In September 2026, a procuratorate in Beijing issued a decision not to prosecute, dismissing the cases against all three defendants—Song XX, Zhang XX, and Hu. With this, the special case involving a company’s issuance of fraudulent invoices—in which attorneys Pan Nanyu, Li Mingzhen, and Liu Bingyang served as defense counsel—was successfully concluded.

 

 

 

Looking back to early 2026, the Economic Crime Investigation Division of a municipal public security bureau launched a crackdown on a nationwide criminal syndicate involved in issuing fraudulent invoices. During the Chinese New Year holiday, the detention center held hundreds of company owners and employees implicated in the case. Before the holiday, the three attorneys stepped in urgently and successfully secured bail for their clients.

 

 

 

However, securing bail was only the beginning. The criminal syndicate responsible for the upstream fraudulent invoicing was implicated in a case involving tens of millions of yuan—a colossal sum. How to secure the most favorable outcome for their clients under such intense pressure was the pressing challenge facing the three attorneys.

 

 

 

 

 

I. The Risks Behind Corporate Invoice Issuance on Behalf of Others

 

 

 

The origins of this case were not complicated; rather, they stemmed from a common predicament faced by many small and medium-sized enterprises. Between October and November 2024, the client, in order to pay project expenses to an individual, used a third-party company to issue nine fraudulent ordinary VAT invoices with a combined face value of over one million yuan.

 

 

 

On the surface, this appears to be a typical case of fraudulent invoicing. However, after meeting with the client immediately and thoroughly verifying the facts of the case, the three lawyers discovered that this case differs fundamentally from cases involving purely shell companies or large-scale fraudulent invoicing. The company involved had genuine financing projects and genuine intermediary services, and the funds ultimately flowed into actual business operations rather than being funneled back to the company. The presence of genuine business operations means the level of social harm is fundamentally different.

 

 

 

II. How Can Taxes Be Paid When the Company Is Operating at a Loss? Insisting on Bail Based on Tax Law Principles

 

 

 

In cases involving the issuance of fraudulent invoices, the payment of back taxes is typically the primary condition for granting bail. When the three lawyers first met with the investigating officers, they received this response, as expected.

 

 

 

However, after the legal team carefully reviewed the financial data, they discovered that in 2024, the company was actually operating at a full-scale loss. According to the *Enterprise Income Tax Law*, enterprise income tax is calculated based on taxable income, and no enterprise income tax is due in years when the company reports a loss. Since the company operated at a loss for the entire year, how could there be any question of paying back taxes?

 

 

 

The three attorneys repeatedly cross-referenced tax law principles, financial data, and the facts of the case, compiling a written dossier of evidence and legal opinions, and engaging in repeated communication with the investigating authorities. Ultimately, the public security authorities accepted the defense’s arguments and granted the client bail pending trial without requiring the payment of back corporate income tax—a first in local cases involving fraudulent invoicing.

 

 

 

III. Preconceived Notions and the Separation of the Special Case

 

 

 

Bail was only a preliminary achievement. As this was a special investigation, the case was ultimately transferred to the procuratorate. If prosecuted in court, even a suspended sentence would inevitably result in a criminal record for the client. How could the case be resolved—or even dismissed without prosecution?

 

 

 

The three attorneys determined that they must implant the unique nature of this case into the investigators’ minds before they had a chance to review the entire case file, so that the investigators would seek out the issues with the answers already in mind.

 

 

 

There are three core arguments:

 

 

 

First, the basis of genuine transactions. This case differs fundamentally from typical cases of fraudulent invoicing without genuine transactions. The financing project was genuine, the intermediary services were genuine, and the funds flowed toward legitimate business operations. This determines that the social harm caused by this case is far less than that of fraudulent invoicing aimed purely at defrauding tax revenue.

 

 

 

Second, the company was in a state of comprehensive loss. In 2024, the company was actually operating at a loss and, in accordance with the law, had no corporate income tax liability; therefore, this case did not result in any actual loss of tax revenue to the state.

 

 

 

Third, this constitutes a corporate crime, not a crime committed by a natural person. This case involved the joint participation of multiple parties, with significant differences in each individual’s role and contribution to the fraudulent invoicing. The three attorneys analyzed each party’s level of subjective awareness, depth of involvement, and extent of contribution to individually argue their specific roles in the joint criminal act. Furthermore, since the act was committed in the company’s name and the benefits accrued to the company, it constitutes a corporate crime and should be regulated in accordance with relevant provisions governing corporate crimes, rather than simply holding the parties criminally liable as if they were natural persons.

 

 

 

The three attorneys systematically organized the above arguments into a written opinion and submitted it to the prosecuting attorney immediately after the case was transferred for review and prosecution, thereby gaining the initiative in shaping the prosecutor’s understanding of the case.

 

 

 

IV. Praise for a Responsible Prosecutor Leads to a Decision Not to Prosecute

 

 

 

Although the prosecuting attorney had not yet formally reviewed the case files, the defense arguments presented by the three attorneys had already planted a seed in their minds. As a result, when reviewing the files later, the prosecuting attorney would approach the case with specific questions in mind and would be more deeply impressed by the attorneys’ defense arguments. As expected, the prosecuting attorney candidly informed the three defense attorneys that this was a special investigation involving over a hundred people, entailing immense pressure, and that a conclusion would not be reached lightly. This initial communication had already yielded positive results. The three attorneys’ goal was not to rush toward a specific outcome, but rather to plant the idea of a no-prosecution decision.

 

 

 

After several rounds of in-depth discussions, the handling prosecutor expressed preliminary approval of the defense arguments. However, as a special case handled by the Municipal Bureau, the final outcome could not be decided by the handling prosecutor alone; it still required reporting up the chain of command to the relevant supervisors. Between approval and formal authorization lay multiple layers of approval procedures. The three attorneys continued to follow up, solidifying the defense framework from the three dimensions of facts, law, and policy, leaving no stone unturned. They supplemented the case file with written opinions, reports on similar cases, and tax law analysis materials to be submitted simultaneously during the reporting process. Ultimately, with the strong advocacy of the handling prosecutor and after a lawful review by senior leadership, the procuratorate fully adopted the defense arguments and issued decisions of non-prosecution for all three clients.

 

 

 

In September 2026, the procuratorate issued decisions of non-prosecution for all three clients. The moment the clients walked out of the procuratorate, they felt a tremendous weight lifted from their shoulders. With no criminal record and no fines, the company could continue its operations, and their lives could start anew. The successful outcome of this case was made possible by the procuratorate’s commitment to fair and lawful handling. Despite the intense pressure from the special investigation, they examined the unique circumstances of this individual case objectively and made the decision of non-prosecution in accordance with the law.

 

 

 

The significance of a criminal defense attorney lies not only in delivering impassioned arguments in court but also in helping clients find that sliver of hope in every specific case, giving them the opportunity to start anew. The three attorneys each fulfilled their respective roles and worked in concert, closely focusing on the actual business context, the company’s financial losses, the clients’ admission of guilt and acceptance of punishment, and the repayment of back taxes. By doing so, they constructed a well-structured and precisely targeted defense strategy for the non-prosecution decision, ultimately achieving the successful outcome of non-prosecution for all parties involved.

 

Translated with DeepL.com (free version)