On 19 October 2026, the State Taxation Administration (STA) released three typical cases as part of its ongoing campaign to rectify the “invoice economy”—a practice where local governments illegally attract investment by offering tax rebates through fraudulent invoicing. The cases involve the illegal introduction of invoicing companies, fictitious trade “circular invoicing,” and non-substantive operations issuing fake value-added tax (VAT) invoices to fraudulently obtain government subsidies. The STA emphasized that such activities severely disrupt tax administration order and cause significant fiscal losses. The announcement signals a nationwide intensification of audits on enterprises and intermediaries engaged in similar schemes, with reference to the Criminal Law provisions on fraudulent invoicing and the Administration of Tax Collection Law.
Key Takeaways
- Crackdown on Circular Invoicing: Tax authorities uncovered schemes where companies created closed loops of fake transactions to generate input VAT credits and extract subsidies, leading to criminal prosecution of involved parties.
- Shell Company Abuse: Intermediaries established shell entities with no real business operations solely to issue fraudulent VAT special invoices, enabling clients to underreport taxable income and claim illegal refunds.
- Subsidy Fraud Focus: The cases highlight the link between invoice fraud and fraudulent acquisition of local government financial incentives, prompting coordinated enforcement between tax, finance, and market regulation departments.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement