Understand the tax risks behind fully digitalized e-invoices in one article

（1.）Risk of non-standard completion of the invoice remarks column - purchase of construction services

The invoice remarks column is an important part of invoice information, used to record additional transaction-related information such as project name, location, and project content. This information is crucial for tax management and auditing, helping tax authorities understand the enterprise's real transactions and prevent illegal acts such as tax evasion.

01 Tax risk

If the remarks column of a purchased construction service invoice is filled in irregularly, it may prevent the tax authority from accurately understanding the enterprise's transaction situation, thereby triggering tax risks. For example, if the project name or location is not filled in the remarks column, the tax authority may consider that the transaction does not comply with tax law provisions and require the enterprise to pay additional taxes or face fines.

02 Financial risk

Non-standard completion of the invoice remarks column may also distort an enterprise's financial data and cause trouble for financial management. For example, if the project content or amount is not filled in the remarks column, it may lead to inaccurate cost accounting and affect the enterprise's decisions and profitability.

03 Legal risk

If an enterprise causes tax or audit problems due to non-standard completion of the invoice remarks column, it may face legal risks. For example, the enterprise may be held legally liable for illegal acts such as tax evasion, and may even face criminal penalties.

（II）Tax risks behind a surge in input VAT invoices

01 Risk of fraudulent invoicing

Some lawbreakers may exploit enterprises' demand for input VAT invoices to falsely issue special VAT invoices, thereby fraudulently obtaining export tax rebates or deducting input tax. This not only brings economic losses to enterprises but may also violate the law.

02 Risk of invoice content not matching actual business

Some enterprises, in pursuit of growth in the number of input VAT invoices, may choose to cooperate with suppliers lacking legal qualifications, resulting in input VAT invoices whose contents do not match the actual business. In this case, the enterprise not only cannot enjoy the corresponding tax preferences, but may also have the invoices identified by tax authorities as "out-of-control invoices", further affecting the enterprise's normal operations.

03 Input VAT deduction risk

Because of an unreasonable surge in the number of input VAT invoices, enterprises may have excess input tax credits. This will reduce the enterprise's VAT burden, resulting in no tax payment or even enjoyment of excess input tax credit refunds.

04 Tax audit risk

A surge in input VAT invoices often easily attracts the attention of tax authorities. Once listed as a key target of tax audits, enterprises will face strict tax inspections and may even incur adverse credit records, affecting long-term development.

（Three）Zero-tax-amount input VAT invoice risks

A zero-tax-amount input VAT invoice is a VAT invoice on which the stated tax amount is zero. Under specific circumstances, such as when an enterprise purchases tax-exempt goods or services, it will receive such invoices. However, some lawbreakers use zero-tax-amount invoices for illegal acts such as tax evasion, causing serious losses to enterprises and society.

Tax risks of zero-tax-amount input VAT invoices

01 Tax evasion risk

Some enterprises, in order to reduce tax burdens, use means such as fabricating transactions and forging invoices to create zero-tax-amount invoices, thereby evading tax payments. This behavior seriously harms national tax interests, and once discovered, will face severe legal sanctions.

02 Financial risk

Zero-tax-amount invoices are often accompanied by non-compliant financial operations, such as fictitious costs and profit manipulation. These behaviors may cause distortion of enterprise financial data and bring serious trouble to enterprise operations and management.

（IV）Risk of inconsistency between the change rate of income after tax adjustment and the change rate of operating revenue

The change rate of income after tax adjustment refers to the change in a company's income after tax adjustment. The change rate of operating revenue is an indicator reflecting the increase or decrease in a company's operating revenue. When these two indicators are inconsistent, it may mean that the company has some problems in tax handling, such as underreporting, misreporting, or profit shifting.

01 Improper tax handling

Enterprises may have oversights or errors in the tax handling process, such as inadequate tax adjustments, resulting in inconsistency between the change rate of income after tax adjustment and the change rate of operating revenue. This inconsistency may attract the attention of tax authorities, leading to a review of the enterprise's tax compliance.

02 Profit transfer

Some enterprises may, through related-party transactions, fabricated expenses, and other means, transfer profits from high-tax-rate regions to low-tax-rate regions to reduce the overall tax burden. This profit transfer behavior will cause the change rate of income after tax adjustment to be inconsistent with the change rate of operating revenue, and may also expose enterprises to serious legal consequences.

（V）Surge in Output VAT Invoices and Tax Audit Risk

A surge in output VAT invoices usually means increased sales for an enterprise, but it may also become a focus of tax authorities. Tax authorities compare information such as the enterprise's sales data and invoice issuance from previous years to assess whether there are illegal acts such as tax evasion or fraudulent invoicing. Once tax authorities believe there are suspicious points, they may initiate a tax audit procedure.

（Six）Has tax-exempt income and simplified taxation sales, and has input tax but insufficient input tax transfer-out

Tax-free income refers to sales income exempt from VAT as stipulated by tax law, such as self-produced agricultural products sold by agricultural producers. Simplified taxation refers to adopting a relatively simple taxation method for certain specific industries or transaction forms to reduce the tax burden on enterprises. Input tax refers to the VAT paid by enterprises when purchasing goods or receiving services, which can be used to offset output tax.

However, when an enterprise has tax-exempt income or sales subject to simplified taxation, the scope for deducting its input tax may be limited, which may lead to insufficient input tax transfer-out and thus generate tax risks.

Although tax-free income and simplified taxation bring tax preferences to enterprises, they also increase tax risks. For example, if an enterprise fails to correctly distinguish taxable income from tax-free income, or fails to file simplified taxation as required, it may cause the tax authorities to question the enterprise's tax filing, or even trigger a tax audit.

At the same time, insufficient input tax amount transfer-out is also one of the important tax risks facing enterprises.

Input tax for projects taxed under the simplified tax calculation method and VAT-exempt projects shall not be deducted from output tax; where purchased fixed assets, intangible assets, and real estate are used for both general taxation and simplified taxation projects, their input tax may be fully deducted from output tax; input tax that cannot be distinguished as used for simplified taxation, exempt projects, or general projects shall be apportioned according to a certain proportion of sales revenue.

（Seven）Risk of inconsistency between VAT filing and output VAT invoice amounts

01 Tax risk

If the VAT filing amount is inconsistent with the output VAT invoice amount, tax authorities may question the enterprise's tax filing and require the enterprise to provide explanations or corrections. If the enterprise cannot provide reasonable explanations or corrections, it may face tax penalties such as fines and late fees.

02 Financial risk

If the VAT filing amount is inconsistent with the output VAT invoice amount, it may cause the enterprise's filing forms to be distorted, affecting the enterprise's financial condition and business decisions.

（Eight）Invoice voiding risks

01 Tax compliance risk

Improper voiding of invoices may lead to inaccurate tax information, thereby affecting the enterprise's tax compliance. If tax authorities discover a large number of non-standard voided invoices during inspection, they may question the enterprise, thereby triggering a tax audit.

02 Tax penalty risk

If an enterprise deliberately voids invoices to evade taxes, once verified by the tax authorities, it will face severe tax penalties. This includes fines, late fees, and back taxes, and may even involve criminal liability.

Source: internet

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