China Business: Understanding ‘Fapiao' And The Taxation Invoice System
In China, the invoice — or fapiao — is an essential component of the State Administration of Taxation (SAT). In accordance with the Administrative Measures of the People's Republic of China for Invoices (revised in 2010), invoices refer 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.To get more
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In practice, a "fapiao" is evidence of payment for the sale of goods or the provision of services. Therefore, they are a part of the supporting documentation to show proof of business transactions or the claiming of business expenses.
The SAT is responsible for the administration of fapiao and individual enterprises are required to print fapiao on special paper purchased from local governmental authorities. Before being able to issue fapio, enterprises are required to have met the following conditions:
Equally, all fapiao are required to be printed from a "fapiao printer" that is linked online to the SAT system. In the printing process, enterprises must select the appropriate business activities registered under their business scope, such as the provision of services or sale of goods.
There are two types of fapiao: the general value-added tax (VAT) fapiao and the special VAT fapiao .
The special VAT fapiao may be used to offset the value-added tax down the VAT chain, whilst the general VAT fapiao cannot. Therefore, it is important for all businesses working in China to understand the two different types of fapiaos.
General VAT fapiao are customarily issued by small scale taxpayers, enterprises with a turnover of less than 5 million RMB or enterprises who are forbidden to issue special VAT fapiao (such as general commercial taxpayers who retail cigarettes, alcohol, food, clothing, shoes and hats, makeup, and other consumer goods).
Special VAT fapiao
Special VAT fapiao are issued by general taxpayers who are VAT registered or small scale taxpayers who may issue special VAT fapiaos through the tax authority. Special VAT fapiao can be used to claim input VAT credit and offset the VAT. From 1 May 2016, the business tax was abolished and VAT applied to all goods and provision of all services in or to China. Consequently, the Special VAT fapiao is a key element to incentivise enterprises to comply with the tax administration (for more details, see our previous posts related to VAT reforms).
Entities are obliged to issue fapiaos for the provision of services or sale of goods. If a company refuses to issue a fapiao to a buyer, the buyer may report the company to the tax bureau. Equally, any forgery of a fapiao shall result in a fine of up RMB50,000 for amounts below RMB10,000.
Blank fapiao are strictly forbidden from being carried, mailed or transported in or out of China. Consequently, fapiao are an integral element in tax and accountancy compliance. It is important for businesses to educate themselves accordingly to be up to date on the laws and regulations of the SAT to maintain efficient fapiao management.
