Can invoices be issued outside the business scope of a business license? The State Taxation Administration gives an official reply!

Can invoices be issued beyond the business scope? Articles are being posted on all major official accounts, but none provide an accurate official reply. So today we have compiled the State Taxation Administration's reply for everyone.

01 Clearly defined by the State Taxation Administration! Issue invoices beyond business scope this way!

Q: Our company currently has a one-time temporary business that requires an invoice to be issued, but the business license's business scope does not include this scope. Can it be handled without changing the business license?

Answer: State Taxation Administration website answer: According to the Decision of the State Council on Amending the Measures of the People's Republic of China for the Administration of Invoices (Decree No. 587 of the State Council of the People's Republic of China) and the Guidelines for the Issuance and Use of VAT Invoices (Tax General Goods Letter [2017] No. 127), units and individuals that sell goods, provide services, or engage in other business activities and collect payments from external business operations shall issue invoices to the payer; under special circumstances, the payer shall issue invoices to the payee.

Therefore,If a taxpayer has a taxable act, unless the State has explicitly prohibited sales, it shall issue an invoice according to the facts even if it exceeds the business scope on the business license.

The author suggests: although the official response again states that invoices can be issued, local tax bureaus have differing interpretations, or tax administrators may advise against or disallow issuance. Please forward and save this article for unexpected needs.

Official reply URL:

http://www.chinatax.gov.cn/chinatax/n810356/n3255681/c5166135/content.html

02 What to do when abnormalities occur in issuing invoices beyond the business scope? A one-time clear answer for everyone!

I. Invoicing anomaly! Unable to issue an invoice at the corresponding tax rate in the invoicing system!

If an enterprise engages in business outside its business scope and needs to issue invoices itself, but the invoicing system does not have the tax rate corresponding to this business, the accountant cannot issue an invoice with the corresponding tax rate in the invoicing system. For example: a small-scale taxpayer's business scope is clothing sales, but it obtains income from real estate leasing services. The former applies a 3% levy rate, and the latter applies a 5% levy rate. A 5% levy rate cannot be found in the invoicing system, so the invoice cannot be issued.

II. Filing abnormality! Filing abnormality occurs after issuing invoices!

Document Shui Zong Fa [2017] No. 124 states that the comparison content of VAT tax filing includes form-to-form comparison, invoice-to-form comparison, and form-to-tax comparison. Therefore, if an invoice is issued that differs greatly from daily business operations, a filing abnormality prompt may appear.

III. No business license change, no assessment!

Policies differ across locations. Some regions require changing the business scope before tax types and item names can be approved, in which case a change should be made. In other regions, when an enterprise occasionally conducts business beyond its scope, there are no obstacles to invoicing and filing, and it can issue invoices on its own. The enterprise should follow local policies.

Finally, regarding the specific operation of invoicing beyond the business scope, we offer 2 suggestions.

1. For temporary business:① Go to the tax bureau to verify the relevant tax types and levy items; ② Bring the disk to reissue it.Whether to specifically change the business scope depends on different local policies, according to the actual situation in each region.

2. For recurring business,It is recommended to change the business registration, change the business scope, then go to the tax authority to change the tax matters and issue the corresponding invoice. Otherwise, there may be a risk of penalties.

03 High risk in issuing invoices beyond the business scope? Never touch the 4 red lines!

Invoices can be issued beyond the business scope, but not arbitrarily—bosses must never touch these 4 red lines!

Red line one: false invoicing

The tax bureau delivered four notices of false invoicing inspection within one day. So, does invoicing outside the business scope constitute false invoicing? According to Article 22 of State Council Decree No. 587, issuing invoices to others, to oneself, having others issue invoices to oneself, or introducing others to issue invoices that do not conform to the actual business situation constitutes false invoicing.

Please note that this emphasizes whether it matches the actual business, not whether it exceeds the business scope.

In addition, according to regulations, when a taxpayer engages in taxable activities, except where prohibited from sale by state order, invoices should be issued truthfully even beyond the business scope stated in the business license. Therefore, invoices may be issued for actual business activities regardless of whether they fall within the business scope. However, issuing invoices for businesses that are inconsistent with the actual operating business will be classified as false invoicing. Therefore, business owners and accountants must exercise discretion and emphasize transaction authenticity, and must not issue invoices arbitrarily just because they can exceed the business scope, and must never cross the red line of false invoicing!

Red line two: expanding the scope of invoice use

Article 25 of the Measures for the Administration of Invoices provides that any unit or individual shall use invoices in accordance with invoice administration regulations and shall not engage in acts that expand the scope of invoice use. ThenDoes "invoicing beyond the business scope" constitute "expanding the use of invoices"?Before the replacement of business tax with VAT, VAT invoices and business tax invoices each applied to different types of business and each belonged to different tax authorities. VAT invoices were managed by the state tax bureau, and business tax invoices by the local tax bureau, with tax categories assessed separately, so they could not be issued interchangeably. After the replacement of business tax with VAT, business tax was abolished, VAT was levied uniformly, and VAT invoices were also managed uniformly by state tax authorities.

Therefore, as long as it is a genuine VAT business operation, ifExceeding the business scope cannot be deemed as "expanding the scope of invoice use." But it cannot be done without restraint.According to the provisions of the Measures for the Administration of Invoices, those who expand the scope of invoice use may be fined up to 10,000 yuan and may also have illegal gains confiscated.

Red line three: invalid contract

Article 52 of China's Contract Law regarding violations of state restrictions on business operations, franchised operations, and laws and administrative regulations on prohibited business operations:

·1. Signing contracts through fraud or coercion

·2. Malicious collusion

·3. Concealing illegal purposes through lawful forms

·4. Provisions were made for acts violating mandatory provisions of laws and administrative regulations.

These situations harm either national interests, collective interests, or the interests of others. Upon appraisal, the above contracts have all become invalid.

So is a contract signed beyond the business scope valid? According to the relevant provisions of the judicial interpretation of the Contract Law, if a party concludes a contract beyond its business scope, the people's court shall not invalidate the contract on that ground. The exception is where it violates state regulations on restricted operations, franchised operations, or operations prohibited by laws and administrative regulations.

Special reminder: Article 505 of the Civil Code, effective January 1, 2021, also provides that a contract shall not be confirmed invalid solely on the grounds of exceeding the business scope.

i.e.As long as it does not violate state restrictions on operations, franchising, or prohibitions stipulated by laws and administrative regulations, contracts concluded by an enterprise legal person outside the business scope cannot be regarded as invalid contracts.Although this fully reflects the autonomy of the contracting parties and contracts can be signed beyond the business scope, bosses must exercise discretion.

Red line four: fines for unlicensed operation

The "Regulations on the Administration of Enterprise Legal Person Registration" provides that those who arbitrarily change major registration items or engage in business activities beyond the approved business scope shall be warned, fined, have illegal gains confiscated, be ordered to suspend business for rectification, have their "Enterprise Legal Person Business License" withheld or revoked, etc.

The "Detailed Rules for the Implementation of the Regulations on the Administration of Enterprise Legal Person Registration" provides that those who arbitrarily change registration items or engage in business activities beyond the approved business scope shall, depending on the severity of the circumstances, be fined up to 30,000 yuan.

So will invoicing beyond the business scope be penalized?

Currently, the market supervision and administration departmentPenalties apply only to engaging in business activities beyond the business scope., but tax authorities do not restrict invoicing for genuine business beyond the business scope. If an enterprise has relevant business, it may inquire with the local authority, with the note that invoices are issued after changing the business scope.

04 Save it! Understand issues related to invoicing beyond the business scope

I. Determination of business scope

1. Filling requirements

(1) No word count requirement, no category restriction.

(2) The wording should be standardized and easy to understand; refer to the "Industrial Classification for National Economic Activities" issued by the National Bureau of Statistics.

2. Enterprise type and business scope

Technology category

(1) Common companies

Companies in technology, information technology, network technology, technology development, etc.

(2) Business scope

Culture, media, and advertising

(1) Common companies

Culture category: culture, cultural communication, cultural development, film and television culture, etc.

Media: media, cultural media, advertising media, etc.

Advertising category: advertising, film and television advertising, etc.

(2) Business scope

Consulting

(1) Common companies

Consulting, enterprise management consulting, business consulting, technical consulting, investment consulting, investment management consulting, education consulting, information technology consulting, financial consulting, and other companies.

(2) Business scope

Management category

(1) Common companies

Companies in investment management, enterprise management, business management, asset management, human resource management, catering management, etc.

(2) Business scope

Trade category

(1) Common companies

Trading, science and trade, commerce, industry and trade companies, etc.

(2) Business scope

Note:

● 1. For projects that require approval in accordance with the law, business activities may only be carried out after approval by the relevant authorities;

● 2. The scope of business shall be subject to the final industrial and commercial approval.

II. Processing Procedures

Project Approval

1. Pre-approval

(1) Permit before license, apply for the permit first in accordance with the regulations of the relevant authorities, then apply for the business license.

(2) An approval document must be obtained first before establishment.

2. Post-approval

(1) License before permit, commercial approval first. Obtain the business license, then apply for the relevant permits in accordance with the regulations of the relevant authorities before officially commencing business.

(2) Industrial and commercial registration is completed, but without the corresponding license, business cannot be conducted in that field. (Obtain business license → window staff passes the "commercial entity approval notification" → the "notification" shows that a certain applied business scope requires approval by a certain department)

III. Tax-related matters to note in business scope

1. There is an order to the scope of filling in

(1) For enterprises operating in multiple industries simultaneously, the industry of the first business item in the business scope shall be the industry to which the enterprise belongs.

(2) During tax audits, case selection indicators often refer to industry levels.

(3) Tax burden indicators differ by industry; pay attention to the order in which the business scope is filled in.

2. The scope of branches cannot be filled in arbitrarily

Branch company

(1) A branch cannot independently bear civil liability.

(2) The business scope cannot exceed the business scope of the head office.

Subsidiary

(1) Having independent legal person status.

(2) The business scope does not need to be within the parent company's business scope.

Parent and subsidiary companies frequently provide services to each other

(1) The parent company should add business scope such as commercial services.

(2) The subsidiary adds a business scope of providing services to the parent company.

3. Assessed collection should be considered

If you plan to apply for assessed collection, avoid circumstances in the business scope that do not permit assessed collection. Refer to Guoshuihan [2009] No. 377.

4. Scope is not the more the better

Note businesses that cannot enjoy tax preferences.

5. Check-in Security

Enterprises in the same industry have different operational priorities, and the business scope should highlight the main business.

IV. Can invoices be issued beyond the business scope?

Answer: Invoicing is allowed.

Policy basis:

● 1. Currently, no document explicitly stipulates that business beyond the scope of operations is not allowed to issue invoices.

● 2. Units and individuals that fill out and issue invoices must issue invoices when the business transaction occurs and operating revenue is recognized. No invoices may be issued under any circumstances if no business transaction has occurred. (Article 26 of the Implementing Rules of the Measures for the Administration of Invoices)

Note: If the business is genuine and compliant and constitutes a taxable business, an invoice can be issued regardless of whether it exceeds the business scope.

V. Related Q&A from local tax authorities

State Taxation Administration

May 6, 2016, State Taxation Administration policy Q&A policy group speech materials:

Q: If a general taxpayer engages in business beyond the scope of tax registration, should it issue an invoice itself or have the tax authority issue an invoice on its behalf?

Answer: General taxpayers shall issue VAT invoices themselves in all cases.

Shanghai Municipal Tax Service

Questions from the 12366 hotline of the Shanghai Municipal Tax Service of the State Taxation Administration (Issue 19 of 2018):

Q: 1. If a taxpayer's taxable activity exceeds the business scope on the business license, can an invoice be issued?

Answer: Except where prohibited by state orders, according to the Decision of the State Council on Amending the <Invoice Management Measures of the People's Republic of China> (State Council Order No. 587 of the People's Republic of China) and the provisions of State Taxation Administration Order No. 37, units and individuals that sell goods, provide services, and engage in other business activities shall, when receiving payments from external business operations, issue invoices to the payer.

Hubei Provincial Tax Service

Hubei Provincial State Taxation Bureau VAT Reform Policy Implementation Guidelines Volume 4:

Q: 11. If a taxpayer engages in business beyond the business scope on the business license, can an invoice be issued?

Answer: If a taxpayer engages in business outside the business scope of its business license, it may apply to the industry and commerce department to change the business license scope. If the industry and commerce department does not change the business license scope, the taxpayer may issue invoices itself.

Note: According to the Hubei Province VAT Reform Question Collection, Volumes 1 to 5 of the Hubei Province VAT Reform Policy Implementation Caliber were all abolished as of January 1, 2018.

Hebei Provincial Tax Service

Hebei Provincial Tax Service 12366 Hot Questions (202008):

Q: 1. If a taxpayer's taxable activity exceeds the business scope on the business license, can an invoice be issued?

Answer: According to the Decision of the State Council on Amending the <Invoice Management Measures of the People's Republic of China> (State Council Order No. 587 of the People's Republic of China) and the Guidelines for the Use of VAT Invoices (Shui Zong Huo Bian Han [2017] No. 127): "Units and individuals that sell goods, provide services, and engage in other business activities shall, when receiving payments from external business operations, issue invoices to the payer; under special circumstances, the payer shall issue invoices to the payee."

Therefore, when a taxpayer engages in taxable activities, unless the state has explicitly prohibited sales, invoices should be issued according to the facts even if they exceed the business scope on the business license.

Six, Policy basis

1. Notice of the State Administration of Taxation on Several Issues Concerning the Assessed Collection of Enterprise Income Tax (Guoshuihan [2009] No. 377)

2. Detailed Rules for the Implementation of the Measures of the People's Republic of China for Invoice Administration

3. "Guidelines for Issuing VAT Invoices" (Tax General Goods Letter [2017] No. 127)

Source: internet compilation

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