issued 2,393 special VAT invoices, in total amount of 220 million yuan, resulting in a total loss of more than 50 million yuan in taxes.
4. Introduction to tax-related cases on the Internet finance and taxation platform
(1) A financial and taxation platform in Shandong is suspected of falsely issuing tax invoices
Shandong D Finance and Taxation Platform was attracted by the Shandong Provincial Department of Commerce's investment promotion policy and started business in Qingdao. Its official website promotes tailor-made tax collection solutions for customers, helping customers settle in the Shandong and enjoy local financial incentives and tax rebates. The platform has served hundreds of customers in recent years. On June 16, 2021, the police of Weihai, Shandong went to the Qingdao headquarters of D Platform to conduct an investigation and seized the platform's office space, and took coercive measures against the responsible personnel. According to news reports, the D platform is suspected of falsely issuing huge invoices.
(2) Three financial and taxation platforms in Xiaogan, Hubei are suspected of falsely issuing tax invoices
In Jan 2020, the Taxation Bureau of Xiaonan District found that two wood industry companies within its jurisdiction had issued nearly 10 million special VAT invoices and fled. After investigation, it was found that there were more than ten registered shell companies associated with the two wood companies. All ten companies have invoices issued by W Finance and Taxation Platform Company, N Finance and Taxation Platform Company, and S Finance Company. Shen Mou, the person in charge of the three platforms, confessed that he knew that more than ten companies were shell companies without actual business and helped those companies to issue VAT invoices on their behalf, or Shen Mou provided VAT invoices and falsely issued them to the outside world. The amount is nearly 100 million yuan. In Jan 2021, with the approval of the Xiaogan City People's Procuratorate, 7 people including Shen and relevant responsible persons were arrested.
(3) Genduoduo financial consulting platform in Xinjiang Province is suspected of falsely issuing tax invoices
Recently, in the process of investigating a case of false issuing tax invoice, the Taxation Bureau discovered that Huiping Yan, the legal representative of Genduoduo Financial Consulting Co., Ltd., and several independent tax-related service personnel used tax proxy as a cover, registered shell companies, illegally handled real-name authentication, changed registration, and collected invoices on other’s behalf. They also acted as an proxy for bookkeeping, taking advantages of preferential tax policies for epidemic prevention and control. In total, Huiping Yan and others falsely issued 17,000 invoices, and the total invoice amounted to 1.594 billion yuan. Currently, the People's Court of Sayibak District, Urumqi City has sentenced 18 defendants to fixed-term imprisonment ranging from 8 months to 15 years for the crime of falsely issuing value-added tax invoices, confiscated all illegal gains and imposed corresponding fines.
B. The Tax Dilemma Facing Internet Platforms
1. Internet freight platform
The transportation business is always populated with individual drivers. Because the individuals are unable or unwilling to issue special VAT invoices, the shipping companies cannot get any deduction for VAT or for corporate income tax. Therefore, more and more shipping companies are reluctant to use individual drivers. In order to utilize the scattered labor force and resolve the tax invoice contradiction, the online freight platform began to emerge. In fact, as early as March 2017, the Ministry of Transport selected 283 car-free carriers in 29 provinces to start pilot platforms. On Sep 6, 2019, the Ministry of Transport and the State Administration of Taxation jointly issued the Jiaoyungui [2019] No. 12 document announcing that car-free shipping business officially transformed into online freight.
For the Internet freight industry, how to legally obtain VAT invoices from individual transporters has always been a problem restricting its development. On Dec 31, 2019, the State Administration of Taxation issued the ShuiZonghan [2019] No. 405, which enables the online freight platform to issue 3% special VAT invoices on behalf of individual transporters. The Notice 405 should help online freight platforms to legalize the VAT deductions and corporation income tax deductions. However, the major dilemma of Notice 45 is that individual transporters are unwilling to bear the 3% value-added tax brought by the platform issuing invoice, so the platform has to ultimately pay the 3% VAT. On top of that, the platform also has the obligation of withholding individual transporter’s VAT surcharge (0.3%) and personal income tax (1.5%). Since individual transporters are also unwilling to pay those taxes, the platform has to pay itself and results at an effective tax rate of 4.8%. In other words, the Notice 45 allows the platform to take 3% of VAT deductions at a cost of paying 4.8% of taxes, which yields a pure loss result for the platform on the tax front.
In order to solve the problem of excessive value-added tax, online freight platforms usually enter investment promotion agreements with local governments to achieve profits through government financial incentives. However, since 2021, the National Audit Office, the Ministry of Finance, and the State Administration of Taxation have worked together to prevent any companies to illegally take advantages of incentive policies, and the authorities have also abolished non-compliant tax refund policies. The possibility of the online freight platform to take advantage of tax incentives is minimized.
2. Flexible employment platform
Currently, it is difficult for tax authorities to monitor the income earned by workers hired through the flexible employment platform, because the transactions on the platforms are countless, fragmented, and virtualized. At the same time, lacking any official tax policy or guidance, it is still unclear whether the workers listed on the platforms should be taxed as employees or as independent third-party. Because the lack of unified tax treatments, different local tax authorities may have different views and made it difficult for platforms to stay compliance to tax laws. And once the authorities noticed any workers not paying income taxes, they are more prone to investigate whether the platform withhold proper amount of income tax on work’s behalf rather than chasing the individual workers themselves. Ultimately, it is the platform who has to face the tax non-compliance penalties or even criminal charges.
3. Internet finance and taxation platform
There has been a growing demand of tax planning service for the high-net-worth people’s in the market, inducing many one-stop Internet finance and taxation platform to emerge. However, with the tightening of relevant national policies, the tax planning possibility is diminished, and the current tax plans also faces judicial doubts, resulting in uncertainties in the business model of the Internet finance and taxation platform.
As a common technique, the Internet finance and taxation platform often assist companies to register in the low-tax areas, signing fictitious contracts, or utilize related-party transactions to achieve tax savings for customers. As the platforms continues to exploit tax beneficial treatments, authorities issued many official documents requiring tax officials to reinforce supervision and increased inspection of the illegal tax planning. On April 29, 2021, the Inspection Bureau of the State Administration of Taxation published an article on the official website requiring officers to accurately implement tax supervision in the high tax risk areas, such as the Internet finance and taxation platform.
Some high-net-worth people will also deliberately construct their business to be approved by taxation authorities to only pay fixed amount of tax upon assessment. On Dec 21, 2021, the report of the State Council also proposed that tax authorities should focus on areas where many companies using approved tax collection policy, and for a certain type of enterprises, the approved tax collection policy should change into audit tax collection method. In the middle of 2021, the approved collection in Shanghai was completely cancelled, and many people lined up to cancel the sole proprietorship’s registration. In many places, the newly established sole proprietorship enterprises should use audit tax collection instead of approved collection, and the ultra-low tax rate of 1% is cancelled. In addition, in 2021, the cases of tax evasion by celebrities such as Xueli and Weiya were exposed, and the tax planning mode adopted by them was also made public. Under the dual pressure of public opinion, law enforcement and judicial authorities, the development of Internet finance and taxation platform almost stagnated.
C. Tax related risks of Internet platforms and their causes
1. The appearance of tax-related risk on Internet platforms
(1) Falsely issuing VAT invoices for VAT tax deductions and corporation income tax deductions.
This kind of risk is commonly seen in online freight platforms. After the individual drivers provide transportation service to the shipping companies, the platform will settle the drivers’ compensation while requesting drivers to provide them with work related costs invoices and use the invoices to deduct the platform’s VAT and income taxes. Some will even ask to drivers to fabricate those costs and buy invoices from third parties. And the fabricated invoices will lead to tax fraud or even criminal charges.
(2) Falsely categorize income type and incorrectly issuing invoice to avoid taxes
This kind of risk is also commonly found in Internet freight platforms. Based on official Announcement (Caishui [2016] No.36), the business offering transportation service without providing the vehicles should pay 9% VAT. To avoid the high tax rate, the platforms will deliberately categorize their services as “logistic service” and pay only 6% VAT.
(3) Falsely issuing invoices for others or help others by using government incentives
As mentioned earlier, due to the lack of tax deductions, Internet platforms usually sign investment promotion agreements with local governments to obtain subsidies and financial paybacks. Since most customers of the platform only care about getting invoices from it, some of the platforms will falsely issue invoices to earn billing fees without conducting any real business. For the platform itself, relying on the governmental incentives, they can easily make huge profits.
2. The reasons for the outbreaks of tax-related risk on Internet platforms
For most of industries, it normally takes one to two years for tax audits to go to criminal proceedings. But for Internet freight, flexible employment, and Internet finance and taxation platforms, the tax risk outburst is imminent. Overall, four reasons played key factors in this question.
(1) The economic supervision of Internet platforms has intensified, and tax issues have become an important focus point.
In 2020, state departments were closely monitoring the Internet platforms for any monopoly actions, unfair competition, data security issues, and tax non-compliance. Relevant authorities have been asked to take the initiative to conduct self-examination and self-correction. As of today, the self-inspection period has expired, and any evidence of violation was passed to judicial departments, leading to the outbreak of tax-related cases on Internet platforms.
(2) Electronic invoices shorten the transaction cycle, and the General Administration deploys a special crackdown on electronic invoice crimes
Nowadays, the VAT invoice and special VAT invoice are electronically issued, making the invoice issuing process simpler, faster and easier to spot any illegal activities. In April 2021, multiple state tax departments and police force carried out joint operations, investigated multiple false issuance of electronic invoices cases, involving hundreds of millions invoices amount. Under the high pressure situation, Internet platforms should maintain high vigilance in the use of electronic VAT invoices to prevent legal risks.
(3) The central bank monitors large-value transfers, and clues about the back-flow of money will become evidence for illegal invoice issuance crimes.
Since Dec 1, 2018, any money transactions exceeding 200,000 yuan in corporate and personal bank accounts will be subject to audit. The scope of supervision includes banks and non-bank financial institutions. In falsely issuance criminal cases, the money transactions, especially the back-flow of money, is the key evidence to prove one’s crimes. If the hiring company use personal accounts to pay individual drivers, freelance works, or platform, the system will alert the authorities when the amount exceeds 500,000 yuan. Currently, Internet platforms often use personal accounts to transfer money avoiding tax obligation, and this kind of operation procedures brought high legal risks for the platforms.
(4) The era of big data tax governance is coming, and tax supervision methods are becoming more resourceful
Combined with the fourth phase of the Golden Taxation, it can be found that in the era of big data tax governance, tax supervision become more resourceful. For example, Jiangxi Provincial Taxation Bureau relies on the Jiangxi Tax Big Data Smart Service Platform to build a cross-regional risk alert for taxpayers and a flexible employment platforms. The enterprise risk identification application of the flexible employment platform is aimed at "4+1" dimensions such as the identity of flexible employees, whether they can enjoy tax incentives, whether to declare tax in full, interact with taxpayers through text messages, and risk of false invoicing by platforms.
It can be seen that under the powerful tax supervision methods, tax violations on platforms are easier to be identified, which in turn leads to the outbreak of tax-related cases on Internet platforms.
D. Analysis of tax-related risks in the business model of Internet platforms

1. Internet freight platforms
Combined with case observation and analysis, the business models of online freight platforms with tax-related risks mainly include the following:
l Model 1: The shipping company will gather individual drivers and use the platform as a agent to issue tax invoices; it will seem like the shipping company used the platform to find individual drivers. Later, the shipping company will select an employee to act like team leader to receive payments for drivers, and the employee will pay the drivers from him/her private account.
l Model 2: The shipping company already completed the shipping works, but the individual drivers cannot issue any invoices. Therefore, the shipping company will ask the platform to provide. At that point, the drivers information, GPS tracks, and contracts will all be fictitious, since the real information is too late to gather.
l Model 3: Some logistics companies will provide shipping service for construction teams and trading companies. In the appearances, the logistics company will "subcontract" shipping business to the platform, and asks the platform to issue invoices for the individual drivers.
l Model 4: Since the platform will not be able to pay the individual drivers in time, the shipping companies often use private card to make the payments, and then collect money from the platforms later. Therefore, the money trail will start from the shipping company’s business account to the platform and then move to the shipping company’s private account; hence, the money trail will show the sign of money back-flow.
2. Flexible employment platform
Combined with the observation and analysis of the case, the business models of the flexible employment platform with tax-related risks mainly include the following:
l Model 1: Employers publish fictitious hiring add on the platform where the work is completed by their employees. The platform will be tricked to send payments into a employer’s private account and issue corresponding invoices.
l Model 2: The platform will register in areas where they can obtain governmental incentives. And then, the platform will collude with employers to falsely issue invoices without conducting any real works.
l Model 3: In some cases, the workers hired through the platform will request timely payment for the job, but the platform cannot issue paychecks in time. So the employers will make advance payments for the workers and then gets reimbursement from the platform. The money movement pattern will look like back-flow of money.
l Model 4: Some employers wants to get more invoices to lower their tax obligations. They will make up fictional materials used by workers hired through the platform and request additional invoices after completion of employment.
3. Internet finance and taxation platform
Combined with case analysis, the business models of Internet finance and taxation platforms with tax-related risks mainly include the following:
l Model 1: The platform provides "tax planning" services for customers, knowing that they lack a real transaction basis, fabricating real transaction materials, evading tax supervision measures, defrauding approved collection and financial returns, and earning illegal benefits such as billing fees.
l Model 2: Some person will disguised as accountants and join the accounting exchange group under the name of providing real consulting services. In fact, they are looking for customers who need invoices, and then use the financial and taxation platform to register a shell company and provide false materials to the platform, which is applicable to shell companies.
l Model 3: Some Internet finance and taxation platforms have set up offices all over the country, and the regional managers are responsible for local business promotion, negotiation with customers, and then handed over to the platform headquarters for unified handling. However, in order to obtain commissions, regional managers and salesmen collude with customers to submit false materials or use platform system loopholes to issue invoices.
In the above business models, there is also the problem of division of responsibilities for false issuing invoices, and it is difficult for judicial organs to accurately identify in judicial practice. Often, it is presumed that the platform knowingly allows false issuing to commit crimes through the confession of customers and salesmen, and then the person in charge of the platform is the main culprit. To investigate criminal responsibility for false openings, Internet finance and taxation platforms should be alert to such risks.
E. Key points of defense in Internet platform tax-related criminal cases
1. It is legal for Internet platforms to issue invoices in their own name
(1) The online freight platform can issue invoices to logistics companies in its own name
Since individual drivers do not issue invoices to the transportation company after completing the transportation task, the transportation company is forced to obtain the invoice from the online freight/car-free carrier platform. This model of issuing and receiving invoices between logistics companies faces judicial challenges.
We believe that the current tax laws and laws do not restrict logistics companies from transferring their business to another company, and the basis for online freight/car-free shipping platforms to issue 9% invoices for logistics companies is still affiliated with operations. In fact, the individual drivers who were originally affiliated with the logistics company were re-affiliated by the logistics company under the name of the online freight/car-free carrier platform, undertook transportation tasks in the name of the platform and issued special VAT invoices in the name of the platform. Announcement No. 39 of the year and its official interpretation.
Since the online freight/car-free carrier platform can often enjoy local financial policies, the local retained part of paying VAT can be fully refunded/rewarded, so even though it accepts 9% invoices for downstream logistics companies, its tax burden can still be obtained Reasonable control. The practice of reducing the tax burden through local fiscal policies does not violate the provisions of the tax law, and the effect of gathering tax sources is obvious, which is encouraged by the local government.
(2) The flexible employment platform issuing invoices to the employer in its own name does not violate the tax law
For a considerable number of "flexible employment platforms", they cannot obtain the authorization of the tax authorities to collect and issue invoices on their behalf. Their business model is actually to participate in the tripartite relationship between the employing unit and the labor service provider, and issue to the employing unit in the name of the platform itself. bill. In this business model, the employer signs an agreement with the flexible employment platform and pays the fees, and the platform organizes laborers to provide labor services to the employer according to the needs of the employer. The platform signs relevant agreements with laborers, pays remuneration, withholds and pays taxes, and issues ordinary/special VAT invoices to employers. This kind of business has nothing to do with "entrusted issuing", and is more similar to labor outsourcing and labor dispatch. Under this business model, laborers and the platform essentially constitute an affiliate relationship. Based on the affiliate relationship, the platform's act of issuing invoices to the employer is also recognized by Chinese tax law.
2. The financial and tax agency platform does not have the legal obligation to review the authenticity of the customer's business
As mentioned above, in some cases of fraudulent issuing of Internet finance and taxation platforms, the judicial authority believes that the platform has a legal obligation to verify the authenticity of the customer's business. Invoices, mailed invoices, should be investigated for criminal responsibility for the main false issuance. However, we believe that no matter from the perspective of legal regulations or industry guidelines, the financial and tax agency platform does not have the obligation to review the authenticity of the customer's business, and there is no implementation and legal basis for holding the platform responsible for the false opening of the customer.
Article 13 of the "Administrative Measures for Agency Bookkeeping (2019 Amendment)" stipulates that the principal shall perform the following obligations: (1) For the economic and business matters that occur in the entity, it shall fill in or obtain original vouchers that conform to the provisions of the unified national accounting system ;... (3) Provide true and complete original vouchers and other relevant materials to the bookkeeping agency in a timely manner. At the same time, Article 46 of the Guidelines for Tax-related Professional Service Procedures for the Tax Agent Industry (Trial) and Article 12 of the Guidelines for Invoice-Related Agency Business (Trial) formulated by the China Association of Certified Tax Agents also stipulate that the client should Ensure that the relevant information is true, accurate, legal and complete. According to the guidelines of the above-mentioned industry associations, the entrusting party shall be responsible for the accuracy, completeness, authenticity and legality of the materials provided, while the auditing obligations of the entrusting party are limited to "the completeness of the application materials, the compliance of tax matters, and the handling of applications. timeliness”. The compliance of handling tax matters means that the way, methods and procedures of the trustee in handling tax matters should meet the relevant requirements of the tax authorities, rather than checking whether the materials submitted by the trustor for handling tax matters are false or illegal.
Therefore, the national laws and the guidelines of industry associations are clear that the financial and tax agency platform does not have the legal obligation to review the authenticity of the customer's business. If the financial and tax agency platform fraudulently obtains false invoices due to customer fraud or fraud in the business, the customer should be investigated for legal responsibility.
3. The adjustment of the form of individual commercial subjects and the change of the nature of income are legal
In some cases of fraudulent issuing of Internet finance and taxation platforms, judicial authorities have denied their business models, believing that they are suspected of tax evasion or that they are false openings without genuine services. However, combined with the provisions of the Tax Law and the Civil and Commercial Law, we believe that the adjustment of the form of individual commercial entities and the transformation of the nature of income are legitimate.
First, Article 54 of the "Civil Code of the People's Republic of China" stipulates that a natural person engaged in industrial and commercial operations shall be registered as an individual industrial and commercial household. Article 2 of the "Regulations on Individual Industrial and Commercial Households" (Order No. 666 of the State Council) stipulates that: Citizens with business ability who have been registered with the industrial and commercial administration department in accordance with the provisions of these regulations and engage in industrial and commercial operations are self-employed industrial and commercial households. Article 2 of the "Law of the People's Republic of China on Sole Proprietorship Enterprises" stipulates that: "Sole proprietorship enterprises" as mentioned in this Law refer to those established within the territory of China in accordance with this Law, invested by a natural person, the property is owned by the investor himself, and the investor uses his personal property An operating entity with unlimited liability for corporate debts.
It can be seen from the above clauses that individuals (natural persons), self-employed and sole proprietorship are all based on the premise of personal production and operation, and the only difference is whether the relevant registration procedures are performed in accordance with the law. With the consent and instigation of the customer, the Internet platform will help individuals to change their business entity status to self-employed/individual individuals through legal and proper registration procedures in accordance with the above provisions, and the adjustment of such entity forms has a legal basis.
Second, Article 6, Paragraph 1 of the Regulations on the Implementation of the Individual Income Tax Law of the People's Republic of China stipulates that the income from labor services refers to the income obtained by individuals engaged in labor services, including income from...medical care, consulting, teaching...and other labor services. . Item 5 of Article 6 of the Regulations on the Implementation of the Individual Income Tax Law stipulates: “Business income refers to the income obtained by individual industrial and commercial households engaged in production and business activities, investors of sole proprietorship enterprises, and individual partners of partnership enterprises from domestic registration. 2. Income obtained by individuals from running schools, medical care, consulting and other paid services according to law; 4. Income obtained by individuals engaged in other production and business activities.
From the perspective of legal regulations, the scope of income from labor remuneration overlaps with the scope of income from business operations. Income obtained by individuals from engaging in medical treatment, consulting and other paid activities in accordance with the law can be classified as income from labor remuneration or as business income. Therefore, the criterion for distinguishing whether the nature of an item of income is income from remuneration for labor services or income from business operations is not the content of the service, but the type of the subject and the facts of the underlying legal relationship. If the individual providing the service establishes a labor relationship with the object of his service, the income obtained by the individual shall be taxed according to the income from labor services; if the individual providing the service is legally registered to establish a self-employed or a sole proprietorship, the service object established by the individual is a If there is a service relationship, the income obtained by an individual through a self-employed or an individual enterprise shall be taxed as the income from production and operation. Therefore, the Internet finance and taxation platform helps natural person customers transform the business form of "individual-company" into "self-employed/sole-company", and realizes the transformation of the nature of labor remuneration income into business income, which has a legal basis.
4. It is legal for Internet platforms to obtain financial returns from local governments
As mentioned above, online freight platforms have their own shortage of input, and they often make up for the excessive tax burden by obtaining financial rebates from local governments. At the same time, some Internet finance and tax platforms have signed investment promotion agreements with local governments. Rewards and subsidies are implemented on the platform. Therefore, in some cases of suspected false opening on the Internet, the judicial organs have identified the local government financial returns and rewards and subsidies obtained as tax losses. We believe that if the companies attracted by the Internet platform provide real consulting services, it is legal for the platform to obtain such financial returns and rewards.
Article 2 of the "Notice of the State Council on Matters Related to Preferential Policies such as Taxation" (Guo Fa [2015] No. 25) stipulates that the preferential policies that have been issued by various regions and departments, if they have a prescribed time limit, shall be implemented within the prescribed time limit; there is no prescribed time limit. If there is a real need for adjustment, the local government and relevant departments shall establish a transition period in accordance with the principle of grasping the rhythm and ensuring stability, and continue to implement it during the transition period. Article 3 stipulates that the preferential policies in the contracts signed by local governments and enterprises will continue to be effective; the cashed parts will not be retroactive. According to the above regulations, in light of the actual background of attracting investment and developing the economy in various places, the state has an inclusive attitude towards the preferential policies for local financial rebates and allows them to continue to be implemented. Therefore, the local government vigorously develops the headquarters economy and implements the financial return and incentive policies for the settled enterprises to distribute its fiscal revenue according to its authority. Based on this, it is completely legal to give the Internet finance and tax platform the form of administrative contracts. Return, reward and supplement.
In addition, my country's judicial practice also supports the validity of the financial rebate awards and subsidy agreements signed by the government and enterprises. For example, the Supreme People's Court held in its retrial ruling on the "Weifang Xunchi Real Estate Development Co., Ltd. v. Anqiu Municipal People's Government Administrative Agreement": "The business tax and income tax local retention will be returned after the Xunchi company pays, and the above expenses belong to the local government. The Anqiu Municipal Government has the right to autonomously control fiscal revenue, and the contract terms concluded on this basis do not violate the mandatory provisions of laws and administrative regulations, and should also be valid agreements.”
5. Those who do not have the subjective purpose of false disclosure and do not cause tax losses should not be punished as a crime of false disclosure
In order to solve the qualitative problem of false issuance in practice, the Supreme People's Court issued the Reply Letter on How to Determine the Nature of the Behavior of "Affiliate" to Carry out Business Activities in the Name of Relevant Companies and Ask Relevant Companies to Falsely Issue Special VAT Invoices for themselves (Fayan [2015] No. 58) clearly pointed out that the establishment of the crime of falsely issuing special VAT invoices is a necessary condition for the perpetrator to have the intention to defraud tax deductions subjectively and to objectively cause the consequences of loss of VAT tax. If there is indeed evidence to prove that the perpetrator does not have the intention to defraud tax deductions subjectively and does not objectively cause the loss of value-added tax tax, the crime of falsely issuing special VAT invoices should not be punished.
On July 22, 2020, the Supreme People's Procuratorate issued the "Opinions on Giving Full Play to Procuratorial Functions to Serve and Guarantee "Six Stability" and "Six Guarantees", which also clearly emphasized that enterprises with actual production and business activities should not use tax fraud for the purpose, and The act of falsely issuing special VAT invoices without causing tax losses shall not be convicted as the crime of falsely issuing special VAT invoices, and shall be transferred to the tax authorities for corresponding tax treatment and punishment.
We believe that when judicial organs handle false criminal cases on Internet platforms, they should combine the spirit and purpose of the Supreme Court's reply letter and the Supreme People's Procuratorate, and at the same time return to the legislative perspective to examine the establishment of false convictions. From the perspective of legislative purpose and legislative background, the legislative purpose of falsified crime is to protect the state's tax revenue and crack down on crimes that infringe on the state's value-added tax. From the perspective of the protection of legal interests and the nature of crime, any act is defined as a crime by the criminal law because it seriously violates legal interests. . Therefore, only fictitious behaviors that infringe upon the legal interests that the crime of falsification is intended to protect should be classified as this crime. If the perpetrator's "false opening" behavior does not infringe on the national value-added tax, or there is no danger of loss of value-added tax, the object elements of this crime cannot be fully satisfied, and there is no serious social harm. Criminal law evaluations that are punishable by penalties.
F. How should the downstream ticket receivers respond to the qualitative false opening of the Internet platform?
1. Three situations in which downstream vote-receiving units avoid paying taxes, late payment fees and fines
The tax-related risks and defense strategies of Internet platforms have been discussed before, but in practice, the reason why tax-related cases on Internet platforms have aroused strong social repercussions is that their end-customer groups are huge, and thousands of downstream companies could be involved in a platform’s case. The most common situation is that the Internet platform is undergoing a joint tax and police investigation, and at the same time, the tax authority issues a "Notice of Confirmed False Statement" and "Letter of Assisted Investigation" to the competent tax authority of its downstream customers. However, it should be clear that even if the tax authority of the upstream invoicing party issues the notice, it does not necessarily lead to the payment of taxes, late payment fees, or even penalties for the invoicing party. According to our practical experience, in the following three situations, the ticket recipient does not need to pay tax, late payment fee and fine.
In the first case, the billing party constitutes a false issued invoice crime. If the tax authorities do not issue any decisions against the invoice receiver, and the invoice amount can be used as legal deductions. In the second case, the issuing party constitutes a false issuing invoice crime and the receiving party constitutes a bona fide acquisition. In this case, the invoice recipient will not be punished for tax evasion or fraudulent export tax rebates, and the relevant provisions on late payment fees and fines do not apply. In the third case, the issuer constitutes a false issuing invoice crime, and the recipient of the invoice has obtained non-compliant invoices. In this case, the invoice received shall not be deducted, and the invoice shall not be used as a deduction for corporate income tax. The tax authority usually requires the enterprise to pay taxes and overdue fines, but generally does not impose a fine on the payee.
2. Coping mechanisms for tax inspection and police investigation of downstream receiving units
The receiving business should check whether the relevant materials can prove the authenticity of the services provided by the Internet platform. In the early stage of the investigation outbreak, the company's account books and other information have not been collected by taxation and police departments, and the relevant personnel have not yet been used as criminal suspects/witnesses. Therefore, the company has the conditions to comprehensively sort out its business and collect the evidence for authenticity in order to better present to the tax and police officers.
After receiving the "Notice of Confirmed False Issuance" and "Letter of Assisting Investigation" from the tax authority, the tax authority in charge of the tax-receiving unit immediately filed a case to conduct an audit. The recipient enterprise shall actively cooperate, sort out the business process, and actively organize and submit the relevant materials of business authenticity to the tax authority. When necessary, the receiving enterprise can call the transportation fleet, individual vehicle owners and freelancers, and request them to issue relevant information to prove that service has been provided and the corresponding remuneration has been collected. A full explanation is also given for the possible "money back-flow" in the process of obtaining invoices issued by the Internet platform.
If the tax authority has already transferred the case or the police authority has come to conduct preliminary investigation, the receiving enterprise should not give up its defense. Before the police formally file a case for investigation, they must conduct in the statutory "review procedure for filing a case". After reviewing the materials transferred by the tax authority or the preliminary investigation, it is believed that the company also constitutes a false crime, and then the investigation process will be initiated. If it is believed that there is no criminal act or the circumstances are minor and no criminal responsibility should be pursued, the police will not file a case after review. During the process of filing and reviewing cases by the police, criminal suspects and suspect units also enjoy similar rights to state and defend themselves, and they should actively exercise the rights.
G. Tax-related risk compliance recommendations for Internet platforms and their users in 2022

1. Taking business authenticity as the first priority of tax compliance on Internet platforms
2. Avoid cash or private transactions to the greatest extent, and prevent money back-flow.
3. Build a complete "evidence chain" through business materials, expenditure vouchers, etc.
4. Institutionalization of business approval - the key to avoiding the responsibility of actual controllers and executives
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