Over three years, an MCN agency with 170 streamers reported zero personal income tax withholding; despite declaring total revenue of 160 million yuan, it enjoyed small and micro enterprise income tax benefits; it colluded with a network technology company in backdoor operations, issuing 447 VAT invoices exceeding actual business amounts, totaling 44.638 million yuan in price and tax...

The State Administration of Taxation Hebei Provincial Tax Bureau has announced that the Baoding Municipal Tax Bureau Investigation Department has lawfully investigated and handled tax violations by Hebei Chuming Cultural Media Co., Ltd. (an MCN agency).

According to investigations, from 2019 to 2021, Hebei Chuming Cultural Media Co., Ltd. obtained invoices from others that did not match actual business operations, falsely deducted input VAT, inflated costs, illegally enjoyed small and micro enterprise income tax benefits, and underpaid VAT, corporate income tax, and other taxes totaling 12.6151 million yuan. The company also paid labor compensation to contracted streamers through personal bank accounts without withholding personal income tax of 3.597 million yuan.

In November 2024, the Baoding Municipal Tax Bureau Investigation Department, based on relevant laws including the Corporate Income Tax Law, Personal Income Tax Law, Tax Collection and Administration Law, and Administrative Penalty Law, issued decisions requiring the company to pay back taxes, late fees, and penalties totaling 20.1006 million yuan for illegally enjoying small and micro enterprise income tax benefits; imposed penalties of 2.1582 million yuan for failure to fulfill withholding obligations; and provided guidance to relevant streamers to correct declarations and pay back taxes and late fees. The case involving suspected invoice fraud has been transferred to public security authorities.

Currently, the case has been transferred by public security to the procuratorate for review and prosecution.

A relevant official from the Baoding Municipal Tax Bureau Investigation Department stated that obtaining invoices from others that do not match actual business operations, falsely deducting input VAT, inflating costs, making false tax declarations, and fraudulently enjoying small and micro enterprise tax benefits constitute tax evasion as defined by tax collection and administration laws. When withholding agents fail to withhold taxes they should have withheld, tax authorities will legally pursue tax payments from taxpayers and impose penalties on withholding agents.

While optimizing tax services and implementing tax benefit policies, tax departments will strictly investigate and handle tax violations and crimes such as fraudulent tax benefits and tax evasion, promoting long-term standardized and healthy industry development.

**The "Business Strategy" of Tax Evasion by MCN Agency with 170 Streamers Had Zero Personal Income Tax Withholding**

The Baoding Municipal Tax Bureau Investigation Department, based on leads from public security and comprehensive analysis of tax big data, discovered that Hebei Chuming Cultural Media Co., Ltd. had zero personal income tax withholding over three years. As an MCN agency contracted with a mainstream live streaming platform, having no personal income tax withholding was clearly unreasonable.

Investigation personnel, combining leads from relevant departments and field visits, found that the MCN agency earned revenue by sharing fan rewards with streamers, with approximately 170 regular streamers and some temporary streamers.

According to the Personal Income Tax Law and the Network Live Marketing Management Measures (Trial), MCN agencies should legally withhold taxes for their streamers. If MCN agencies establish employment relationships with streamers, sign labor contracts, and pay social insurance and housing funds, then streamers are employees and should have personal income tax withheld as "salary and wage income." If MCN agencies establish service cooperation relationships with streamers, sign temporary service contracts without paying social insurance and housing funds, with streamers providing services individually and receiving compensation by project or task, then MCN agencies should withhold "service compensation income" personal income tax. Streamers must conduct annual personal income tax settlements the following year.

With these questions, investigation personnel analyzed the MCN agency's self-reported data and VAT input invoices, finding total declared revenue of 160 million yuan over three years, but average annual wage expenses of only 720,000 yuan. Since wage expenses were low, were there service compensation expenses? However, investigators found no service compensation invoices among the MCN agency's input invoices, but discovered that over half of the input invoices were issued by Yiwu Network Technology Co., Ltd. for cultural services and network information services.

Relevant department investigations revealed that Yiwu Network Technology Co., Ltd. was suspected of issuing fake VAT invoices. This MCN agency had low wage expenses, zero personal income tax withholding, no service compensation invoices, and over half of its input invoices from a company suspected of invoice fraud - these anomalies raised high alert among investigators.

Facing multiple suspicious points, the Baoding Municipal Tax Bureau Investigation Department conducted preliminary verification and systematic analysis before legally opening a case investigation.

**Fund "Backflow" Confirms Invoice Fraud Facts**

During case handling, investigation personnel legally questioned the MCN agency's legal representative Zhang Xuyang. According to Zhang's testimony, to boost streamer popularity, they purchased platform virtual currency to reward and gift their streamers, with input invoices mainly for virtual currency purchases. Over half of their virtual currency was purchased from Yiwu Network Technology Co., Ltd.

Following leads about Yiwu Network Technology Co., Ltd.'s suspected VAT invoice fraud, investigators traced the money flow by legally obtaining bank account and transaction details from both companies, analyzing the correlation between input invoices and fund flows to uncover the backdoor operations.

Zhang Xuyang and Cheng (legal representative of Yiwu Network Technology Co., Ltd.) had colluded early on, with both real and fake virtual currency transactions between their companies. Real business involved the MCN agency purchasing platform virtual currency from Yiwu Network Technology Co., Ltd., paying through bank accounts with proper sales invoices. In fake transactions, the MCN agency requested invoices that didn't match actual business operations and paid for them. After funds reached Yiwu Network Technology Co., Ltd.'s corporate account, Cheng transferred them to his personal account, then to Zhang Xuyang and MCN agency staff personal accounts, forming a fund "backflow" loop.

Investigation confirmed that over three years, the MCN agency had Yiwu Network Technology Co., Ltd. issue 447 VAT invoices exceeding actual business amounts, totaling 44.638 million yuan in price and tax. Yiwu Network Technology Co., Ltd. returned 44.638 million yuan to the MCN agency.

Investigators also found in MCN agency staff personal bank account flows that staff paid multiple streamers with transaction notes "Chuming salary settlement," confirming the company used personal bank accounts to pay streamers and evade personal income tax.

**Unable to Escape Legal Sanctions Despite Solid Evidence**

Faced with substantial evidence, Zhang Xuyang finally admitted that to reduce tax payments, he had devious ideas, having Yiwu Network Technology Co., Ltd. issue invoices that didn't match actual business operations to falsely deduct input VAT and inflate expenses to meet tax benefit conditions. Meanwhile, to expand business, he paid streamers through private accounts without withholding personal income tax.

Investigation showed the MCN agency should have applied a 25% corporate income tax rate but used non-compliant invoices to falsely deduct input VAT, inflating expenses in books to control annual taxable income within 3 million yuan, illegally enjoying small and micro enterprise income tax benefits (taxable income over 1 million but not exceeding 3 million yuan reduced to 10% actual tax rate, further reduced to 5% since 2022), underpaying VAT, corporate income tax, and other taxes totaling 12.6151 million yuan.

The MCN agency also paid service compensation to streamers through staff personal bank accounts without properly withholding personal income tax of 3.597 million yuan.

Article 63, Paragraph 1 of the Tax Collection and Administration Law states: Taxpayers who forge, alter, conceal, or destroy account books and accounting vouchers, inflate expenses or underreport income in account books, refuse to declare after tax authority notification, or make false tax declarations to avoid or underpay taxes are committing tax evasion. For taxpayer tax evasion, tax authorities shall pursue unpaid or underpaid taxes and late fees, imposing penalties of 50% to 500% of unpaid or underpaid taxes; criminal liability shall be pursued if crimes are constituted.

Article 19 of the Personal Income Tax Law states: Taxpayers, withholding agents, tax authorities, and their staff who violate this law shall be held legally responsible according to the Tax Collection and Administration Law and relevant laws and regulations.

Article 69 of the Tax Collection and Administration Law states: When withholding agents fail to withhold taxes, tax authorities shall pursue taxes from taxpayers and impose penalties of 50% to 300% of unwithheld taxes on withholding agents.

The Baoding Municipal Tax Bureau Investigation Department legally ordered Hebei Chuming Cultural Media Co., Ltd. to pay back taxes, late fees, and penalties, transferring suspected invoice fraud leads to public security. The case has been transferred by public security to the procuratorate for prosecution review, with Yiwu Network Technology Co., Ltd.'s suspected invoice fraud handled separately by competent tax authorities.

For unwithheld streamer taxes, investigation personnel used explanatory law enforcement methods to guide and supervise relevant streamers to voluntarily declare and pay taxes.