As a special institutional arrangement in value-added tax (VAT) management, agricultural product purchase invoices play a pivotal role in solving the invoicing challenges faced by agricultural producers when selling agricultural products and maintaining the integrity of the VAT deduction chain. In recent years, tax authorities have tightened their supervision of agricultural product purchase invoices and intensified their crackdown on fraudulent issuance related to agriculture, necessitating agricultural enterprises to pay closer attention to tax compliance. This article provides useful suggestions for tax compliance for agricultural product purchasing enterprises by sorting out common tax risk points for such enterprises.

1. Tax-related legal policies for agricultural product purchases

1. Clarify that agricultural product purchase invoices are legal deduction vouchers for value-added tax

An agricultural product purchase invoice refers to an invoice issued by the paying party, using the identity information of the receiving party, when the purchasing entity acquires tax-exempt agricultural products directly produced by individual agricultural producers. Its primary purpose is to address the issue of compliant deductions for purchasing enterprises.

Article 16, Paragraph 3 of the Value-Added Tax Law of the People's Republic of China stipulates that taxpayers shall deduct the input tax from the output tax based on the value-added tax deduction vouchers prescribed by laws, administrative regulations, or the State Council. Therefore, taxpayers shall deduct the input tax based on legal value-added tax deduction vouchers. Article 11 of the Implementation Regulations of the Value-Added Tax Law of the People's Republic of China stipulates that the value-added tax deduction vouchers referred to in Article 16 of the Value-Added Tax Law shall comply with the relevant provisions of the tax department of the State Council, specifically including value-added tax special invoices, customs import value-added tax special payment vouchers, tax payment vouchers, agricultural product purchase invoices, agricultural product sales invoices, and other deduction vouchers with the function of deducting input tax. Therefore, agricultural product purchase invoices are legal value-added tax deduction vouchers. In addition, according to Article 10 of the Value-Added Tax Law of the People's Republic of China, agricultural product sales are subject to a tax rate of 9%.

2. Agricultural producers are exempt from tax when selling their own agricultural products

Article 24, Paragraph 1, Item 1 of the Value-Added Tax Law of the People's Republic of China stipulates that agricultural products sold by agricultural producers themselves are exempt from value-added tax. Article 26 of the Implementation Regulations of the Value-Added Tax Law of the People's Republic of China defines agricultural producers referred to in Article 24, Paragraph 1, Item 1 of the Value-Added Tax Law as units and individuals engaged in agricultural production; agricultural products as primary agricultural products. Therefore, agricultural products must be "self-produced", excluding those that are directly resold or simply processed and resold after acquisition; agricultural products must be "primary agricultural products", excluding products whose properties have been changed after processing, such as canned fruits and refined tea. The "Notes on the Scope of Taxation of Agricultural Products" stipulates the scope of primary agricultural products, including various primary products of plants and animals produced in planting, breeding, forestry, animal husbandry, and aquaculture.

It should be noted here that the tax exemption is only applicable to self-produced agricultural products sold by agricultural producers. Beyond this, the tax exemption provisions do not apply.

II. Common tax risk points in issuing agricultural product purchase invoices

1. Using incorrect farmer identity information, resulting in non-compliant invoices

In the procurement of agricultural products, middlemen often organize the supply of goods and handle unified settlement, making it difficult for purchasing enterprises to directly and accurately obtain and verify the identity information of the farmers who actually sell the products. The identity information of farmers obtained by the purchasing party may be untrue or inaccurate. If fraudulent identity information is used, even though the actual procurement business takes place, the purchasing enterprise may be unable to make compliant deductions due to non-compliant invoices.

In addition, according to Article 24 of the "Administrative Measures for Invoices of the People's Republic of China", invoices are limited to be issued by the receiving units and individuals within the same province, autonomous region, or municipality directly under the central government. Therefore, some provinces have explicitly issued documents stating that agricultural product purchase invoices are only valid for purchasing locally produced agricultural products from local farmers. Under this regulation, in order to solve the deduction problem, purchasing enterprises have resorted to purchasing from other provinces and then issuing invoices using the identity information of local farmers. From a compliance perspective, such invoices cannot be deducted as input tax, and the purchasing enterprises are exposing themselves to tax risks.

2. In the agricultural product acquisition business, the mixing of public and private accounts makes it difficult to verify the real transactions based on the fund flow

When purchasing agricultural products, farmers are accustomed to using WeChat, Alipay, or cash for settlement. To facilitate settlement, purchasing enterprises often transfer funds from their public accounts to private accounts for payment of purchase amounts. In the event of a tax dispute, the severe disconnection between the flow of funds in the public account, invoice flow, and goods flow makes it difficult to form a complete evidence chain, thus increasing the difficulty of using the flow of funds to prove genuine transactions.

3. The absence of a complete evidence chain for the flow of goods makes it difficult to trace the transportation records

The acquisition of agricultural products is mostly conducted on a sporadic and nearby basis, often lacking standardized transportation contracts, shipping documents, and freight payment vouchers. It frequently relies on farmers to "deliver goods to the doorstep" or internal personnel to "pick up goods by car", resulting in the absence of logistics information and freight payment records. When tax risks arise and transportation records need to be matched, it is often impossible to use the flow of goods to verify the occurrence of transactions.

4. Non-compliant financial and tax management increases the difficulty of verifying genuine transactions

The enterprise has not established comprehensive internal vouchers such as agricultural product purchase ledgers, weighing sheets, quality inspection forms, and warehousing records, or these vouchers are inconsistent with invoice information and are kept in disarray. When facing tax audits, it is unable to provide a complete data chain to support the authenticity of its business operations.

In the process of issuing invoices, incomplete or inaccurate filling of invoice items, such as general product names, non-standard measurement units, and failure to truthfully fill in the detailed address and contact information of the seller, may affect the compliance of the deduction voucher, pose difficulties for tax authorities in verification, and easily be identified as non-compliant invoices.

In general, if an enterprise issues or obtains non-compliant agricultural product purchase invoices, it will directly lead to tax risks such as input tax transfer-out and cost reduction adjustments.

III. Tax compliance key points for agricultural product purchasing enterprises

To effectively address the tax-related risks associated with agricultural product purchase invoices, enterprises should establish an internal control system centered on "business authenticity, integration of the three flows, and complete evidence". Specific measures are as follows:

1. Strengthen verification of farmers' identity information

To address the risk of inconsistent identities of sellers, enterprises need to strictly control the procurement source. Strict identity verification procedures should be implemented: when purchasing from natural persons, their identity documents must be verified and their status as "agricultural producers" confirmed; when purchasing from cooperatives, enterprises, or other units, their business licenses must be checked, and it must be clarified that the purchasing enterprise shall not issue purchase invoices to such entities. Instead, the cooperatives or enterprises shall directly issue invoices to the purchasing enterprise.

2. Establish a management book for farmers' information archives

In response to the risk of difficulty in verifying the identity information of sellers, enterprises should establish and implement information archive management. Even in cases of procurement through intermediaries, efforts should be made to obtain and archive basic information such as copies of the actual selling farmers' ID cards, contact details, and planting location information. Whenever possible, these documents should be signed and confirmed by the farmers themselves to ensure the authenticity of the information source and the legality and effectiveness of the transaction authorization.

3. Strictly regulate corporate transfer payments

To address the risk of inconsistent cash flow, enterprises must unify and standardize their payment methods. It is required that all acquisition payments be made through bank transfers from corporate accounts to the seller himself or the designated payee specified in the contract, ensuring consistency between cash flow, invoice flow, and contract flow. The use of cash or personal accounts of operators for payment is strictly prohibited.

4. Pay attention to tax compliance in cross-regional acquisitions

To address the risks associated with cross-regional acquisition businesses, farmers can apply for invoice issuance on behalf of the tax authorities in the production area. At the same time, the acquiring enterprises can also proactively consult the local tax authorities in the farmers' area to understand whether digital innovation services such as "invoice issuance upon payment" have been implemented locally. Such innovative models generally involve the platform automatically retrieving the seller's identity information and transaction information when the enterprise makes payment to the seller, automatically completing the issuance of agricultural product acquisition invoices, and uploading the invoice data to the digital invoice platform in real time.

5. Consolidate the evidence chain of goods circulation

In response to the risk of missing evidence chains in the flow of goods, enterprises should pay attention to solidifying logistics vouchers at all stages. Whether the goods are delivered by farmers themselves or picked up by the enterprise, complete goods handover vouchers should be retained, such as weighing sheets, quality inspection sheets, warehousing sheets, transportation vehicle information, or confirmation sheets for farmers' deliveries, to form a continuous and traceable record of the flow of goods.

6. Improve internal ledgers and conduct regular self-inspections

To address the risk of internal management deficiencies, enterprises should improve their internal ledgers and establish a regular self-inspection mechanism. It is necessary to establish detailed agricultural product purchase ledgers and regularly cross-check and self-inspect the ledger records, business vouchers, invoice information, bank statements, and logistics documents to ensure that all information matches and is logically consistent. All business materials must be kept complete as required for future verification.

7. Ensure that invoices are issued accurately and truthfully

In response to the risk of irregular invoice issuance, enterprises must adhere to the principle of issuing invoices based on facts and accuracy. They should strictly fill in the acquisition invoices according to the actual transaction details, including the object, product name, specifications, quantity, amount, place of origin, etc., to ensure the content is complete and accurate.

Overall, the key to compliance management lies in integrating the aforementioned control measures into every aspect of daily operations, ensuring that each acquisition transaction forms a complete evidence chain where funds, bills, goods, and information mutually corroborate and are interconnected, thereby fundamentally avoiding tax risks.

Conclusion

Given the particularities of the agricultural product purchasing industry and its entities, purchasing enterprises should pay more attention to tax compliance management and prevent tax risks. Enterprises should deeply integrate compliance requirements into all aspects of daily operations, establish an internal management system based on business authenticity, effectively prevent and control risks, and achieve compliant operations.