This paper puts forward a series of early warning suggestions for tax compliance risk control in the digital and electronic stage, covering common tax risk scenarios, enterprise response strategies, compliance early warning cases, and handling of violation consequences, aiming to help enterprises effectively prevent and control tax risks.
Tax compliance early warning aims to assist enterprises in accurately implementing tax policies and avoid risks caused by policy misunderstandings or operational errors.
The tax compliance early warning system in the digital stage needs to take into account the requirements of enterprise risk prevention and control and tax supervision, which should not only meet the needs of refined management of enterprises, but also meet the regulatory orientation of the tax authorities to “govern taxes by numbers”.
The following will elaborate on the tax compliance risk control and early warning suggestions in the digital and electronic stage from the aspects of common scenarios of tax compliance risks, enterprise response strategies, compliance early warning case suggestions, consequences and response strategies of violations, and policy basis.
1. Common scenarios of tax compliance risks
(1) Compliance risks of invoice issuance
1. Incorrect application of tax rate/levy rate
Scenario:
Confusing tax rates for different tax lines (e.g., invoicing “construction services” as “sale of goods”), incorrect invoicing by small-scale taxpayers, or applying general tax rates.
Risk:
Resulting in underpayment or overpayment of taxes, triggering the tax bureau’s “abnormal tax rate” warning (such as a sudden increase in the proportion of low-tax invoices).
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2. Invoice type misuse
Scenario:
special invoices for tax-exempt items (such as special invoices with tax rates issued by elderly care service institutions);
Non-taxable items are not issued “tax-free invoices” in accordance with regulations (such as prepaid card sales issued invoices with tax rates).
Risk:
Violation of the “Invoice Management Measures” may require tax payment or fines.
3. The content of the invoice is not compliant
Scenario:
The name of the goods or taxable services is general (e.g., “office supplies” is not included with the list);
Missing buyer information (e.g., missing taxpayer identification number) or incorrect (e.g., tax ID mismatch business name).
Risk:
The invoice recipient cannot be deducted or credited, causing chain risks for upstream and downstream enterprises.
(2) Input tax deduction risk of violations
1. Illegal deductions for projects shall not be deducted
Scenario:
input tax deduction for collective welfare (such as employee canteen procurement) and personal consumption;
The mixed input tax for simplified taxable items and tax-exempt items has not been transferred out.
Risk:
The tax bureau identifies abnormal deductions through “input invoice purpose monitoring”, requires back tax payment and imposes late payment penalties.
2. False input tax
Scenario:
Accept false invoicing (such as “material procurement” special invoice without actual transactions);
false issuance of agricultural product purchase invoices (such as fictitious farmer identities and inflated acquisition quantities).
Risk:
It directly triggers the tax bureau’s “false invoicing” major risk warning, which may involve criminal liability. 3. The deduction voucher is not compliant
Scenario:
Obtain out-of-control invoices and abnormal certificates (invoices issued by fleeing enterprises recognized by the tax bureau);
Repeated reimbursement deduction for electronic general invoices (such as multiple authentication of the same invoice code).
Risk:
The deduction amount needs to be transferred out, which will affect the credit rating of the enterprise.
(3) The risk of deviation in the implementation of tax policies
1. Incorrect use of preferential policies
Scenario:
Not eligible to enjoy tax exemption/tax reduction policies (e.g., misjudgment of small and low-profit enterprise standards);
Failure to file or retain information for reference in accordance with regulations (such as R&D expenses plus deduction without project ledger).
Risk:
The preferential tax was recovered by the tax bureau and fined (such as Article 63 of the Tax Collection and Administration Law).
2. Tax obligation time confusion
Scenario:
Accounts receivable in advance are not recognized as revenue in accordance with regulations (such as VAT is not paid in advance for construction services);
The sales of installment collection are not invoiced and taxed according to the time agreed in the contract.
Risk:
Resulting in late payment of taxes and late payment fees (5/10,000 per day).
3. Cross-regional operations are not compliant with inspection
Scenario:
Provision of construction services and real estate leasing in different places have not handled cross-regional tax-related matters;
Failure to prepay tax at the place of business (such as non-payment of VAT for off-site construction).
Risk:
The tax authorities of the place of operation are ordered to make corrections within a time limit, which may affect the authority of the enterprise to receive invoices.
(4) The risk of improper handling of special business
1. Red letter invoice (red flushing) violation
Scenario:
The original invoice has been deducted and the seller still initiates the red flush;
The reason for the red rush is not true (such as fictitious sales return) or there is no corresponding blue invoice record.
Risk:
The tax bureau passed the “red flush and original bill correlation comparison” warning and determined that it was a false red flush.
2. Deemed sales are not taxed
Scenario:
free gift of goods and services without output tax (such as gifts from customers at the annual meeting of enterprises);
The goods transferred by the head office for sale are not deemed to be sales.
Risk:
The tax office identifies anomalies, recovers taxes, and penalizes them through “inventory and revenue matching analysis.”
3. Out-of-the-money expenses are not taxed
Scenario:
the collection of liquidated damages and the overdue deposit of packaging materials have not been converted into income;
Collection and advance payments (except for eligible transportation expenses) are not included in sales.
Risk:
As a result, the basis for calculating value-added tax and enterprise income tax is false.
(5) Risk of non-compliance in declaration and filing
1. Abnormal tax declaration data
Scenario:
The difference between VAT return sales and invoicing system data > 10% (without reasonable reason);
The difference between corporate income tax income and value-added tax sales > 15% (not due to policy differences).
Risk:
Trigger the “Logical Verification of Declaration Data” alert of the tax bureau and ask for an explanation of the reason for the discrepancy.
2. Lack of filing matters
Scenario:
tax reduction and exemption and pre-tax deduction of asset loss were not filed in accordance with regulations;
Cross-border taxable acts are exempt from VAT and have not been recorded.
Risk:
Relevant expenses shall not be deducted or exempted before tax, and must be paid in supplementary tax.
3. Contradictions between financial statements and tax data
Scenario:
The income statement “operating income” is very different from VAT sales;
Balance sheet “Accounts receivable” has been recorded for a long time and has no corresponding tax return records.
Risk:
The tax office identifies potential undercounted revenue risks through Cross-Report Data Matching.
(6) System and data security risks
1. Invoice data breach
Scenario:
The leakage of the account password of the invoicing system leads to false invoicing.
Risk:
Trigger corporate tax liability (such as fraudulently invoicing in the name of others) and affect credit rating. 2. Reuse of electronic invoices
Scenario:
Repeated printing of electronic documents of digital invoices for reimbursement (such as reimbursement twice with the same invoice code);
Failure to establish an electronic invoice plagiarism checking ledger.
Risk:
As a result, the pre-tax deduction of corporate income tax may be recognized as false costs.
2. Enterprise response strategy
(1) System construction
1. Establish an invoice management system
Clarify the process of issuing, reviewing, obtaining and keeping invoices, and assign responsibilities to the person (such as a special person in the financial department responsible for invoice verification).
Illegal acts such as false invoicing and buying and selling invoices are prohibited and included in employee compliance training.
2. Contractual Terms
Stipulate the type of invoice (special invoice/general invoice), issuance time, and liability for breach of contract in the procurement/sales contract (if the loss is caused by non-compliance with the invoice, the responsible party shall bear it).
Suppliers are required to provide invoicing information forms (including taxpayer identification numbers, bank accounts, etc.) to ensure that the “three streams are consistent” (capital flow, contract flow, invoice flow).
(2) Risk prevention and control
1. Review before invoicing
Verify the authenticity of transactions: Check original documents such as orders, outbound orders, and logistics vouchers.
Commodity code matching: Check the tax classification code through the own system or the electronic tax bureau to ensure that it is consistent with the actual business (such as the corresponding code 3040401 for “cargo transportation services”).
2. Verification at the time of receipt
With the help of the “VAT Invoice Verification Platform” of the State Administration of Taxation, the authenticity of the invoice is verified, focusing on checking:
Whether the invoice code, number, invoice date and amount are consistent with the face of the ticket;
Whether the seller’s information is consistent with the supplier’s business license.
Check whether the “remarks column” is filled in according to the regulations (such as indicating the project address for construction services and indicating the property address for real estate lease).
3. Input tax management
Establish a “deductible/non-deductible” list and regularly screen for abnormal deductions (such as catering services, residents’ daily service input tax is not deductible).
Timely handling of abnormal vouchers: After receiving the notice from the tax authorities, the input tax will be temporarily transferred out, and it will be handled according to the regulations after verification.
(3) Application of technical tools
1. Invoice management system
Adopt self-owned or third-party invoice systems to automatically verify invoice compliance and warn of problems such as repeated reimbursement and tax rate errors.
The docking invoice system realizes “one-click check authentication” to reduce manual operation errors.
2. Big data monitoring
Through the enterprise tax risk analysis platform, the following indicators are monitored:
fluctuations in invoice volume (e.g., triggering early warnings for a month-on-month increase of more than 50%);
mismatch of input and output (such as the obvious abnormality of “importing oil and selling steel” of commercial enterprises);
The tax burden rate deviates from the industry average (e.g., ±3% lower than the warning value).
By accurately identifying the above compliance risk points, enterprises can effectively reduce the probability of tax early warning triggering, and at the same time improve the standardization and transparency of tax management, which is in line with the regulatory trend of “governing taxes by numbers” by the tax bureau.
3. Compliance early warning case suggestions
The following is from the five dimensions of transaction authenticity, invoicing standardization, risk index changes, tax compliance, and system operation abnormalities, sorting out the early warning directions and specific indicators that meet the requirements of both parties, and providing plan suggestions and implementation suggestions to help enterprises build a solid tax security defense line.
(1) Program suggestions
1. Transaction authenticity warning (anti-false opening / false offsetting)
Core objective: Prevent false invoicing, fictitious transaction deduction inputs, etc., and meet the requirements of the tax bureau’s “penetrating supervision”. Specific indicators / rules of early warning scenariosData sourcesAbnormal invoicing is concentrated, multiple large invoices are issued to the same invoice recipient in a short period of time, and the cumulative amount far exceeds the customer’s historical transaction scale, the proportion of centralized invoicing in the early morning/non-working days is >30%, the invoice issuance time, amount, and recipient data are inconsistent with the flow of goods, the invoice name is inconsistent with the content of the outbound bill and logistics documents (such as express tracking number, transportation contract), and the difference between the seller’s shipping address and the registered address is >500 km (non-cross-regional operating enterprises) business system (outbound order), logistics data, enterprise registration information, abnormal capital flow, difference between invoice amount and bank flow amount> 10% (no reasonable reason) inconsistency between the payee/payer and the invoice seller/buyer (third-party payment not recorded) enterprise bank flow, invoice purchaser and seller information, abnormal customer operation, related invoice recipient is “fugitive and lost enterprise” and “high-risk taxpayer” or new customers who have recently been subject to tax inspection issue large invoices for the first time and have no historical transaction records, the list of risk enterprises of the tax authorities, and the data of the invoice recipients
2. Normative early warning of invoicing (prevention of operational errors / policy violations)
Core objective: Ensure compliance with invoice elements, reduce tax risks caused by human error, and meet the tax bureau’s “face information integrity” requirements. Specific indicators of early warning scenarios / Rule data source commodity code / tax rate Incorrectly issued commodity code matches the “Tax Classification Code Table” of the State Administration of Taxation < 90% Low tax rate commodities (such as agricultural products) apply high tax rate code invoicing system code database, tax policy document invoice information is missing/incorrectly omitted buyer taxpayer identification number, address and phone number and other required items are inconsistent in case and case, and the name of the goods or taxable services is ambiguous (such as “a batch of daily necessities) No list attached) Invoice face data red flush abnormal, double red flush > the same invoice 2 red flushes, the amount of red flushing accounts for 80% of the original invoice amount> and there is no reasonable reason (such as sales discounts exceeding the industry’s usual proportion), red invoice data, and explanation of the reason for red flushing
3. Early warning of changes in risk indicators (to prevent tax risk level from rising)
Core objective: Monitor corporate tax risk indicators to avoid triggering “risk scanning” or audit by the tax bureau due to abnormal indicators, and meet the requirements of the tax bureau’s “dynamic credit evaluation”. Specific indicators / rules of early warning scenariosData sourceInput output mismatchDifference rate between output commodity code and input commodity code>40% (non-processing enterprises)Difference between input deduction and actual production capacity of agricultural product acquisition enterprises>30%Abnormal tax burden rate between input invoice and output invoice commodity codeDataVAT tax burden rate is 30% lower than the lower limit of the industry warning value or 50% higher than the upper limitTax burden rate fluctuates >20% for 3 consecutive monthsEnterprise tax return, industry tax burden data invoice is invalid / The red flushing rate is too high, the invalid invoice accounts for > of the current invoice volume (non-new enterprises), the amount of the red flushing invoice accounts for >15% of the current invoice amount, the invoice is invalid / the red flush data is abnormally deducted, the special VAT invoice obtained is not certified and deducted, and accounts for > of the total input invoice, and the amount involved in the retention invoice exceeds 50% of the average monthly sales of the enterprise, and the input invoice certification data and sales data
4. Tax compliance early warning (to prevent deviations in policy implementation)
Core goal: Ensure that enterprises accurately apply tax policies, avoid penalties caused by compliance loopholes, and meet the requirements of the tax bureau’s “policy implementation supervision”. Specific indicators / rules of early warning scenariosData sources: No deduction items: Deduction for input deductions issued by special invoices for employee benefits, catering services, etc., simple taxation items, use of general taxation invoices, deduction of input invoices, use labels, enterprise tax declaration data, misuse of taxable items, issuance of tax-free invoices or non-taxable invoices, tax-free sales account for >30% of total sales, and do not have tax exemption qualifications, record invoice tax rate column data, tax filing information, cross-regional invoicing, unverified, off-site operation, invoice amount, invoice amount >50 10,000 yuan and failing to report and register the invoice with the tax authority at the place of operation, the seller’s address, the cross-regional operation filing data of the enterprise, the scope of use of the invoice, the illegal issuance of invoices unrelated to the scope of the enterprise’s business (such as the “service fee” invoice issued by a trading company), the business license, the business scope of the enterprise, and the name of the invoice
5. System operation abnormal warning (prevention of internal control loopholes)
Core objectives: to prevent internal personnel operational risks, meet the management needs of enterprises for “invoice traceability throughout the life cycle”, and indirectly comply with the tax bureau’s “internal control and compliance” regulatory orientation. Specific indicators / rules of early warning scenarios: Abnormal login of the data source, login of unauthorized personnel, login to the invoice management system, remote login (such as IP address and enterprise registration place across provinces), and no approval records, system login logs, IP address database, repeated reimbursement/entry, the same invoice code + number appears more than 2 times in the reimbursement system, electronic invoice (including digital invoices), PDF file hash value, repeated verification, reimbursement system invoice data, electronic invoice file information, operation log, missing key operations (such as red flushing, voiding, Change the invoicing limit) No approval records or incomplete logs, system operation logs, and approval process data
(Picture from the Internet)
(2) Suggestions for the implementation of the early warning system
1. Technical tool support
Connect with the “tax digital account” provided by the tax authorities (such as the risk warning module in the electronic tax bureau), and synchronize the enterprise’s own invoice management system (such as ERP and fee control system) to achieve real-time data capture and intelligent early warning.
2. Human-machine collaboration mechanism
After the system automatically triggers the early warning, the financial personnel will verify and feedback the reason within 48 hours (such as with explanations and screenshots of vouchers);
Matters that have not been rectified for three consecutive early warnings shall be included in the enterprise tax risk ledger and submitted to the management for supervision.
3. Dynamic adaptation of policies
Regularly update the early warning rules (such as quarterly) to match the latest policies of the State Administration of Taxation (such as expanding the number of bills and adjusting the code) to avoid the failure of early warnings due to policy lag.
Through the above multi-dimensional early warning system, enterprises can realize the whole chain management of “pre-risk prevention and control, in-process monitoring, and post-event retrospective analysis”, and actively adapt to the “risk-oriented” supervision model of the tax bureau to reduce the probability of tax audits.
4. Consequences of violations and countermeasures
(1) Risk of violation
1. Administrative responsibility
False invoicing: a fine of not less than 50,000 yuan but not more than 500,000 yuan, and confiscation of illegal gains; if a crime is constituted, criminal responsibility shall be pursued.
Failure to issue invoices in accordance with regulations: A fine of up to 10,000 yuan may be imposed, and illegal gains shall be confiscated.
2. Tax losses
Non-compliant invoices shall not be used as pre-tax deduction certificates, resulting in an increase in corporate income tax;
The transfer of input tax on abnormal vouchers may cause pressure on the capital chain.
3. Credit impact
Downgrading tax credit ratings (such as downgrading from A to D), affecting enterprise bidding, bank loans, etc.
(2) Response suggestions
1. Regular self-inspection
Check the invoice ledger and accounting records every month, focusing on New Year’s Eve invoices and large invoices.
Entrust a tax agent firm to carry out special audits of invoices to identify risks in advance.
2. Tax communication
For businesses with unclear policies (such as mixed sales invoicing), consult the competent tax authorities in a timely manner and keep communication records.
In the event of problems such as loss of invoices, report to the tax authorities as soon as possible and publish a statement (some areas have canceled the publication requirements, subject to local regulations).
3. Emergency treatment
After receiving the tax warning, immediately start internal verification and prepare evidence chain materials such as transaction contracts, capital flows, and logistics documents.
If it involves obtaining false invoices in good faith, timely reissue compliance invoices to avoid late fees.
5. Policy basis
Measures for the Administration of Invoices of the People’s Republic of China and its Implementation Rules
Announcement of the State Administration of Taxation on the Management of Abnormal VAT Deduction Vouchers and Other Related Matters (Announcement of the State Administration of Taxation No. 38 of 2019)
Administrative Measures for Enterprise Income Tax Pre-tax Deduction Vouchers (State Administration of Taxation Announcement No. 28 of 2018)
Through full-process control, technical tool empowerment, and improved compliance awareness, enterprises can effectively reduce invoice risks and ensure tax compliance. It is recommended to customize early warning indicators based on industry characteristics, regularly update the policy knowledge base, and dynamically adapt to tax supervision requirements.
