Why are invoice mills a risk?
Invoice mills are entities that do not pay taxes, generate non-existent expenses, have no employees, and are generally untraceable. On the other hand, the companies that purchase these invoices inflate their fictitious expenses to reduce tax payments and pay a commission per invoice. You could say it is the “everyday business.”
The economic activities with the highest incidence of invoice buying and selling — with respect to tangible goods — are wholesale trade and construction. With respect to services, they are professional, scientific, and technical services.
In addition, these companies share among themselves a considerable number of individuals (clients) who received assimilated salaries and are involved in 2 or more companies.
That is, they do not only invent invoices for fictitious expenses, but also use invoices to conceal or disguise illicit expenses and payments — you could say it is a “ghost company.”
These companies are not what anyone would call legitimate. The most advisable course of action is to avoid these “jobs” and above all to stay informed about these areas, as they can cause serious problems.
How to identify an invoice mill?
Bearing in mind that it is a ghost company, there is no efficient way to detect them without putting yourself at total risk. The best we can offer are 3 steps you can take to try to detect them:
- Google Maps.
You can search for the company name on the virtual map and check whether it actually exists. If no results appear or you only get suggested alternatives, do not enter into contracts with that company.
- Call the company's numbers from a public or private telephone
The most intuitive thing is not to do this, but if curiosity gets the better of you and you want total privacy and security, call from a public telephone to avoid your number being recognized as a business, or set your local number to private so it is not identified by other phones or mobile devices.
- Purchase and sales records
Under new law, we can request from companies — or through the SAT — a purchase history or financial statement of the company, and verify whether this “new company” is real and operational. If it is not, it will have no records.