In international trade, it's not uncommon to encounter clients who make some "special" requests. Recently, a friend mentioned a client who not only asked to inflate the invoice amount but also wanted to pay part of it in cash in USD. Additionally, the client requested an extra invoice of the same amount, claiming it was for cash receipts, even though no actual payment would be made. This situation sounds a bit complicated and can easily be confusing. Today, let's discuss the reasons behind such practices, the potential risks involved, and how to respond in a way that both assists the client and protects yourself.

Why would the customer do this?

Let’s first discuss the motivation behind the client’s request for an inflated invoice. Generally, this practice is mostly driven by loan requirements. In some countries, clients may use inflated invoices to apply for larger loans from banks, thereby increasing their liquidity. The client initially mentioned needing a higher quotation for loan purposes and later requested an even higher invoice amount, likely to "package" their transaction scale in front of the bank to secure more financial support.

As for the part about paying in USD cash and issuing an additional cash receipt invoice (without actual payment), this is quite intriguing. It's possible that the client intends to adjust their taxes by inflating expenses, such as reducing taxable income or circumventing certain regulations. However, while such maneuvers may bring benefits to the client, for the supplier, it's more like a "hot potato."

What are the risks of doing this?

For those of us who work inforeign tradeFor enterprises, complying with customer demands may strengthen relationships, but it's also essential to weigh the potential risks:

• Tax troubles: If the invoice amount does not match the actual transaction, it may be considered as issuing false invoices by the tax authorities. In China, issuing false invoices is a serious matter, ranging from fines and tax supplements to affecting the company's reputation.
• Legal risks: Providing false invoices may be considered fraudulent behavior, especially if the client uses these invoices for any non-compliant activities. The supplier could be implicated and may even face legal consequences.
• Prosecution risk: Although the possibility is slim, if the client later turns hostile and presents a high-value invoice claiming "payment was made but goods were not fully received," the supplier would have to go through the hassle of explaining. Bank transaction records and contracts are key pieces of evidence, but it's best to avoid unnecessary trouble whenever possible.

What's the safest way to handle this?

Faced with such demands, we neither want to offend the client nor fail to protect ourselves. Here are some practical suggestions for your reference:

1. Adhere to compliance and maintain transparency.

In international trade, accurate invoicing is the baseline for tax and legal compliance. It is advisable to issue invoices based on the actual transaction amount to avoid overstatement. If the client insists on a higher invoice amount, you may politely remind them that there are alternative ways to apply for loans, such as providing guarantees or proof of assets, which would be more convenient for all parties involved.

2. Distinguish between customs clearance invoices and customs declaration invoices.

The high-value invoice requested by the client is most likely a commercial invoice for customs clearance. In such cases, we can accommodate adjustments to the customs invoice amount, but the invoice used for our own declaration must strictly reflect the actual contract amount. For example, if the contract amount is $800,000 and the client requests a customs invoice for $1,000,000, we can issue the $1 million invoice for customs clearance while still declaring the actual $800,000 amount for our own customs filing. This approach meets the client's needs without compromising domestic tax compliance.

3. Handle cash payments and additional invoices with caution.

The client requested payment in USD cash and asked for an extra cash receipt invoice without actual payment, which is clearly unreliable. It is advisable to directly refuse issuing false receipt invoices to avoid future liabilities. If the client insists on cash transactions, suggest they make the payment via bank transfer and provide formal documentation, ensuring both security and clarity.

4. Use "small tricks" to reduce risks

If it's truly unavoidable to decline the client's request for a high-value invoice, you can issue the required invoice using a different stamp or an electronic seal, distinguishing it from the official customs declaration invoice. This way, even if disputes arise, boundaries can be clearly drawn. However, such practices should still be approached with caution, and it's best to consult a professional for confirmation.

5. Consult the experts

When faced with such complex tax or legal issues, don't try to handle them alone. Consult a reliable tax advisor or lawyer—they can provide more professional advice to ensure everything is foolproof.

Let me say a few final words.

In international trade, clients' demands can be varied and unusual, but compliance always comes first. When faced with requests for over-invoicing or cash payments, we must stay clear-headed—remaining flexible while not crossing the line. As long as payments are fully collected, goods are properly shipped, and communication with clients runs smoothly, many issues can be resolved effectively. Hopefully, these insights will help everyone feel more confident the next time they encounter similar situations!