Manufacturing – Key Tax Risk Prevention Guidelines
First, the key points of financial accounting
The financial accounting of the manufacturing industry is the accounting of all the production and operation processes of manufacturing enterprises, such as procurement, production and sales, covering five main economic businesses: fund raising, material supply, product production, product sales and the formation and distribution of financial results.
(1) Accounting for fund raising
It is mainly the accounting of the owner's capital investment business and the capital borrowing business from creditors, and the main accounts involved include paid-in capital, capital reserve, bank deposits, fixed assets, short-term loans and long-term loans.
(B) material supply accounting
It is mainly the accounting of fixed assets construction and material procurement business, and the main accounts involved include fixed assets, construction in progress, bank deposits, material procurement, raw materials, accounts payable, notes payable, prepaid accounts and tax payable - VAT payable (input tax), etc.
(3) Product production accounting
It is mainly the accounting of the process of product manufacturing and consumption, and the main accounts involved include production costs, manufacturing expenses, employee remuneration payable, accumulated depreciation, inventory goods and management expenses. The recognition of enterprise costs and expenses should follow the accrual principle. Among the expenses incurred by a manufacturing enterprise within a certain period of time, the production expenses and other expenses incurred for the production of a certain type of product shall be collected and included in the product cost by a certain method. Among them, direct materials and direct labor should be directly included in the production cost of specific products; Manufacturing expenses are indirect expenses and should be allocated and included in the production costs of various products through reasonable methods; Period expenses should be directly included in the profit or loss for the current period. Enterprises are not allowed to arbitrarily change the method of allocating expenses.
(4) Product sales accounting
It is mainly the accounting of the process of issuing finished products and recovering payments, and the main accounts involved include main business income, main business costs, sales expenses, business taxes and surcharges, accounts receivable, notes receivable, accounts receivable, bank deposits, tax payable - VAT payable (output tax), etc. The product is generally issued using the first-in-first-out method, the weighted average method or the moving weighted average method, and the last-in-first-out method is generally not adopted. The cost of sales carry-forward method should remain stable for a year.
(5) Accounting for the formation and distribution of financial results
It is mainly the accounting of profit formation and profit distribution, and the main accounts involved include current year's profit, other business income, other business costs, non-operating income, non-operating expenses, profit distribution, income tax expense, surplus reserve, dividends payable or profit payable, etc.
2. Major tax risks and their prevention and resolution
(1) The establishment and change of enterprises
1. Major tax risks
The determination of the taxpayer's business scope and the inaccurate selection of the main industry may cause risks in the application of tax rates, preferential policies, and tax risk indicators, and may also bring problems in the types of invoices, the verification of the amount of invoices, and the determination of the maximum invoicing limit for anti-counterfeiting tax control.
2. Prevention and resolution
(1) When going through the registration, the business items shall be listed in the "business scope" in turn according to the priority of the business content;
(2) When handling tax-related matters such as tax type identification and invoice verification, if it is found that the appraisal content is inconsistent with the actual business content, it shall communicate with the tax authorities in a timely manner;
(3) If there is a change in the business content, the change shall be handled in a timely manner.
(2) Procurement of equipment and raw materials
1. Major tax risks
Procurement is a high-incidence link of tax risk in the manufacturing industry, which is mainly reflected in the non-standard original vouchers such as invoices obtained, which brings the risk of not being able to deduct VAT input normally and not being able to be paid before enterprise income tax. Those who receive false invoices will even be investigated for criminal responsibility. The specific performance is as follows:
(1) Lack of necessary contract signing links, inconsistent flow of goods, capital flow and ticket flow;
(2) The invoices obtained are irregular, such as errors in taxpayer identification number, name, bank account, etc.;
(3) The items issued by the obtained invoices are inconsistent with the actual business content, or the supplier is required to issue invoices that are inconsistent with the actual business content, including the items, models, quantities, unit prices, amounts, etc.;
(4) The invoice issuer is inconsistent with the actual supplier, the payment party is inconsistent with the billing party, or the bank deposit payment method is replaced by cash or other means;
(5) Invoices that should or could be obtained but not obtained or obtained in a delayed manner, or invoices issued or purchased through disguised forms are recorded in the accounts through white slips or self-made vouchers, etc.;
(6) The purchase invoice of the agricultural product processing enterprise is not issued in accordance with the regulations, and the acquisition business is not true, and even the items are falsely increased and the costs are falsely listed.
2. Prevention and resolution
(1) Sign the contract well and ensure that the project content, time frame, and payment method reflected in the contract are consistent with the actual business;
(2) The procurement personnel shall ensure that the flow of goods, the flow of tickets and the flow of funds are consistent, and the items in the invoice shall not be inconsistent with the actual purchased items, the invoice issuer or the payee shall be inconsistent with the actual supplier, etc., and shall not artificially require the supplier to change the invoice item, quantity, price, etc.;
(3) In terms of payment method, try to choose the payment method by bank deposit;
(4) Improve the internal control mechanism of the enterprise. The financial department should do a good job in the review of contracts, invoices and payments, and put forward opinions and suggestions on tax-related businesses in a timely manner;
(5) Obtain invoices in a comprehensive and timely manner and certify, confirm and deduct them within the specified time limit.
(3) Manufacturing and processing
1. Major tax risks
When abnormal losses caused by poor management, change of material use, etc., the input tax is not transferred out, resulting in underpayment of tax; or the failure to accurately collect and allocate packaging, ingredients, auxiliary materials, electricity, etc., may cause various risk indicators to be significantly abnormal compared with the same industry.
2. Prevention and resolution
(1) For non-deductible behaviors caused by various reasons, the input tax shall be transferred out in a timely manner;
(2) Do a good job in cost sharing of packaging, ingredients, electricity, etc., and accurately collect production costs.
(4) Revenue realization and recognition
1. Major tax risks
The sales link is also a high-incidence link of tax risk in the manufacturing industry, which is mainly reflected in:
(1) The realized income is linked to the current account for a long time or outside the account, and the income is not recognized at the specified time, such as the income from leftovers and scraps, and the income that does not need to be invoiced;
(2) taxing high-tax products at low tax rates;
(3) the risk of failure to accurately calculate taxable and tax-exempt income;
(4) Off-price expenses, self-produced goods used for collective welfare, and the free gift of self-produced, commissioned processing or purchased goods is regarded as a sales behavior, and the revenue is not recognized in accordance with the regulations;
(5) Risks caused by red letter invoices, invalid invoices, sales returns, discount invoicing or accounting irregularities;
(6) Related party transactions such as the sale of goods and the provision of labor services are not adjusted according to the arm's length principle.
2. Prevention and resolution
(1) In accordance with the time regulations for revenue recognition, do a good job of revenue recognition in a timely manner;
(2) Accurately select the tax rate corresponding to the taxable item, and accurately calculate the taxable income, tax-exempt income and the corresponding input tax distribution;
(3) Timely and accurately confirm the income from all kinds of deemed sales and non-invoiced income;
(4) The invoice issuing personnel should be relatively fixed, and the issuance process should be conscientious and responsible, so as to reduce the frequency of red invoices and invalid invoices;
(5) Related-party transactions shall be valued, revenue recognized or tax adjusted in accordance with the arm's length principle;
(6) Selling, scrapping, disposing of fixed assets, disposal of scraps, fines for breach of contract, late fees, profits from fixed assets, various types of return income, leasing of intangible assets, fixed assets, packaging, etc. The above forms of income shall be recognized in a timely manner;
(7) Revenue recognition should be done when dealing with non-monetary asset exchanges, policy relocations, return of various subsidies, debt restructuring and other business transactions.
(5) Consumption tax
1. Major tax risks
For enterprises involved in the production of taxable consumer goods, there may be the following risks:
(1) Production and sales of taxable consumer goods (small and medium-sized enterprises generally involve wine, alcohol, cosmetics, batteries, paints, solid wood flooring, wooden disposable chopsticks, etc.), but have not made tax identification and tax declaration;
(2) the risk of underpayment of tax due to the wrong application of the consumption tax rate or unit tax amount;
(3) the risk of non-payment or underpayment of consumption tax caused by the change of items;
(4) the risk that taxable consumer goods are not taxed when they are transferred for use in terms of employee welfare and production of non-taxable consumer goods;
(5) The risk of failing to withhold and pay consumption tax on taxable consumer goods entrusted to the processing of taxable consumer goods in accordance with regulations.
2. Prevention and resolution
(1) In the event of a consumption tax taxable act, the applicant shall take the initiative to apply to the tax authorities for the formalities of tax identification;
(2) The items of taxable consumer goods cannot be changed to non-taxable consumer goods in the process of accounting, invoicing and declaration;
(3) Pay attention to whether consumption tax should be paid or withheld in each link such as transfer and use, entrusted processing, etc., and use calculation methods such as composition taxable value in accounting.
(6) Pre-tax deduction of enterprise income tax
1. Major tax risks
(1) Include the costs, expenses, and losses unrelated to the income obtained into the deduction items, such as personal expenses, retirement benefits, external guarantee expenses, and various payments on behalf of others (withholding and paying individual income tax, entrusted processing and freight forwards, etc.);
(2) multi-transfer material costs to inflate production costs;
(3) Failure to adjust the valuation and warehousing materials in a timely manner, duplicate the accounting, and replace the formal accounting with the valuation entry;
(4) The costs and expenses incurred do not correctly distinguish between revenue expenditures and capital expenditures, such as the engineering costs that should be borne by non-sales products such as projects under construction are included in the main business costs, or the financing expenses of the construction funds and operating funds of large-scale equipment are not clearly divided, or the materials that should be recorded as fixed asset management are recorded as low-value consumables for one-time deduction, etc.;
(5) All kinds of expenses in the nature of withholding provisions, such as withholding expenses and asset impairment provisions, have been deducted before enterprise income tax, but no tax adjustment has been made;
(6) If the management fees paid by affiliated enterprises are not adjusted for tax payment, or if the business transactions between affiliated enterprises such as purchase and sale, equipment purchase, loan agreement and other business transactions are not collected or paid in accordance with the business transactions between independent enterprises and the taxable income is reduced, no tax adjustment shall be made.
2. Prevention and resolution
(1) Expenses unrelated to the acquisition of income, such as personal consumption and business entertainment expenses, which stipulate the pre-tax deduction ratio, shall be adjusted for tax payment in accordance with the regulations;
(2) If the cost of valuation and other expenditure items without legal original vouchers have not been obtained within the remittance period, tax adjustment shall be made according to the regulations, and cannot replace the formal accounting;
(3) Correctly distinguish between revenue expenditure and capital expenditure items;
(4) transactions between affiliated enterprises should comply with the principle of independent enterprises;
(8) Formulate a strict internal control system to accurately calculate and attribute the cost of the project.
(7) Urban land use tax
1. Major tax risks
Occupation of taxable land, expropriation of collective land, and unauthorized reduction or exemption without meeting the conditions for tax reduction and exemption, resulting in non-declaration or under-declaration and payment of urban land use tax, or failure to declare and pay according to the specified time when the tax liability occurs.
2. Prevention and resolution
(1) Declare and pay according to the actual occupied land area. The actual occupied area refers to the land area determined by the units determined by the people's governments of provinces, autonomous regions and municipalities directly under the Central Government. if it is not measured, the area determined by the land use certificate shall prevail; If the land use certificate has not been issued, the land area shall be declared according to the facts;
(2) If the land is shared with other units and individuals, the land use tax shall be accurately calculated and paid according to the proportion of the actual land area to the total area;
(3) Accurately declare and pay land use tax according to the applicable unit tax amount of different lots, and the higher unit tax amount cannot be wrongly calculated according to the lower unit tax amount, so as to underpay the land use tax, and make corresponding adjustments in a timely manner after the adjustment of the land grade;
(4) Declare and pay according to the specified time when the tax liability occurs. It is necessary to accurately grasp the provisions on the method of transfer and transfer, the time for the termination of tax liability if the physical or right status of cultivated land and non-cultivated land is requisitioned, and real estate land;
(5) Accurately divide tax-exempt land and taxable land, and clearly distinguish between enterprise-run schools, hospitals, nurseries, kindergartens and other land that enjoy exemption from land use tax and other land use.
(8) Real estate tax
1. Major tax risks
(1) Failure to pay real estate tax in accordance with regulations for taxable temporary housing on underground buildings, infrastructure construction sites, real estate for the use of other units without rent, and real estate for financial lease;
(2) The land value, ancillary facilities and supporting facilities, the initial decoration cost of the new house, the expenditure of housing reconstruction and expansion, the appreciation of the real estate appraisal, and the relevant taxes and fees of the real estate certificate are not fully included in the original value of the real estate and pay the real estate tax;
(3) The real estate that has been put into use before the final account is recorded at the provisional valuation, and the original value of the real estate is not adjusted in time to pay the real estate tax after the decision;
(4) Failure to pay real estate tax in accordance with the prescribed time when the tax liability arises for newly built houses that have not been accepted for a long time, newly built houses that have been used or leased out before going through the acceptance procedures, newly built houses purchased and leased by financial leases;
(5) Expanding the scope and duration of property tax reduction and exemption resulting in non-payment or underpayment of property tax.
2. Prevention and resolution
(1) Declare and pay real estate tax in strict accordance with the time of occurrence of tax liability, the confirmation standard of the original value of real estate, and the taxable scope stipulated in the tax law;
(2) If there is a change in the basis of taxation, it shall be reported to the tax authorities in a timely manner;
(3) Accurately divide taxable and tax-exempt properties.
(9) Equity transfer
1. Major tax risks
(1) The procedures for the transfer of equity by natural persons do not comply with the tax laws and regulations, and the income from equity transfer is obviously low, and the individual income tax is underpaid;
(2) The price of the equity transfer of the affiliated enterprise does not conform to the arm's length principle, and the enterprise income tax is underpaid;
(3) Failure to recognize the transfer income in a timely manner, and delay in the payment of individual income tax or enterprise income tax.
2. Prevention and resolution
(1) In the event of equity transfer of natural persons, the provisions of the Administrative Measures for Individual Income Tax on Income from Equity Transfer (Trial) (Announcement No. 47 of 2014 of the State Administration of Taxation) shall be strictly implemented, and no equity transfer agreement at parity or discount shall be signed without permission;
(2) The equity transfer price shall be in accordance with the arm's length principle between group enterprises, parent and subsidiary companies and other resident enterprises with related relationships;
(3) After the transfer agreement takes effect and the equity change procedures are completed between the parties, the tax shall be declared and paid in a timely manner.
(10) Export tax rebates
1. Major tax risks
(1) If the export sales revenue exceeds the production capacity, or the goods declared for export customs do not match the products produced by the enterprise, there may be fraudulent export tax rebates;
(2) The declaration and deduction time is not timely, the filing of documents and the archiving management of export documents are chaotic, or the tax calculation is inaccurate and the accounting treatment is not standardized due to the lack of understanding of the tax refund policy, resulting in losses in export tax rebates;
(3) The export commodity code is inaccurate, the commodity code base is not updated in time, or the goods with different tax rebate rates are not submitted and accounted for separately, resulting in the wrong application of the tax rebate rate;
(4) The export goods returned from customs are not offset by the export sales revenue in accordance with the regulations;
(5) The production cost and main business cost of domestic goods and export goods are not separately calculated, and the exemption, credit and tax refund cannot be accurately calculated.
2. Prevention and resolution
(1) Master the relevant provisions of declaration, deduction, filing, customs declaration, etc., accurately calculate, timely submit relevant information and electronic data, and avoid operational errors;
(2) If the goods that have been declared for tax exemption and tax refund are returned, or the tax exemption is waived, etc., the relevant procedures such as tax payment and tax payment shall be handled in a timely manner;
(3) Pay attention to the changes of new policies and the connection between new and old policies in a timely manner.
3. Relevant tax policies
1. Notice of the Ministry of Finance and the State Administration of Taxation on Expanding the Scope of Pilot Industries for the Verification and Deduction of Input VAT on Agricultural Products (CS [2013] No. 57)
2. Announcement of the State Administration of Taxation on Issues Concerning the Tax Policy on Accelerated Depreciation of Fixed Assets (Announcement No. 64 [2014] of the State Administration of Taxation)
3. Notice of the Ministry of Finance and the State Administration of Taxation on Improving the Enterprise Income Tax Policy for Accelerated Depreciation of Fixed Assets (CS [2014] No. 75)
4. Notice of the Ministry of Finance and the State Administration of Taxation on Levying Consumption Tax on Battery Coatings (CS [2015] No. 16)
5. Announcement of the State Administration of Taxation on the Deferred Declaration of Export Tax Rebate (Exemption) for Overdue Declarations (Announcement No. 44 [2015] of the State Administration of Taxation)
6. Announcement of the State Administration of Taxation on Issues Concerning the Collection and Administration of Individual Income Tax on Equity Awards and Conversion of Share Capital (Announcement No. 80 [2015] of the State Administration of Taxation)
7. Announcement of the State Administration of Taxation on Issues Concerning the Policy of Pre-tax Deduction of Enterprise R&D Expenses (Announcement No. 97 [2015] of the State Administration of Taxation)
8. Notice of the Ministry of Finance and the State Administration of Taxation on Extending the Relevant Tax Pilot Policies of the National Independent Innovation Demonstration Zone to the Whole Country (CS [2015] No. 116)
9. Notice of the Ministry of Finance, the State Administration of Taxation and the Ministry of Science and Technology on Improving the Policy of Pre-tax Deduction of R&D Expenses (CS [2015] No. 119)
10. Announcement of the State Administration of Taxation on Issuing the Interim Measures for the Administration of the Collection and Collection of Value-Added Tax on the Transfer of Immovable Property by Taxpayers (Announcement No. 14 [2016] of the State Administration of Taxation)
11. Notice of the Ministry of Science and Technology, the Ministry of Finance and the State Administration of Taxation on Revising and Printing the Administrative Measures for the Recognition of High-tech Enterprises (Guo Ke Fa Huo [2016] No. 32)
12. Notice of the Ministry of Finance and the State Administration of Taxation on Comprehensively Promoting the Pilot Program of Replacing Business Tax with Value-Added Tax (CS [2016] No. 36)
13. Notice of the Ministry of Science and Technology, the Ministry of Finance and the State Administration of Taxation on Revising and Issuing the Guidelines for the Management of the Identification of High-tech Enterprises (Guo Ke Fa Huo [2016] No. 195)
14. Announcement of the State Administration of Taxation on Issues Concerning the Implementation of Preferential Income Tax Policies for High-tech Enterprises (Announcement No. 24 [2017] of the State Administration of Taxation)
15. Announcement of the State Administration of Taxation on Issues Concerning the Scope of Pre-tax Deduction of R&D Expenses (Announcement No. 40 [2017] of the State Administration of Taxation)
16. Announcement of the State Administration of Taxation on Issues Concerning the Declaration of Export Tax Refund (Exemption) (Announcement No. 16 [2018] of the State Administration of Taxation)
17. Notice of the State Administration of Taxation of the Ministry of Finance on the Enterprise Income Tax Policies Related to the Deduction of Equipment and Appliances (CS [2018] No. 54)
18. Notice of the State Administration of Taxation of the Ministry of Finance on Extending the Loss Carry-forward Period for High-tech Enterprises and Technology-based Small and Medium-sized Enterprises (CS [2018] No. 76)
19. Notice of the Ministry of Finance, the State Administration of Taxation and the Ministry of Science and Technology on Increasing the Pre-tax Deduction Ratio of R&D Expenses (CS [2018] No. 99)
20. Announcement of the Ministry of Finance and the State Administration of Taxation on Expanding the Scope of Application of the Preferential Policy on Accelerated Depreciation of Fixed Assets (Announcement No. 66 [2019] of the Ministry of Finance and the State Administration of Taxation)
Note: If the relevant content introduced in this article is inconsistent with the tax regulations and policies announced in the future, the latter shall prevail.
4. Tax assessment warning cases
(1) Introduction to the case
Xuzhou ×× Wood Industry Co., Ltd., with a registered capital of 60 million yuan, is mainly engaged in the production and sales of wood plywood. In 2017, the company declared sales revenue of 41.66 million yuan, of which export sales revenue was 23.483 million yuan and domestic sales revenue was 18.177 million yuan. The output VAT is 3.09 million yuan, the input tax is 4.951 million yuan (of which 3.23 million yuan is deducted from the input VAT by issuing agricultural product purchase invoices), the input tax is transferred out of 939,000 yuan (the part of the difference in the export tax rebate rate), the VAT paid is 49,000 yuan, 129,000 yuan is retained at the end of the period, and the export tax rebate receivable is 923,000 yuan, which has been fully refunded.
The unified risk analysis of the provincial bureau identified that the enterprise had a number of obvious abnormalities, and there were risks such as underpayment of value-added tax, enterprise income tax, and urban construction tax.
(2) Analysis and identification of major tax risks
Using the data provided by various information systems, the tax authorities obtained the company's main risk points in 2017, as well as information such as declaration, tax payment, upstream and downstream transactions, financial statements, etc., and confirmed the following risks of the company through comparison and analysis:
1. The purchase of agricultural products is false;
2. Personnel salaries, management expenses, and sales expenses are false;
3. Urban construction tax and surcharge are not proportional to value-added tax;
4. Failure to declare and pay urban land use tax and real estate tax in accordance with regulations;
5. There are out-of-control invoices that do not meet the deduction conditions.
(3) Tax assessment
Through the tax assessment, the tax authorities found the following illegal facts of the enterprise, and dealt with the tax payment, late payment fees and fines:
1. The acquired business is not genuine
During the on-site inspection, the tax personnel found that the company had two veneer rotary cutting machines, and there were wage slips for workers in the rotary cutting group in the payroll, which preliminarily proved that the enterprise had the business of processing logs into core boards. The company issued 1,705 invoices for the purchase of agricultural products throughout the year, deducting 3.23 million yuan of value-added tax.
Through the analysis of the detailed data of the acquisition invoices, it was found that 10 sellers appeared in a row, and the purchase amount was obviously too large, and the company could not provide a reasonable explanation.
When inspecting all kinds of current payments of the enterprise, it was found that there were many large sums of money remitted to outside the province, amounting to 5.23 million yuan, and the book records reflected the purchase of core boards, but the payee was several local natural persons, that is, the people who appeared in a chain on the purchase invoice. The company's behavior of purchasing core boards but issuing purchase invoices in the name of logs for deduction was established, and the tax deduction was 679,000 yuan.
During the inspection, it was also found that the company's other purchased panels and core boards issued purchase invoices in the name of logs, with a total of 1.518 million yuan of deducted inputs, 755,000 yuan of value-added tax should be paid, 763,000 yuan of export tax rebates should be recovered, and late fees were charged according to regulations. A fine of 8,000 yuan shall be imposed on the failure to issue purchase invoices in accordance with the regulations.
2. Falsely listing wages and other expenses
The wages of the core board workshop personnel corresponding to the core board processing business are falsely listed, and the taxable income is increased by 260,000 yuan; There are expenses that are obviously unrelated to the production and operation of the enterprise in the management expenses and sales expenses, and the taxable income is increased by 869,000 yuan.
3. Underpayment of other taxes (fees).
If the newly requisitioned collective land fails to declare and pay the urban land use tax, 28,000 yuan shall be paid, and the land value shall be calculated according to the plot ratio rule, and the corresponding amount shall be incorporated into the original value of the real estate to pay the real estate tax. According to the calculation of the floor area ratio of the factory building, the floor area ratio of the office building, the unit price of the land, etc., the real estate tax is 119,100 yuan, the stamp duty is underpaid on the purchase and sale and loan contracts, and the total amount is 13,000 yuan, and the urban maintenance and construction tax, education surcharge, local education surcharge and value-added tax are not matched, and a total of 11,000 yuan is paid.
4. Tax deduction with out-of-control invoices
The out-of-control invoice obtained by the company is a batch of core board purchase business, and the supplier has not filed tax returns to the tax authorities after issuing the invoice, and has been identified as an abnormal household due to the escape and loss of contact, and the company has transferred out the input tax to pay 135,000 yuan of value-added tax.
Source: Xuzhou Tax