In daily life, in addition to providing insight into tax dynamics through the release of tax related documents, the release of hot news and typical cases also reveals tax related information. "Tax Eye News" aims to extract and interpret tax related information from news, tax related legal documents, or major tax cases, and share it with readers. Although no new tax documents have been issued for nearly half a month, tax authorities in various regions have reported typical tax cases, revealing key industries and areas for tax inspection at the end of the year. The author specially sorts out and analyzes typical tax cases in the past half month, hoping to be beneficial to readers.

1、 Wuxi Taxation Bureau Inspection Bureau Announces a Tax Evasion Penalty Case on Webcast Platform

Recently, the State Administration of Taxation, Wuxi Taxation Bureau, Inspection Bureau, announced a case of tax evasion punishment on the online live streaming platform. The "Fire X Live" app operated by a cultural media limited company provides users with virtual props for live consumption. The platform system will automatically recharge the account within 1-5 minutes after the user makes the payment, and there will be no refund after successful recharging. However, the platform did not legally recognize all the recharge amounts as revenue, but instead changed the recharge recognition revenue to virtual currency consumption recognition revenue, and the unused amount was included in advance receipts, resulting in underpayment of taxes by the platform. The Wuxi Municipal Taxation Bureau of the State Administration of Taxation has identified this act as tax evasion, pursuing tax payment, and imposing a double fine, totaling over 460000 yuan.

Legal analysis: The focus of this case is on "the time node of income acquisition, i.e. the time when the tax liability occurs.". Due to the fact that after a user's recharge, the recharge amount will not be returned to the user regardless of whether the user ultimately purchases the platform props, so the revenue has actually been collected by the live streaming platform. According to the Notice of the Ministry of Finance and the State Administration of Taxation on the Comprehensive Promotion of the Pilot Project of Replacing Business Tax with Value-Added Tax (CS [2016] No. 36), Annex I, "Implementation Measures for the Pilot Project of Replacing Business Tax with Value-Added Tax", Article 45 (1): "The occurrence time of value-added tax payment obligations and withholding obligations is:

 (1) The day on which the taxpayer commits a taxable act and receives the sales payment or obtains the evidence for claiming the sales payment; "If an invoice is issued first, it shall be the day on which the invoice is issued." Therefore, after a user successfully recharges a virtual currency, the platform will incur value-added tax liability.

In combination with the situation that several online celebrity anchors have received requests from tax authorities to complete self inspections by the end of December, it is expected that new typical cases will be reported by the end of the year. We hereby remind relevant practitioners to attach importance to tax self inspections and eliminate tax risks at the front end.

2、 The Second Inspection Bureau of Beijing Municipal Bureau of Taxation notifies a star of a tax evasion case

On November 25, the Second Inspection Bureau of the Beijing Municipal Taxation Bureau reported the details of the investigation and handling of Wu's tax evasion case. According to investigation, during the period from 2019 to 2020, Mr. Wu made a false declaration by fabricating the nature of his business and converting his income, concealed his personal income through multiple domestic and foreign affiliated enterprises, and evaded taxes. At the same time, there were other behaviors of underpaying taxes. In the end, it was found to have evaded tax by 95 million yuan, while others had underpaid tax by 84 million yuan. The tax authorities shall impose a fine of four times the amount of tax evasion on those who falsely declare and evade tax on their fictitious business conversion income, and impose a fine of five times the amount of tax evasion on those who conceal personal income.

Legal analysis: In the past reported cases of tax evasion by celebrity online celebrities, it is common to convert "labor remuneration income" into "business income" for tax evasion. However, in this case, there is a different means of tax evasion. Wu used his foreign status to require domestic enterprises or overseas institutions established by domestic enterprises to pay their personal labor remuneration to their overseas registered enterprises, "packaging" their domestic personal income into overseas enterprise income, in order to conceal the fact that their individuals have obtained taxable income from within China, evade China's tax regulation, and achieve the purpose of tax evasion.

As cross-border transactions and capital flows become increasingly frequent, a few taxpayers attempt to take advantage of cross-border transactions and international tax havens to evade their tax obligations in China. However, under the supervision of big data and China's strict regulatory tax policies, this illegal act is bound to be subject to legal sanctions.

3、 The Third Inspection Bureau of Beijing Municipal Taxation Bureau announced a case of failing to handle the final settlement of individual comprehensive income according to law

On November 21, the Third Inspection Bureau of the Beijing Municipal Taxation Bureau announced a case of failing to handle the final settlement and payment of individual comprehensive income according to law. During the post hoc spot check on the handling of the final settlement and payment of individual comprehensive income tax, the Beijing Municipal Taxation Department found that Wang, the legal representative of a design service company in Beijing, had not handled the final settlement and payment of individual comprehensive income tax for the years 2019 and 2020, so it conducted a case filing inspection according to law. Upon investigation, the taxpayer Wang failed to complete the final settlement and payment of comprehensive income of individual income tax in 2019 and 2020 within the statutory deadline, and underpaid the individual income tax. After being reminded and urged by the tax department, Wang has not yet completed the final settlement declaration. After the tax department filed and inspected the case, Wang declared and paid the tax.

Legal analysis: Taxpayers should promptly verify whether there are situations where final settlement and payment should be handled but not handled, tax declaration and payment are not standardized, and taxable income obtained is not reported, and promptly make corrections. If the tax authorities find that there are tax related issues, they will remind and urge taxpayers to rectify them by means of reminders, urging rectification, and appointment warnings. For taxpayers who refuse to rectify or whose rectification is not complete, the tax authorities will file a case for inspection in accordance with the law and regulations.

It should be noted here that after the tax authorities make a risk alert, they often do not directly inform the taxpayer of the risk points, but rather let the taxpayer conduct self-inspection and self correction, which leads to the taxpayer often having no way to initiate self-inspection. It is recommended that taxpayers, upon receiving a risk alert, use professionals to assist them in effective communication with the tax authorities to resolve risks in a legal and compliant manner.

4、 Multiple exposure of typical cases of fraudulent export tax refund

Recently, the Chongqing tax authorities exposed that after obtaining false invoices for purchasing agricultural products, four enterprises they investigated and punished resorted to falsifying their business, forging transportation documents, and exporting fake goods to defraud export tax rebates. At the same time, Xiamen has also announced that an industrial limited company has taken measures such as paying bills and matching tickets to falsely report exports and defraud export tax rebates. The relevant responsible persons in the above-mentioned cases have been transferred to the public security and judicial organs for processing.

Legal analysis: Export tax refund involves multiple departments such as tax, customs, and foreign exchange management. The competent tax authorities of enterprises should monitor the authenticity of traded goods, and the customs should promptly verify various documents for the export of goods. The foreign exchange management department needs to review the source of foreign exchange. With the promotion of information sharing mechanisms among tax, banking, customs, and foreign exchange management departments, as well as the establishment of big tax data, the tax authorities will increasingly intensify their efforts to crack down on fraudulent export tax rebates.

5、 Announce typical cases of fraudulent tax rebates

Recently, the First Inspection Bureau of Hegang City Taxation Bureau in Heilongjiang Province announced a case of a grain trading limited company in Heilongjiang Province defrauding value-added tax retention, offset, and refund. The First Inspection Bureau of Fuxin City Taxation Bureau in Liaoning Province reported a case of a transportation limited company in Fuxin City defrauding value-added tax retention, offset, and refund.

The above two enterprises fraudulently obtain tax retention, offset, and refund by hiding sales revenue, reducing output tax, and making false declarations. After that, they were recovered by the local tax authorities according to law and fined.

Legal analysis: Since the implementation of the large-scale tax rebate policy this year, there have been cases of fraudulently obtaining tax rebates. In response, the tax authorities have severely investigated and cracked down on illegal acts of fraudulently obtaining tax rebates for retention, and have repeatedly published typical cases of fraudulently obtaining tax rebates for retention as an example. Taxpayers are hereby reminded that they should not seek temporary profits and break through the legal boundaries, and comply with the law to provide tax rebates.