Editor's note: Labor dispatch employment methods are flexible and convenient, which can greatly reduce transactional work for enterprises, save labor costs, and avoid possible disputes with dispatched workers in personnel (labor) relationships. It is favored by all walks of life. In practice, many employers have difficulty distinguishing the qualifications of labor dispatch companies and have flaws in the signing of the Labor Dispatch Agreement, which leads to the risk of false opening of labor dispatch workers. In this issue, the Chinese Tax Lawyer used a criminal case of labor dispatch false opening, analyzing the court's judgment on false opening determinations in different situations, and analyzed from the perspectives of legal relations and substantive taxation principles. Labor dispatch employment that violates the Labor Contract Law does not necessarily constitute tax evasion or false opening for readers.
1. Cases introduced
Harbin Baoxing Labor Dispatch Co., Ltd. (hereinafter referred to as Baoxing Labor Dispatch Company), was established on November 30, 2007. Its business scope is: labor dispatch, labor services, labor consultation, social insurance and provident fund payment agency, etc. Meng Moumou is the actual controller. From August to October 2014, Harbin Baoxing Labor Dispatch Co., Ltd. was issued a labor fee invoice issued by five units including Heilongjiang Zhonghai Economic Test Space Information Technology Co., Ltd. (hereinafter referred to as Zhonghai Economic Test Company), Harbin Hongcheng Baotai Economic and Trade Co., Ltd. (hereinafter referred to as Hongcheng Baotai Company), Heilongjiang Provincial Water Conservancy and Hydropower Engineering Corporation (hereinafter referred to as Water Conservancy and Hydropower Company), Harbin Haitai Navigation and Measurement and Control Technology Co., Ltd. (hereinafter referred to as Haitai Navigation Company), and Heilongjiang Zhengyang Home Appliances Co., Ltd. (hereinafter referred to as Zhengyang Home Appliances Company). It was prosecuted by the Harbin Daoli District People's Procuratorate for the crime of issuing false invoices and filed a public prosecution with the local court on July 29, 2015.
2. Controversy focus and opinions of all parties
Basic basis for the procuratorate:
From August to October 2014, Meng Moumou operated Baoxing Labor Dispatch Company without obtaining the relevant labor dispatch business qualifications and did not actually have labor dispatch business. The invoice issued should be deemed to be false.
Baoxing Labor Dispatch Company’s defense points:
From August to October 2014, our company issued invoices to five companies including China Overseas Economic Testing, which are consistent with the actual business and should not constitute a crime.
Court judgment opinion:
The court determined that the main factor in false is whether the labor dispatch employers have actual business, and whether they have signed a labor dispatch contract, whether there is a salary list and a certificate of the situation of relevant labor personnel, etc., have become the key considerations for the "actual business occurrence".
3. China Taxation Views
(I) The business should not be denied because the labor dispatch employment model violates the Labor Contract Law. If the state tax loss is not caused, it should not be deemed as false issuance or tax evasion
1. The business is actually occurring, failure to sign a labor dispatch agreement and other acts that violate the Labor Contract Law do not necessarily deny real transactions
0 Article 22, paragraph 2, item (2) of the Invoice Management Measures of the People's Republic of China "Let others issue invoices that do not match the actual business situation" is a false invoice issuance. Interpretation of the Supreme People's Court on the application of several issues concerning the "Decision of the Standing Committee of the National People's Congress on Punishing the Crime of False Issuance, Forgery and Illegal Sale of VAT Special Invoices" (Fafa (1996) No. 30): 1. Anyone who has any of the following acts is a "fixed VAT special invoice": (1) No. 1) No. 1 of the following acts is to issue VAT special invoices for others, for themselves, for themselves, and introduce others; ... Therefore, whether there are real taxable labor is the key to determining whether labor dispatched labor constitutes false issuance.
"Labor Dispatch Agreement" is an agreement signed between the labor dispatch unit labor dispatch unit and the employer on matters such as dispatched positions and number of personnel, dispatch period, labor remuneration and social insurance premiums. If a failure to sign the Labor Contract Agreement violates the provisions of Article 59 of the Labor Contract Law, it may be punished in accordance with the relevant provisions of the Labor Contract Law.The court ruled that the business should not be denied on the grounds that the "Labor Dispatch Agreement" has not been signed. If the enterprise can provide relevant labor staff payroll, social insurance payment status, personnel situation description and other materials to prove that both parties do have actual business, the court should acknowledge it. In the case, Baoxing Labor Dispatch Company issued invoices for Hongcheng Baotai Company and Haitai Navigation Company. If the labor service can be provided with relevant labor personnel personnel status certificates, payrolls, social insurance payments, etc., proof that the labor service is actually happening, it should not be deemed to be false.
2. Differential taxation is a reflection of the principle of substantive taxation. The withholding agent has fulfilled the withholding obligation and does not cause national tax losses because of the choice of differential taxation
The substantive taxation principle means that in a certain situation, whether tax should be determined based solely on its appearance and form, should be determined based on actual conditions, especially based on its economic purpose and the essence of economic life, whether it meets the elements of taxation, in order to ensure that taxation is fair, reasonable and effective. According to the "Notice on Further Clarifying the Policies on Labor Dispatch Services, Toll Road Toll Deductions, etc. for the Pilot of VAT Reform" (Finance and Taxation [2016] No. 47), you can choose to pay taxes in the difference based on all the prices and extra-price expenses obtained. After deducting the wages, benefits paid to the labor dispatch employees by the substitute unit and the balance after applying for social insurance and housing provident fund for them, the sales amount will be calculated and paid value-added tax according to the simplified tax calculation method at a 5% collection rate. This clause is the embodiment of the principle of substantive taxation. If the labor dispatch and employment model violates the relevant provisions of the Labor Contract Law, but has fulfilled the withholding and payment obligations in accordance with the Personal Income Tax Law and the Tax Collection and Administration Law, and has not caused the loss of state taxes, it should not be considered as false issuance or tax evasion.
Regarding the withholding agent , the labor dispatch employment model, according to the provisions of the "Supplementary Notice on Related Issues in Investigation and Handling of Personal Income Tax Evasion Cases" (State Tax Letter [1996] No. 602), the withholding agent for labor dispatch employment should be "units and individuals with the right to decide on the payment object and payment amount of the income". As can be seen above, whether it is a labor dispatch unit or an employer, as long as the amount paid by the relevant labor personnel has the right to decide, it should be deemed as the withholding agent.
(II) If the labor dispatch company issues an invoice and is proven to be false, the employer's legal liability as the recipient
1. Be able to prove the authenticity of the business + obtain the invoice in good faith - pay the tax
In the labor dispatch employment model, if the employer obtains a false value-added tax invoice that has been proven to be issued falsely, according to the provisions of the "Notice of the State Administration of Taxation on the Handling of the Special Value-added Tax Invoices issued by Taxpayers for the Good faith Obtaining a False Value-added Tax Invoice" (Guoshifa [2000] No. 187) and the "Reply of the State Administration of Taxation on the Issue of the Taxpayers for the Good faith Obtaining a False Value-added Tax Invoice that has been deducted from taxes and late payment fees" (Guoshifa Letter [2007] No. 1240), if the invoice states that the amount of labor and tax amount provided are consistent with the actual situation, and there is no evidence to show that the employer knows that the invoice provided by the labor dispatch unit is obtained by illegal means, it will not be treated as tax evasion or fraudulent export tax rebates; the provisions of Article 32 of the Tax Collection and Administration Law are not subject to the provisions of Article 32 of the Tax Collection and Administration Law, and late payment fees shall not be charged. However, the input tax should be transferred out and the tax should be paid.
2. If the invoice that cannot prove that the good faith is deemed as a non-compliant invoice—Refund tax payment + late payment
If the employer obtains a false value-added tax invoice and cannot prove that the good faith is not proved, if the VAT tax deduction certificate obtained is deemed as a non-compliant invoice, according to Article 9 of the Interim Regulations on Value-added Tax and the State Administration of Taxation Announcement No. 33 of 2012, taxpayers shall not use the invoice that the false value-added tax special invoice that is not deducted as a legal and valid VAT deduction certificate. Taxes paid for due to non-deduction shall be charged a late payment fee of 5/10,000 per day from the date of late payment of tax; at the same time, the non-compliant invoices obtained shall not be used as valid pre-tax deduction vouchers, and the fees and costs listed shall not be deducted before corporate income tax. Corporate income tax shall be adjusted and supplemented, and a late payment fee of 5/10,000 per day from the date of late payment of taxes shall be charged.
3. Using the labor dispatch unit to issue false invoices for himself, he should bear the criminal responsibility for false issuance
In practice, in order to embezzle funds for employee wages and bonus payments, evading tax payment is a common reason for false issuance. In the absence of actual labor service business, using the labor dispatch unit to issue false invoices and withdraw cash for himself is serious, which will violate the criminal law and face the risk of criminal liability.
According to Article 205 of the Criminal Law and Law Fa (1996) No. 30, if you do not purchase or sell goods or provide or accept taxable services, but do not provide or accept taxable services, and issue special value-added tax invoices for others, for yourself, and introduce others, are all "false issuance". According to Article 205 of the Criminal Law and the "Notice of the Supreme People's Court on the Conviction and Sentencing Standards for the Conviction and Sentencing of False VAT Special Invoice" (Fa [2018] No. 226), based on the amount of false value-added tax special invoices, you may be sentenced to life imprisonment and fined at worst; if you issue false VAT ordinary invoices seriously constitutes a crime, it shall be a crime of false invoices, and a fine may be sentenced to 7 years of fixed-term imprisonment and a fine. commit the crime in the preceding paragraph. If an organization commits the crime in the preceding paragraph, it shall be sentenced to a fine, and the directly responsible supervisor and other directly responsible persons shall be punished in accordance with the provisions of the preceding paragraph.
