Case Introduction:
Beiheng Company and Xixin Company signed a sales contract in April 2018, agreeing on the total price including tax and the 17% tax rate of the contract. After the contract was signed, the State Administration of Taxation issued a document to reduce the contract tax rate from 17% to 16%. According to the regulations of the State Administration of Taxation, Beiheng Company could only issue 16% of the invoices and delivered the full amount of the invoices to Xixin Company. During the performance of the contract, Xixin Company paid one after another, but finally refused to pay on the grounds that the invoice did not comply with the contract. Therefore, Beiheng Company sued Xixin Company to the court.
After receiving the entrustment of Beiheng Company, the lawyers of our firm actively carried out their work and carried out investigations from the administrative and commercial fields:
1. Does Beiheng Company's issuance of 16% invoices comply with the regulations of the tax department?
Since 2018, the State Administration of Taxation has undergone two changes in the tax rate, and in terms of the VAT rate, the tax rate for taxable sales is as follows:
1. Cai Shui [2018] No. 32 stipulates that the tax rate for VAT taxable sales by taxpayers will be reduced from 17% to 16% from May 1, 2018;
2. Cai Shui [2019] No. 39 stipulates that the tax rate for taxpayers' taxable sales will be reduced from 16% to 13% from April 1, 2019.
In the case of a sudden change in the tax rate of the State Administration of Taxation, how to solve the problem of invoicing the contract being performed? According to the reply of the tax department, the judgment standard for the application of the old and new tax rates is mainly bounded by the time of contract performance, if the time of contract performance is before the tax rate change, the company can provide relevant certificates to the tax department to issue invoices according to the tax rate agreed in the contract. If the contract is performed after the change in the tax rate, the invoice shall be issued at the latest tax rate.
According to the reply of the tax department, although the contract in this case was signed before the change of the tax rate, the actual performance time of the contract was after the change of the tax rate, and the issuance of special VAT invoices by Beiheng Company at the tax rate of 16% was in accordance with the provisions of the tax law and the document No. 32 of the Ministry of Finance and Taxation [2018].
2. Is there a breach of contract in the issuance of 16% invoices by Beiheng Company?
First of all, Beiheng Company was unable to issue a 17% VAT special invoice due to national policy factors, not its own reasons.
Secondly, after the change of the tax rate, Beiheng Company also actively communicated with Xixin Company, and although the tax rate was reduced from 17% to 16%, the total amount of the contract did not change. Although no written agreement was signed between the two parties, Beiheng Company delivered 16% of the invoices to Xixin Company, and it did not raise any objections, and it was also certified in the VAT invoice comprehensive service platform.
Finally, Xixin Company issued a Letter of Commitment to Beiheng Company, promising to pay the balance after receiving the full VAT invoice.
In summary, Beiheng Company's issuance of 16% VAT invoices did not constitute a breach of contract, and Xixin Company's issuance of the Letter of Commitment should be regarded as a new agreement between the two parties on the change of tax rates.
3. The application for this case was upheld by the courts of first and second instance:
1. The court of first instance held that:
(1) Since the supply and payment in this case occurred after May 1, 2018, the provisions of Cai Shui [2018] No. 32 issued by the State Administration of Taxation of the Ministry of Finance have been implemented, so although the 16% tax rate issued by Beiheng Company to Xixin Company is inconsistent with the contract, it meets the requirements of national laws and regulations, and is not a unilateral change of the terms of the contract.
(2) The invoice is an ancillary obligation of the contract, and under the circumstance that Beiheng Company has supplied the goods and performed the main obligations of the contract, Xixin Company does not enjoy the right to perform the defense first.
(3) Xixin Company asserted that the total amount of the contract price included 17% of the tax amount, and that it should pay the purchase price to Beiheng Company after deducting 16% of the actual tax invoice amount. According to Article 19 of the Contract for the Purchase and Sale of Industrial and Mineral Products, if the total contract price is adjusted or changed, it shall be confirmed in writing. However, the two parties did not actually reach an agreement in writing on the change of the total price of the contract. Therefore, Xixin Company's opinion that the amount of the payment should be adjusted accordingly according to the 16% value-added tax rate was not adopted because there was no relevant evidence to support it.
2. The court of second instance held that:
(1) Xixin Company issued a Letter of Commitment on December 29, 2018, promising to settle the balance before February 28, 2019 after receiving the full VAT invoice issued by Beiheng Company. On January 3, 2019, Beiheng Company had issued a VAT invoice to Xixin Company for the total amount under the contract, and after receiving the full amount of VAT invoice, Xixin Company should settle the balance to Beiheng Company in accordance with the content of the letter of commitment.
(2) From the fact that Xixin Company issued the Letter of Commitment and actually accepted the special VAT invoice with a tax rate of 16% and paid it one after another, it can be seen that the two parties have reached a new agreement on the same total price of the contract involved in the case due to the adjustment of the VAT rate from 17% to 16%.
4. Lawyer's Advice:
1. Regarding the terms of the contract, in order to avoid disputes arising from the change of tax rate in the process of signing the contract, the two parties can agree on the terms of the contract when they are established, as follows:
(1) The two parties may agree on the untaxed price, and the invoice tax rate shall be issued in accordance with the provisions of the national taxation department;
(2) The parties may agree on a tax-inclusive price, including a 13% tax rate, and indicate that if the national tax rate changes, the tax-inclusive price will change accordingly.
2. If the contract is not agreed in accordance with the above terms, then in the process of performing the contract, once the tax rate changes, both parties need to actively communicate with the other party and form a written agreement to protect their rights and interests in the future.
3. If the company finds that the invoice tax rate issued by the partner is wrong, it must refuse to accept the invoice before negotiating and communicating with the other party, and do not authenticate it in the VAT invoice comprehensive service platform, otherwise it may be regarded as retrospective recognition and lead to the inability to claim rights and interests.
Note: This case is a real case handled by Shanghai Shaoyu Law Firm, and in order to protect the privacy and reputation rights of the parties in this case, the names of the relevant companies in the article are pseudonyms.