Yes. Falsely issuing VAT special invoices to evade tax is a criminal offence under Article 205 of China’s Criminal Law, and since the 2024 judicial interpretation the thresholds are explicit: the case becomes criminal at RMB 100,000 of tax falsely issued, with “relatively large” and “huge” amounts at RMB 500,000 and RMB 5 million.

What the law provides

Article 205, as amended by Amendment (VIII) to the Criminal Law, sets three tiers. Falsely issuing VAT special invoices, or other invoices used to fraudulently obtain export tax refunds or to offset tax, attracts up to three years of imprisonment or criminal detention plus a fine of RMB 20,000 to RMB 200,000. Where the amount of tax falsely issued is relatively large or there are other serious circumstances, the range is three to ten years plus a fine of RMB 50,000 to RMB 500,000. Where the amount is huge or the circumstances are especially serious, it is ten years to life imprisonment, with a fine of RMB 50,000 to RMB 500,000 or confiscation of property. Where a unit commits the offence, the unit is fined and the persons directly in charge and other directly responsible personnel are also punished.

Article 10 of the 2024 judicial interpretation (SPC and SPP, Fa Shi [2024] No. 4) defines the prohibited conduct: issuing invoices with no real underlying business, issuing invoices that exceed the deductible tax actually generated, issuing invoices through fabricated transaction parties, and falsifying invoice data. Article 11 sets the thresholds: RMB 100,000 of falsely issued tax brings the conduct within Article 205; RMB 500,000 is “relatively large”; RMB 5 million is “huge”. Unrecoverable tax of RMB 300,000 or more is “other serious circumstances”, and RMB 3 million or more is “especially serious”.

The safe harbour that matters most

The interpretation also narrows the offence in a way foreign investors should know. Issuing invoices to inflate revenue for financing or loan purposes — without intent to fraudulently obtain tax credits and with no tax actually lost through offsetting — is not treated as this crime, although other offences may still apply.

What this means in practice

Two points matter for executives. First, what counts is the tax amount stated on the invoices, not your revenue or profit, so a modest invoicing practice can cross RMB 100,000 quickly. Second, China’s Golden Tax Phase IV system cross-checks invoice flows automatically, which means broken invoice chains, circular invoicing between connected companies and invoice-only transactions are detected by data analytics rather than by a random audit. A finding is often referred to the Public Security Bureau within days, before the company has a chance to correct its filings. Full tax payment, voluntary correction and cooperation before prosecution are the main mitigation levers, and the company’s internal controls — who approved the invoicing and whether finance raised a flag — weigh heavily in the analysis of who is a responsible person.

A typical scenario (hypothetical)

A trading company seeks bank financing. To show stronger revenue it asks a long-standing supplier to issue VAT invoices for RMB 4 million of goods that were never delivered. Two years later an invoice-data comparison flags the mismatch. The tax on the invoices exceeds RMB 500,000, so the case falls into the “relatively large” tier with a three-to-ten-year range, and both the general manager who approved the arrangement and the finance manager who arranged it are treated as directly responsible persons. This scenario is illustrative and hypothetical, not a reported case.

Bottom line: invoice fraud in China is now a data-detected crime rather than a paperwork risk — the tax stated on the invoices, not your profit, decides the sentencing tier.

FAQ

Q: Is falsely issuing VAT invoices a crime in China?

A: Yes. Article 205 of the Criminal Law covers it, and the current thresholds come from the 2024 judicial interpretation issued by the Supreme People’s Court and Supreme People’s Procuratorate.

Q: At what amount does it become a criminal case?

A: RMB 100,000 of tax falsely issued brings the conduct within Article 205. RMB 500,000 is “relatively large” and RMB 5 million is “huge”.

Q: What is the maximum penalty?

A: Ten years to life imprisonment, with a fine of RMB 50,000 to RMB 500,000 or confiscation of property, where the amount is huge or the circumstances are especially serious.

Q: Can the company be punished, or only individuals?

A: Both. Where a unit commits the offence the unit is fined, and the persons directly in charge and other directly responsible personnel are punished as well.

Q: Is there any case that is not treated as this crime?

A: Yes. Inflating revenue for financing or loans without intent to fraudulently obtain tax credits and without tax actually lost through offsetting is not treated as this offence, though other offences may apply.

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Wang Guan | Co-founder, Beijing Haolue Law Firm | +86 17813108512