There are contracts, purchase invoices (fapiao), payment records, and warehouse in/out slips.
If you only look at the filing cabinet, there is almost nothing wrong with this purchase. But the inspectors took one extra step: after the money left the company account, where exactly did it go?
Case file sketch
Disclosure date
June 16, 2026
Company involved
Jiangshan Suole Household Products Co., Ltd.
was found to have issued false invoices
35 VAT special invoices, with a total price and tax of ¥8.983 million
Handling result
Recovered taxes and fees, imposed late payment penalties, and imposed fines totaling ¥2.0279 million
A single fund-flow chart overturned the entire set of paper materials
Suole Household Products paid "for goods" from its corporate account to 4 textile companies. Soon afterward, the funds were transferred from the suppliers' accounts into multiple personal accounts, circulated through several transfers, and finally returned to the names of the company's legal representative and their spouse.
This loop has two characteristics: money goes in and out quickly; and between the returned amount and the original payment, a relatively fixed difference is retained.
Where did the difference go? The investigation conclusion given in the official notice is that the company, by paying invoice-issuing fees, had suppliers issue invoices for larger amounts.
Visual illustration: payment flows back through personal accounts (not a screenshot of the accounts involved in the case)
When faced with the inspection, the company produced purchase and sales contracts, purchase invoices (fapiao), payment records, and warehouse in/out slips. Looked at one by one, they all seemed to correspond. But none of these materials could explain why money already paid to suppliers returned to the personal accounts of the company's controllers.
Having all the "documents" and having a "real" transaction still leaves one business-logic check in between.
What is even trickier is that not all of the purchases were fictitious.
This is not a transaction with no goods from beginning to end.
The official notice disclosed that Suole Household Products did purchase raw materials from multiple individual industrial and commercial households. The company's problem was that it asked some supplier companies with which it had real dealings to continue issuing invoices above the actual transaction amount, so as to deduct more VAT and record more costs.
In other words, a real business relationship cannot automatically prove that all amounts on the invoices are real. How much goods actually arrived and how much was ultimately settled is the business basis for the invoice amount.
This point is easy to overlook. When finance staff see an old supplier, a long-term contract, and normal warehousing, they often lower their guard; but "having had real transactions" may precisely become the best cover for excess invoicing.
Stop understanding "consistency of the four flows" as four attachments
Contracts, invoices, warehousing, and payments are not four checkboxes. They need to tell the same story.
Materials seen
Questions to keep asking
Purchase contract
Whether the quantity, unit price, and performance process are consistent with the actual purchase
Warehousing records
Who delivered the goods, who accepted them, and where the inventory later went
Bank payment
Who is the ultimate payee, and is there any refund or third-party transfer back
VAT invoice
Whether the amount exceeds the final transaction consideration
When these three types of transaction records appear, pause first
Operator self-check
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After the supplier receives payment, it quickly transfers funds to the company's shareholders, responsible persons or their close relatives
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Payment for goods circulates through multiple personal accounts and then returns to an account controllable by the company
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Refunds, rebates, deposits and other differences remain at a fixed ratio over the long term, yet there is no agreement or accounting basis
These phenomena do not necessarily equal fraudulent invoicing, but they must have a genuine, continuous and verifiable explanation. If no explanation can be given, the relevant amounts should no longer be treated as safe input VAT and costs.
Source: relevant tax case notification by the Quzhou Municipal Tax Service, State Taxation Administration, published on June 16, 2026.
This article is compiled from publicly available tax case notifications and serves only as a general risk alert. Handling of individual cases should be based on contract performance, settlement methods and complete fund records.