Recently, I conducted some research on local corporate law enforcement and judicial cases, uncovering several legally intriguing situations that might offer insights into current corporate compliance management.
Receiving Problematic Invoices from an MCN Agency
Main Case Details
Company A signed an “Artist Authorization Cooperation Agreement” with Company B, stipulating that Company B would arrange for artists to shoot product placement videos for Company A’s brand, to be used for brand promotion. The contract specified the amount excluding tax and the tax amount, and required Company B to issue an equivalent amount of VAT special invoices to Company A within 7 working days after receiving payment. If Company B failed to issue the invoices on time or the invoices did not comply with the contract or relevant laws and regulations, Company B would bear all losses incurred by Company A. After Company A paid the full amount as agreed, Company B issued 5 VAT special invoices. Company A declared and deducted the VAT from these invoices in the same month. Subsequently, Company A received a “Tax Matters Notice” from the tax authorities, informing them that the abnormal VAT deduction vouchers they obtained did not comply with the current regulations for VAT input tax deduction and other tax-related matters. Company A was required to reverse the VAT input tax of over 20,000 yuan that had been declared and deducted in the current period (tax period) upon receiving the notice, and to declare and pay the tax in the next month (quarter). Company A paid over 30,000 yuan in VAT and additional taxes (urban maintenance and construction tax, education surcharge, and local education surcharge) that could not be deducted.
Outcome
The court ruled that Company B should compensate Company A for the tax loss of over 30,000 yuan and interest.
Case Insights
As economic pressures increase, tax authorities across the country are emphasizing the need to collect every possible tax. In this context, minor issues that were previously overlooked in tax reporting are now coming to light. The problematic invoices in this case are likely not the first issued by this MCN company, but a search of the company’s litigation records reveals no similar cases. It is speculated that tax authorities may not have previously paid attention to such issues and thus did not discover them.
In this case, Company A suffered tax losses due to receiving non-compliant invoices during transactions with Company B. The court ruled that the defendant should bear the compensation responsibility. This case highlights the importance of tax compliance in corporate operations. When signing contracts, companies should specify invoice issuance time, invoice type, tax rate, and tax amount, and clearly define breach of contract responsibilities to assert their rights in case of disputes. After receiving invoices, companies can verify invoice information through official channels provided by tax authorities or delegate professional agencies to check the authenticity and legality of invoices. Additionally, companies can use various corporate information platforms to assess the risk status of potential partners to avoid unnecessary transaction risks.
In the future, companies should be more cautious when receiving invoices.
Replacing IT Company Labor Contracts with Maintenance Service Agreements
Main Case Details
Liu was primarily responsible for equipment maintenance at an IT company. After working for six months, he submitted an arbitration application to the arbitration committee, requesting confirmation of an employment relationship with the IT company. The IT company claimed that the relationship was a service cooperation and submitted a “Maintenance Service Agreement” as evidence. The dispute centered on whether the “Maintenance Service Agreement” constituted an employment relationship.
Outcome
During the trial, both parties confirmed that Liu was subject to the IT company’s attendance and safety management, and his work scope was within the IT company’s premises. The IT company’s finance director paid Liu a relatively fixed amount each month, sometimes labeled as “salary” and other times as “maintenance service fee.” Ultimately, the arbitration committee recognized it as a de facto employment relationship.
Case Insights
IT companies commonly outsource services, but it is rare to see internal facility maintenance personnel treated as independent contractors, as in this case. This shows how some companies go to great lengths to circumvent labor contract laws.
This case reminds companies to respect and protect the legal rights of workers. If the employment model meets the characteristics of an employment relationship, companies should proactively sign labor contracts with workers. In this case, although the company signed a “Maintenance Service Agreement” with Liu, the management and payment methods resembled an employment relationship, leading the labor arbitration department to recognize it as a de facto employment relationship.
Key Characteristics of an Employment Relationship
- The worker is subject to the employer’s management, direction, and supervision;
- The employer pays the worker wage-based compensation;
- The worker is integrated into the employer’s organizational system, using the employer’s means of production, rather than engaging in independent business or operational activities.
Selling Cracked Software Leads to Jail Time
Main Case Details
In 2017, Zhang purchased a legitimate software A developed by a network technology company for 8,000 yuan, with the copyright holder listed as B. Starting in 2018, Zhang, seeking illegal profits, used batch replacement software to replace all files related to B in software A with C and changed the software server’s URL to C’s server URL, thereby cracking software A. Each time software A was updated, Zhang used the same method to update software C. Additionally, Zhang purchased pirated software D based on software A from another source, modified it into his own pirated software E, and sold the cracked versions of software A, C, and E on his website for 200 yuan each, profiting from the sales. Zhang also attracted users to pay for 288 yuan and 588 yuan annual premium memberships by offering free access to software A. His total profits amounted to 180,000 yuan.
Outcome
Zhang was sentenced to two years in prison and fined 180,000 yuan for copyright infringement.
Case Insights
In recent years, China has significantly increased its crackdown on online illegal activities. Even issues like server DDoS attacks can lead to criminal cases, let alone selling cracked software. Upon closer examination of the software involved in this case, it turns out to be some WeChat mini-program source codes, mostly modified from open-source projects. However, since they obtained copyright registration, cracking and selling them naturally constitutes a crime.
In this case, Zhang was severely punished by the law for unauthorized cracking and selling legitimate software. This case highlights that intellectual property infringement is a serious crime, and it is essential to respect others’ intellectual property rights. Unauthorized copying, distribution, modification, or sale of intellectual property is prohibited. Additionally, intellectual property owners can collaborate with industry associations and intellectual property authorities to combat infringement. If intellectual property rights are violated, legal measures should be actively pursued to protect those rights.
