We should have written on this years ago, but since it has never presented a real problem for my firm’s clients, it just never really rose to a level that it occurred to me. My mistake. The it to which I am referring is the send out a bill scam to whomever has just registered a company or IP just about anywhere in the world.
But before I explain the scam in full, I will quote from the comment that finally spurred me to write this post:
Shortly after registering my WFOE, I got an early morning phone call from (a Beijing land line) someone who identified herself as being with the Tax Bureau in Beijing. I’m a night owl who frequently works on US time so I missed most of the details due to still being asleep and her ignoring all of my “I’m asleep, please don’t talk to me now” comments.
It wasn’t until the next phone call (a Jiangxi cell phone number) identifying themselves as being in Hainan that I caught the gist of them saying they had a published copy of the tax code that all new enterprises were being required to purchase for 2000 rmb and change, that they would be mailing it to me whether I wanted it or not, that the bank details would be in the mailing, and if I didn’t pay I’d be in big trouble.
All comments along the lines of “don’t want,” “don’t need,” and “can’t use” were ignored and a couple days later the books arrive by courier.
My first hint that something was wrong was the package label. It wasn’t addressed to my company. It wasn’t addressed to the 22 letter English name that causes me all sorts of headaches with every single official bureau that must use the name on my ID. It was addressed to my Chinese name. Not only that, but they got the family name wrong.
Inside the box I find some very official looking books (on very flimsy paper) with a (still ridiculously huge) price tag that doesn’t match the number they gave me on the phone.
I also find a fake fapiao.
The local police got involved and, at one point, were trying to set up a sting to get the scammers to come and meet me if they wanted to get paid but although they agreed a couple times, they’d never show up.
I continued to get early morning phone calls off and on for the next month. In one phone call, the people on the other end threatened to have my visa revoked if I didn’t pay up immediately. In another, I got death threats.
A few months later, a company I’m involved with (but which isn’t in my name) did a change of address. The Chinese person whose name is on the documentation is the listed contact person but the number is mine. When I got a phone call asking to speak to him so they could tell him about the important tax materials they would be mailing, I just hung up the phone.
Yup. This happens just about all the time, though usually not quite so aggressively (this is the first I have heard of death threats).
Here’s the deal.
Just about every time my firm registers a trademark or a copyright or a corporate entity anywhere in the world — be it a WFOE, a Rep Office, or a Joint Venture in China, or an LLC or a Corporation in the United States — our client gets a fake invoice. The invoice purports to be from the trademark or copyright or company registration office of whatever country it is in which we just did the registration and it is usually for anywhere from USD$250 to $750. This happens so frequently that it is our firm’s policy to warn our clients in advance of these.
The tax one of which the commenter wrote has become the scam du jour in China, which makes me think it is working. The fact that at least ten percent of our clients contact us about such invoices even though we have warned them about them in advance and assured them that we will cover ALL government filing fees and costs also indicates that these fake invoices do work, at least sometimes.
It is actually a pretty good scam in that it is not even clear to me that the scammer is violating the law. I say this because the invoices I have seen for this particular scam involving China WFOE formations usually say that they are offering a copy of the tax code along with tax consulting advice. So though the fees they are charging for this are absurd, they are at least offering something for the money. Where the illegality comes in though is that they are really just offering what you can get for free from the Chinese government and they are making it seem as though your registration is going to be held in limbo if you do not pay, which is, of course, completely untrue.
My law firm has overseen hundreds of company and IP registrations in China and not once have we or our clients ever been hit up for additional and unwarranted fees by the Chinese government. Not one time. Also (and unlike in some other countries), we have never been told to pay an extra fee for “expedited” service. So if something like this happens to you, the odds are overwhleming that it is not the government and it is not legitimate.
In any event, you have now been warned.
Have any of the above happened to you? What do you think?