After receiving the "Notice of Confirmed Falsification", the tax authorities will require enterprises to submit transaction information with upstream enterprises in accordance with the law, verify the authenticity of the transactions, and impose corresponding penalties on downstream enterprises. Even the slightest punishment requires enterprises to pay value-added tax and surcharges (except for overdue collection periods). If in the tax inspection, the tax authorities believe that the downstream acceptance of false information is suspected of criminal responsibility, they will transfer it to the public security organs for handling. In practice, many downstream enterprises believe that there are real transactions between themselves and upstream enterprises, and it is unfair to pay value-added tax and surcharges. However, from the current tax related documents and tax processing practices, it is difficult to avoid paying value-added tax and surcharges. However, in a recent case of this type, the Shanghai Railway Court used a "penetrative review" method to involve the tax authority that issued the "confirmed false issuance notice" in the lawsuit. In the end, downstream enterprises and tax authorities reached a settlement in the lawsuit, avoiding the need for supplementary payment of value-added tax and surcharges. This is the first case in China, and we take this opportunity to analyze and explore the handling of such cases together.

1、 Upstream confirmed false opening, common types of tax risks for downstream enterprises

（1） Beyond the collection period, no collection will be made

The investigation and handling of tax cases has a certain lag. When the tax authority where the downstream enterprise is located receives the "Confirmed False Issuance Notice", it will require the enterprise to provide transaction information with the invoicing party and verify the transaction situation. If the tax authorities consider that the transaction is non compliant and has not reached the level of transferring criminal responsibility, and only require tax administrative punishment, they will consider the recovery period of the case. In practice, the calculation of the collection period is generally based on the date when the tax authority issues the "Notice of Filing Inspection" (partially the "Notice of Assistance Inspection") to downstream enterprises. If the time between the deduction of taxes by downstream enterprises on that day exceeds the collection period, the tax authority will make a decision not to pursue the payment.

For example, the First Inspection Bureau of Foshan Taxation Bureau of the State Administration of Taxation issued the "Tax Processing Decision" (Foshan Taxation Yiji Office [2022] No. 307), which stated that "your company obtained 59 value-added tax special invoices issued in the name of Guangdong Biao Steel Trading Co., Ltd. in 2015 and 2016 According to the Third Inspection Bureau of Guangzhou Taxation Bureau of the State Administration of Taxation, the above-mentioned invoice is a false invoice. . According to Article 52 of the Tax Collection and Administration Law of the People's Republic of China and Article 82 of the Implementation Rules of the Tax Collection and Administration Law of the People's Republic of China, the illegal acts of underpaying enterprise income tax in 2015 in items (1) to (4) and (5) have exceeded the statutory collection period, and value-added tax, urban maintenance and construction tax, education surcharge, local education surcharge, 2015 enterprise income tax and its late fees will not be pursued in this case. ”

（2） Downstream enterprises constitute 'good faith acquisition'

According to current regulations, invoices issued by upstream enterprises are classified as false. If the input invoices obtained by downstream enterprises are recognized by tax authorities as "good faith acquisition", they only need to pay value-added tax and surcharges, without late payment fees, and do not need to pay corporate income tax (in some regions, there have been situations where companies are required to pay income tax under the recognition of good faith acquisition, which I believe is inappropriate).

For example, the "Tax Processing Decision" (Chang Shui Ji Er Chu [2023] No. 151) issued by the Second Inspection Bureau of Changzhou Taxation Bureau of the State Administration of Taxation states that "your unit purchased goods from Wang * *, a salesperson claiming to be Jiangyin * * Textile Co., Ltd., in 2017 and obtained three value-added tax special invoices issued by Jiangyin * * Textile Co., Ltd. on October 23, 2017 provided by Wang * * *... The above-mentioned invoices were classified as false by the Second Inspection Bureau of Wuxi Taxation Bureau of the State Administration of Taxation on December 16, 2021. After inspection, there is currently no evidence to suggest that your unit knew that the value-added tax special invoices provided by the seller were obtained through illegal means, and your unit obtained false value-added tax special invoices in good faith. According to the Notice of the State Administration of Taxation on the Handling of Taxpayers Obtaining Falsely Issued Value added Tax Special Invoices in Good Faith (Guoshuifa (2000) No. 187), downstream enterprises must handle the transfer of input tax, pay value-added tax and surcharges, and have no late payment fees.

（3） Handle according to obtaining non compliant invoices

Although Guoshuifa (2000) No. 187 was issued and implemented on November 16, 2000, the recognition of "good faith acquisition" is also very rare in practice. Most tax authorities prefer to rely on Article 9 of the Interim Regulations on Value Added Tax, which states that "if a taxpayer purchases goods, services, intangible assets, or real estate and obtains a value-added tax deduction certificate that does not comply with laws, administrative regulations, or relevant provisions of the tax authorities under the State Council, the input tax amount shall not be deducted from the output tax amount." Taxpayers who obtain non compliant invoices are required to transfer the input tax, pay the value-added tax and surcharges, and charge late fees. In addition, under this recognition, enterprises should actively strive to ensure that the costs involved in invoices comply with the provisions of the "Management Measures for Enterprise Income Tax Pre tax Deduction Vouchers", so that tax authorities can allow enterprises to make cost deductions without the need to pay additional enterprise income tax.

（4） Recognized as tax evasion behavior

Obtaining false gains and being classified as tax evasion is a relatively serious approach in tax administrative processing. Under this recognition, enterprises not only need to pay value-added tax and surcharges, corporate income tax, and late fees, but also involve multiple fines.

Under the determination of tax evasion, if a company believes that it has no subjective intention of tax evasion, or is dissatisfied with the classification based on other reasons, it should use the hearing procedure in the punishment without authorization, and strive to solve the problem of tax evasion classification in the tax administrative penalty hearing procedure.

（5） Illegally purchasing value-added tax special invoices

The case of obtaining false invoices and being classified as the crime of illegally purchasing value-added tax special invoices has only emerged in large numbers in recent years. Through the analysis of cases related to the illegal purchase of value-added tax special charges, it can be seen that the composition of this charge generally reflects such characteristics: the two parties have no real business transactions, the payee does not intend to defraud and deduct value-added tax (but based on other illegal purposes), and the payment of invoicing fees is identified.

It should be noted that in criminal cases, if the payee obtains false non fraudulent national value-added tax credits, but also causes underpayment of corporate income tax due to this behavior, it should not be simply classified as "other illegal purposes" and classified as the crime of illegally purchasing value-added tax special invoices (there are situations where it does not constitute a crime). After all, if the payee engages in tax violations in order to underpay corporate income tax, it can also be treated as tax evasion or other tax administrative measures, and does not necessarily constitute a criminal offense.

（6） Crime of falsely issuing value-added tax special invoices

If there is no real business transaction between the payee and the issuer, and the purpose of obtaining false invoices is to defraud the national value-added tax and cause national tax losses, it is easy to be classified as the crime of false issuance of value-added tax special invoices. If the tax authorities believe that the act of "accepting false information" is suspected of criminal responsibility during the inspection process, they will transfer it to the public security organs in accordance with the law.

There are six common ways to handle virtual opening, but in practice, there have also been other types of handling methods. Due to their rarity and specificity, they will not be listed one by one. In the author's opinion, the boundary of what kind of tax administrative treatment should be taken for the act of "obtaining false opening" itself is not particularly clear at present. Due to unclear boundaries, multiple types of punishment outcomes have emerged for the same behavior. If a company encounters a request from the tax authorities for the recipient company to cooperate in the investigation or file an inspection on the recipient company on the grounds of receiving a "Notice of Confirmed Falsification", the company should hire professionals to cooperate with the tax authorities and strive for the lightest possible handling result.

2、 Upstream confirmed false opening, downstream normal deduction case

As mentioned earlier, there are currently six common ways to handle virtual opening. But in a recent tax case handled by the Shanghai Railway Court, there were special circumstances. Let's take a look at the case together. [Note: The brief introduction of the case and the court's handling approach in this section are sourced from the Shanghai Railway Transport Court]

（1） Case Introduction

The receiving enterprise, namely the plaintiff, a certain oil company, received 13 value-added tax special invoices issued by the issuing enterprise, with a total value-added tax amount of over 1.48 million yuan, all of which were certified and deducted. The upstream tax authority of a certain inspection bureau in another province determined that the invoice involved in the case was falsely issued, and issued a confirmed false issuance notice and cooperation letter to the downstream tax authority, namely the Fifth Inspection Bureau of the Shanghai Municipal Taxation Bureau. The Fifth Inspection Bureau has made a tax treatment decision after investigation, and believes that there is no evidence to prove that a certain oil company maliciously accepted invoices involved in the case. It has decided to recover more than 1.48 million yuan of value-added tax and more than 170000 yuan of additional taxes and fees, but no late fees will be charged. A certain oil company disagrees and applies for administrative reconsideration to the Shanghai Taxation Bureau. After review, the Shanghai Taxation Bureau made an administrative reconsideration decision and upheld the decision to handle the lawsuit. After receiving the sued reconsideration decision, a certain oil company filed a lawsuit against the Supreme Railway Court on the grounds of genuine transactions between itself and the invoicing company, requesting a judgment to revoke the sued handling decision and the sued reconsideration decision, and ordering the tax authority to refund the tax. During the trial, presided over by the Shanghai Railway Court, a certain oil company reached a settlement with the tax authorities regarding an administrative dispute and voluntarily applied to withdraw the lawsuit.

（2） The court's innovation and breakthrough in handling this case

1. Innovation: Involve tax authorities who have issued 'Confirmed False Notice' in litigation

Prior to the trial, the Shanghai Railway Court conducted a search and found that the traditional approach to handling cases involving the collection and payment of taxes by downstream tax authorities holds that the decision made by the upstream tax authority to recognize the false issuance of value-added tax invoices is made by an administrative authority with the power to determine administrative actions, and downstream tax authorities can directly use it as factual evidence for tax processing decisions. In tax enforcement, when there is a disagreement between upstream and downstream tax authorities regarding the determination of key facts such as whether there is a genuine transaction between the issuing enterprise and the receiving enterprise, downstream tax authorities generally limit themselves to the false determination made by upstream tax authorities. Even if they believe that there is a genuine transaction, they will make tax treatment decisions to recover value-added tax and additional taxes. Under the traditional trial mode, if the upstream tax authority does not revoke its deterministic tax treatment decision, the downstream tax authority's tax treatment decision complies with legal provisions and is not inappropriate. In this situation, the Shanghai Railway Court believes that the transaction between a certain oil company and the invoicing company in this case has been recognized by the tax authorities as a genuine transaction. As a company that obtained invoices in good faith, it is obviously unreasonable for the obtained invoices to be deemed as false and not allowed to deduct input tax. If the legality of the sued decision is simply reviewed and the original claim is rejected, it will be difficult for the input tax deduction rights of a certain oil company to be remedied through other channels. Therefore, the Shanghai Railway Court focuses on the key fact of the case, which is whether there is a real transaction between a certain oil company and the invoicing enterprise. It traces back along the factual evidence submitted by the downstream tax authority, the Fifth Inspection Bureau, and seeks evidence support from the upstream tax authority, a certain inspection bureau in another province. To this end, the Shanghai Railway Court has opened up new ideas, broken through traditional practices, and notified a certain inspection bureau from another province to participate as a third party in the lawsuit. After active communication and full explanation with a certain inspection bureau in another province, and obtaining the cooperation and support of the inspection bureau, the deputy director personally appeared in court to participate in the offline trial of this case.

2. Breakthrough: Allow downstream enterprises to deduct input tax

During the trial, administrative officials from the Fifth Inspection Bureau and a certain inspection bureau from another province appeared in court to respond effectively to the objections of a certain oil company. The Shanghai Railway Court fully listened to the statements and opinions of the upstream and downstream tax authorities, and found out that the substantive claim of a certain oil company is to offset 13 value-added tax special invoices that were found to be falsely issued. In order to substantively resolve disputes, the Shanghai Railway Court guided upstream and downstream tax authorities to conduct arguments around key facts, built dialogue platforms, and conducted in-depth interactive exchanges, ultimately leading to clear statements from upstream and downstream tax authorities on key facts, restoring the truth of the facts, and jointly confirming that the 13 invoices involved in the case were genuine transactions and should be subject to input tax deduction. The Shanghai Railway Court organized all parties to determine a coordinated resolution plan in court, effectively promoting the substantive resolution of tax disputes.

3、 Think about it

In recent years, the author has acted as an agent in several tax administrative cases where false invoices were obtained in good faith, or treated as non compliant invoices, or exempted companies from making up for overdue payments. As stated by the Shanghai Railway Court, "downstream tax authorities are generally limited by the false recognition made by upstream tax authorities, and even if they believe that there is a real transaction, they will make tax treatment decisions to recover value-added tax and additional taxes." Therefore, in this case, the Shanghai Railway Court adopted a "cross perspective judgment" approach, allowing the inspection bureau that issued the "Confirmed Notice" to appear in court, investigate the truth of the facts, and focus on resolving tax disputes from the perspective of rationality and tax fairness principles, which deeply impressed the author.

The Supreme People's Court has issued the "Opinions on Improving the Working Mechanism of Uniform Legal Application Standards", requiring the standardization of legal application standards and avoiding "different judgments for similar cases". At the same time, it was mentioned in the first paragraph of Article 5 of the "Tax Collection and Administration Law (Draft for Comments)" that "the competent tax department of the State Council shall be in charge of the national tax collection and administration work, and shall strengthen the unity and standardization of tax law enforcement between regions in accordance with the law." This also greatly reflects the concept and requirements of the State Administration of Taxation to promote the unity of tax law enforcement between regions. The author believes that there is currently no unified standard for tax treatment or criminal responsibility definition for the act of "obtaining false information", which leads to results that can be light or heavy under one behavior. We look forward to more clear documents being issued in the future regarding cases of 'false opening', so that tax and judicial authorities can handle this type of case more uniformly and provide more reasonable protection for taxpayers' rights and interests.