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China has recently began transforming its paper-based official invoices, also known as fapiao, into digital versions. Specifically, 11 regions in China were incorporated, by December 21, 2020, in the pilot program on electronic special value-added tax fapiao (or in short, VAT e-fapiao). These regions are Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Anhui, Guangdong, Chongqing, Sichuan, Ningbo, and Shenzhen. On January 21, 2021, the list adds 25 more regions: Beijing, Shanxi, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Fujian, Jiangxi, Shandong, Henan, Hubei, Hunan, Guangxi, Hainan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, Dalian, Xiamen, and Qingdao.
A reform to digitalize a general fapiao in China has been rolled over since 2015, and by 2017 a general e-fapiao could be issued by entities across the whole country. Compared to a general fapiao, a special VAT fapiao can be used to offset input VAT from output VAT. According to the Announcement No. 22 (2020) of the State Administration of Taxation, the legal and tax interpretations of a special VAT e-fapiao are the same as a paper-based special VAT fapiao. Despite the reforms limit the issuance of a special VAT e-fapiao to the selected regions, a recipient of such a fapiao can be based anywhere in China.
A special VAT e-fapiao has many advantages to the businesses and accounting teams in China. Firstly, an e-fapiao can be produced by applying via the electronic tax bureau. Lengthy visits to a tax bureau are no longer necessary. A special VAT e-fapiao can be quickly verified on the National VAT Invoice Verification Platform. Furthermore, a special VAT e-fapiao can now be preserved, so in case an e-fapiao file is damaged or a paper version of a fapiao is lost, it can be recovered using the previously mentioned platform.
For businesses in China, a move towards further digitalization of the fapiao system is positive news. It implies less paperwork for accounting teams, easier access to these official invoices, faster delivery, and more precise financial management and due diligence. However, entities in China must ensure the full compliance with all regulations, as tax bureaus will have a more complete control and inspection capabilities with the introduction of official electronic invoices.
The team at PHC Advisory provides all the necessary support in the e-fapiao management. Please contact us at info@phcadvisory.com for additional information.
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