When in Rome, be like a Roman. And in China, be like China. When it comes to a country's tax invoice management system, Fapiao is the word you should know. This is the translation of Chinese invoices known in the Western world. And it is very common in China's business environment.
What is Fapiao?
Fapiao is actually collecting money in China. Simply put, a fapiao is a legal proof of purchase of a product or service. When a local transaction occurs, the seller issues a fapiao. This invoice is generated by government-provided software.
Pre-prepared invoice documents and special printers linked to the central tax system. And to make it clear All domestic transactions in China must be recorded and a fapiao must be provided. If the seller refuses to issue a fapiao, the buyer can appeal to the tax authorities.
The fapiao system is administered by the Chinese State Taxation Administration (STA). The government agency issues, distributes, records, and administers fapiao across China. The STA allocates fapiao to companies.
In China according to their business activities, for example, the quota for small taxpayers may include a fapiao booklet containing 25 to 50 sheets, and the value of each sheet should not exceed 10,000 RMB.
Please note that newly setup WFOEs have several limitations on the number of invoices that can be issued. and the total value of each invoice These requirements vary by locality in China. and is dealt with the relevant local tax office.
How to use Fapiao:
Buyers use fapiao to recover business expenses.
Sellers use fapiao to offset taxes and discounts.
Governments use Fapiao to fight tax evasion and track payments.
Types of Fapiao
General Fapiao
This is usually used as proof of payment. It's a Chinese tax invoice. If you want Compared with other types of Fapiao, general Fapiao is easier to process and more common among small taxpayers, B2C industries, life service industries. And general Fapiao tax-free transactions cannot be used for VAT deduction purposes.
Special VAT Fapiao
These serve as proof of purchase in addition to deducting VAT. Small taxpayers cannot use these. Therefore, it is commonly found in the B2B VAT sector. Fapiao should be kept in a safe place. The penalty for lost Fapiao discs must be at least equal to the original value.
Special VAT fapiao requires filling in more detailed information on 3 documents:
Accounting Documents: Serves as the seller's accounting.
Tax Deduction Sheet: Serves as evidence of the amount of input tax paid by the buyer.
Billing Sheet: Used by customers for their accounting purposes.
Convert to e-fapiao
Following the completion of the general e-fapiao reform in 2016 and as part of China's efforts to digitize and improve commercial processes, A VAT-specific electronic e-fapiao pilot project was launched in China in September 2020.
Officials expect the system to be completed in major cities. of China by 2022 and will be fully implemented throughout the country by 2025.
Advantages of e-fapiao
Here are some of the most obvious benefits:
It's easier and faster to buy, process and deliver.
Fapiao sheets can be verified and verified online before applying for tax filing in China.
Fapiaos are stored online so they are not lost and can be reprinted.
E-fapiao can be easily integrated into your company's system. and can improve broader processes such as annual reports. Supply chain management, etc.
There is no need for paper, ink and delivery services. And it is also environmentally friendly.
Four practical implications for companies
Increased efficiency and automation – The shift to e-fapiao is expected to impact not only financial management and accounting in China. but also the business as a whole. This is an opportunity to further update and optimize business functions to achieve greater accuracy and effectiveness.
Greater transparency – The new system aims to increase the government's ability to monitor business activities. These digital tools also increase transparency. Therefore, it is recommended to use internal control and governance systems such as operational audits in China.
careful It also increases the government's ability to monitor business activities. For more information you can read here: https://www.msadvisory.com/what-is-a-fapiao-the-invoicing-system-in-china-explained/
