Many business owners and finance teams have encountered this frustrating situation:
Standard procurement of goods/services with complete contracts, B2B payments, and receipt of special VAT invoices for normal deduction. However, shortly after...Supplier absconded without declaring or paying taxes.This invoice is flagged as an abnormal tax deduction voucher. The tax authority has notified the enterprise to reverse input VAT.
Real business, payment and delivery completed, but downstream companies still bear tax losses due to upstream supplier's default? Today, we clarify the policy, practical steps, common misconceptions, and pre-risk controls in one go.
1. What is an abnormal voucher?
BasisState Taxation Administration Announcement No. 38 of 2019Value-added tax special invoices issued by businesses that have fled or lost contact during their existence will be classified as abnormal VAT deduction tax vouchers.
Core Policy Rules:
- Not yet claimed for deduction:Deduction not allowed
- Already declared and deducted:In principle, input VAT transfer-out must be processed first.
Key distinction: Grade A taxpayers have exclusive opportunities!
- • Grade A credit enterprise, notification receivedwithin 10 business daysYou may submit a verification request and defer input VAT transfer; upon approval, continue claiming the credit.
- • B/M/C/D-level enterprises must be transferred out first and submit evidence for tax verification.
II. Key Concept: Bona Fide Acquisition; No Penalties or Late Fees
Policy Basis:Guoshuifa [ 2000 ] No. 187, Guoshuhan [ 2007 ] No. 1240。
Simultaneously satisfy the followingAll 4 conditions, it qualifies as bona fide acquisition:
Benefits of Bona Fide Acquisition:
No determination of tax evasion, no penalty imposed, and no late payment interest charged.
However: Good faith acquisition does not automatically allow for VAT input tax deduction.
If the upstream supplier is in an abnormal state and cannot reissue invoices, input VAT credits are likely to be unrecoverable.
3. Common Misconceptions Clarified
IV. Five-Step Action Plan Upon Receiving Tax Authority Notice
Immediately conduct an internal self-check to identify risks.
Key verification: Ensure the contracting entity, invoicing entity, and payment recipient are consistent. Check for fund backflow, payments to individuals, or private settlements. Any evidence of fund backflow fundamentally alters the nature of the transaction.
Complete evidence chain organization and binding (critical priority)
Procurement of Goods: Procurement contract, bank remittance receipt, delivery note, goods receipt note, logistics documents, invoice verification screenshot. Procurement of Services: Service contract, bank remittance receipt, project deliverables, acceptance report, communication records, original invoice. Written "Business Situation Statement" fully restoring the entire transaction process and stating that you were unaware of the upstream party fleeing to avoid tax obligations.
Submit verification request to the tax authority
Grade A: Submit a verification request within 10 business days; transfer is temporarily suspended. Other grades: Complete the input VAT transfer as required and submit full supporting evidence for review. If the tax authority determines eligibility after verification, deduction rights will be restored.
Distinguish between Value-Added Tax (VAT) and Corporate Income Tax
VAT: Input tax cannot be deducted and must be reversed if the upstream supplier absconds and a replacement invoice cannot be issued. Corporate Income Tax: If the transaction is genuine and expenses are valid, supported by a complete chain of evidence, they remain deductible for tax purposes (State Administration of Taxation Announcement [Year] No. 2018, Item 28). Input tax reversal does not mean costs are non-deductible!
Civil recovery to recoup tax losses
If a supplier breaches the contract and absconds, causing tax losses to your company, you may sue them in court for compensation based on the contract, payment records, and tax documents. Note: Recovery will be difficult if the supplier has no remaining assets.
Key Points for Organizing Evidence Chains
Procure Goods
- Procurement Contract
- Corporate Bank Receipt
- Delivery Note
- Inbound Acceptance Note
- Shipping Documents
- Invoice verification screenshot
Service Procurement
- Service Agreement
- Bank Statement
- Project Outcomes
- Acceptance Report
- Communication History
- Original Invoice
5. Never Cross These Red Lines
6. Pre-event Risk Control: Proactively Mitigate Supplier Default Risks
Final thoughts
Disconnected upstream enterprises issuing invoices is a typicalRisk ContagionLegitimate businesses can also be affected.
If you receive a notice regarding an abnormal voucher, don't panic or wait passively. Prioritize compiling complete evidence and submit a verification request to the tax authority within the statutory deadline. Leverage the "good faith acquisition" policy to protect your rights.
Tax and financial compliance hinges on proactive prevention. Thorough supplier due diligence and robust contract terms are the most effective ways to avoid being caught off guard.
Policy Original Attachment
Suspicious Credential Handling Guide (PDF)
This summary is based on publicly available policy information. Actual implementation is subject to official documents and the guidance of the competent tax authority. We recommend sharing this with business leaders and finance teams to conduct supplier due diligence and refine contract terms in advance.