In China, the invoice — or fapiao (发票) — refers to the certificate of payment or receipt of money made or received in purchases and sales of goods, provisions or acceptance of services and other business activities.
In practice, an invoice shows that the purchased goods or the provision of services is paid.
On the December 1, 2021, the digital invoice pilot program was introduced across China. Companies are selected and notified by the state tax administration and local tax bureau.
For the selected companies, the digital invoice ('e-invoice') enables greater precision and efficiency in financial management. Specifically, the e-invoice management reduces human errors, paperwork, and trips to the tax bureau for the accounting team. In the below, we outline how e-invoices work and practical steps to implement.
- The local tax bureau regulates the e-invoice management and determines the maximum amount of e-invoices that can be issued by an applicable company (per month).
- E-invoices, refers to special VAT invoices, ordinary VAT invoices and other invoices issued by the selected company ('company').
- Adjustments to the maximum amount shall be made according to the risk degree, tax credit level, actual business situation and other factors of the company
- If the amount is insufficient, the company may request the local tax authority to adjust the maximum amount.
E-invoice account users
- Selected companies shall pass a real name verification to register and access the e-invoice service platform. Though no special tax management equipment is required. Instead, companies can issue invoices by the e-invoice service platform.
- The e-invoice online platform enables account users (selected companies) to query, download and print their collected data.
- E-invoices can be sent through the e-invoice service platform via the account, or the company may send an e-mail or QR code.
- Companies shall confirm the purpose of any obtained VAT deduction voucher, and apply for the deduction of VAT input tax, or apply for export tax rebate or agent tax rebate.
Implementing e-invoice management
- Companies selected by the tax bureau shall activate the e-invoice online service account. Therefore, such companies should digitalise accounting procedures inline with the e-invoice online management – such as revising company procedures and workflow, as well as training relevant employees.
- Companies should notify clients or customers that the e-invoice will replace paper invoices and ample time should be provided, so parties can make internal adjustments
Companies and individuals can utilise the e-invoice service platform or the national VAT invoice inspection platform to verify an e-invoice. Therefore, companies should comprehensively manage internal controls to ensure e-invoices are lawfully issued and reduce risks.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.