- 28 August, 2022
- 137876
All You Need to Know About ‘Fapiao’ (Invoices) in China
China first rolled out the electronic general
fapiao in 2015, which achieved great success among retail,
food and beverage and other high-frequency transaction industries due to the
number of tax receipt requests from the public being met by a dedicated
electronic fapiao portal that helps speed up tax receipt issuance.
The electronic general fapiao is now in a more advanced state of development
where third parties provide automatic and semi-automatic systems that give the
user (i.e. the consumer) the capability to request and issue an electronic
general fapiao by inputting relevant company information in a dedicated portal
without the help of an operator.
New Application of
Electronic Special VAT Fapiao in China
Before 20 December 2020, the electronic fapiao was only applicable to general VAT fapiao while
the special VAT fapiao were still in a paper format.
The success of the electronic fapiao among the public, mainly in the B2C field,
has thus encouraged Chinese tax authorities to apply a similar system to B2B
transactions, simultaneously granting the relevant authorities more power to
monitor tax evasion.
Announcement No. 22
[2020] issued by the State Taxation Administration (STA) on 20 December
2020 extends the possibility of issuing electronic special fapiao
solely to newly established companies in China (whose date
of establishment or tax registration was after 20 December 2020) for the time
being in a selected number of pilot locations divided into two batches, as
detailed below.
Batches |
Implementation Date |
Province / City |
1st Batch |
21/12/2020 |
Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Anhui,
Guangdong, Chongqing, Sichuan, Ningbo and Shenzhen |
2nd Batch |
21/01/2021 |
Beijing,
Shanxi, Neimenggu, Liaoning, Jilin, Heilongjiang, Fujian, Jiangxi, Shandong,
Henan, Hubei, Hunan, Guangxi, Hainan, Guizhou, Yunnan, Xizang, Shanxi, Gansu,
Qinghai, Ningxia, Xinjiang, Dalian, Xiamen and Qingdao |
* Electronic special VAT fapiao recipients can be
nationwide.
Newly established companies in these cities/provinces may use the electronic special VAT fapiao instead of the traditional paper special VAT fapiao for tax registration.
Comparison Between Paper
Special VAT Fapiao and Electronic Special VAT Fapiao
Items |
Paper Special VAT
Fapiao |
Electronic Special VAT
Fapiao |
Format |
Paper |
Digital |
Invoice Copies |
Three
forms and three copies: the invoice copy, the copy for
offsetting tax (the offset copy) and the copy for keeping accounts (the
book-keeping copy) |
Only
one electronic copy |
Validity |
Invoice seal |
Electronic signature |
Authentication |
Tax
bureau, scanning equipment |
Online
invoice reader |
Invoice Loss |
Subject to the lost copy/ies, the taxpayer will need to
obtain evidence and re-stamp the other copies |
Re-download through the VAT verification platform based
on the fapiao code, fapiao number, date of issue and issued amount (tax
excluded). Alternatively, ask the issuer to reissue the electronic fapiao |
Invoice Issuance |
Manual
self-issuance or automatic 3rd party service provider schemes |
Manual
self-issuance |
There is no functional difference between the paper special VAT fapiao and electronic special VAT fapiao.
Advantages of Electronic Special VAT Fapiao
This new invoicing process will
lead to more cost-effective, environmentally friendly, streamlined and accurate
business practice while also bringing about significant changes in the way
businesses send and receive invoices in the years ahead, thereby contributing
to the development of high-quality account reconciliation.
Some advantages are listed below:
Cost
saving
The fapiao issuer can issue the
electronic special VAT fapiao with a U-Key and a computer with an internet
connection, meaning that a printer is no longer
needed for the fapiao.
The issuance of electronic VAT
fapiao will become very useful, freeing up employees to focus on other tasks
and contribute to other areas. In future, technologies such as artificial
intelligence and blockchain will change the game by drastically optimising manpower and time costs, while also preventing human error
and fraud.
Efficient
delivery
Electronic special VAT fapiao can
be delivered by e-mail, link or QR code, with instant delivery allowing
companies to speed up their payment
collection process while
minimising courier and postage expenses.
Traceable
records
Unlike the paper fapiao,
electronic special VAT fapiao can be easily tracked and matched with each transaction.
A
more economical way of preserving fapiao
Paper fapiao can be easily
damaged, worn off or lost due to improper storage, while electronic special VAT
fapiao can be permanently
preserved in a digital format; they
do not need to be stored in a specific place and can also greatly reduce the
cost of subsequent storage management.
In addition, taxpayers can repeatedly download electronic special VAT fapiao from the free channel provided by the STA in case
of invoice loss and damage.
Reliable
authentication technology
Electronic special VAT fapiao can
be verified by a specified system developed by the STA called ‘Fapiao Reader’,
which has been released to help in taxpayer invoice verification.
How to Issue Electronic Special VAT Fapiao
The STA has developed a dedicated
portal for issuing electronic special VAT fapiao (previously only available in
the paper format) accessible to designated taxpayers via a U-Key to be provided
for free to newly established enterprises in the aforementioned areas, at each
local tax bureau available in the territory.
Authentication technology is incorporated into the new e-invoicing system to
guarantee the legitimacy and monitoring of tax receipts, while taxpayers can
also access a separate platform created by the Chinese tax authorities called ‘Fapiao Reader’ to verify any e-fapiao received from suppliers, available via the following link: https://inv-veri.chinatax.gov.cn/xgxz.html.
Electronic Special VAT Fapiao Cancellation
As per STA Announcement [C.7], a
red electronic special VAT fapiao shall be issued in cases of sales returns,
invoice errors, suspension of tax services and sales discount according to the
following instructions:
If the purchaser has
used the electronic special VAT fapiao for declarations and deductions, the
purchaser needs to fill in and upload the information form for issuing
red electronic special VAT fapiao (hereinafter the information
form) to the fapiao management system (hereinafter the fapiao system), and
shall not fill in the corresponding information for the blue electronic VAT
fapiao when filling in the information form. If the purchaser hasn’t used the
electronic special VAT fapiao for declarations and deductions, the seller shall
fill in and upload the information form to the fapiao system, and shall fill in
the corresponding blue electronic VAT fapiao when filling in the information
form.
The taxpayer can submit the
information form online, which will be automatically checked for approval by
the system. The system will then generate an information form with a red fapiao
information serial number and this information is synchronised with the system
used by the taxpayer.
The seller shall issue a red
electronic special VAT fapiao in the invoice system, with the information form
approved by the tax authorities’ system. The red electronic special VAT fapiao
content should be consistent with that on the information form.
If the purchaser has used the
electronic special VAT fapiao for declarations and deductions, the payable VAT
listed in the information form shall be temporarily transferred from the
payable current income tax, and after obtaining the red electronic special VAT
fapiao issued by the seller, it shall be used as an accounting voucher together
with the information form.
Impacts on Existing Companies
Newly established companies can
either issue electronic special VAT fapiao or paper special VAT fapiao so that
fapiao receivers (likely to be existing companies) can still request for a
special VAT fapiao in its paper format, with issuers being obliged to issue the
paper special VAT fapiao upon request.
The settlement cycle in the supply chain will undoubtedly become more efficient
with the introduction of electronic special VAT fapiao. However, existing
companies are likely to go through a
transitional learning curve period,
including but not limited to learning to use the new VAT issuance system, new
standard operating procedures for invoice issuance, tax filing, bookkeeping,
and more importantly, communications with upstream and downstream companies for
daily operations.
We anticipate a trend whereby existing companies using paper fapiao will gradually switch to electronic formats in future, with the rapid development and upgrade of the e-fapiao system being promising.