China’s Fapiao Invoice System

China’s Fapiao Invoice System

July 2, 2021 Comments Off on China’s Fapiao Invoice System By Robert Fisch

Compared to invoice in other countries, China’s invoice (发票 or fapiao in Chinese) is different as it fulfills a different role in the Chinese invoice system. For foreign companies that want to register and start a business in China, they have to get familiar with fapiao to engage in business activities in China.

What is a Fapiao(发票)?

Fapiao refers to business vouchers issued and received by all units and individuals when they purchase or sell commodities, provide or accept services in other business activities. Different from receipt, the proof of payment, fapiao only indicates that the business took place, not the payment has been paid or received.

Fapiao is the text signed by the seller to the buyer, and the content of the fapiao includes the name, quality, and price of the product. Besides, each fapiao has a unique account number on it.

The fapiao is a document that records the cost, expense, and revenue. For the company, fapiao is the basis of accounting, and it’s the proof of the cost of tax. For employees, fapiao is used to get reimbursement.

General VAT fapiao and Special VAT fapiao

There are two major types of fapiao in China, general value-added tax (VAT) fapiao and special value-added tax (VAT) fapiao. The major difference is that the special VAT fapiao can be used for tax reduction, but the general fapiao cannot.

  1. General VAT fapiao

It is mainly used by business tax taxpayers and small-scale VAT taxpayers.

2. Special VAT fapiao

Special VAT invoice also has a more special role than general invoices. It is not only the sales of goods and value-added tax records of financial receipts and payments. Moreover, it is the legal proof for both the tax obligation of the seller and the input tax of the buyer, and the legal proof for the buyer to deduct the tax, which plays a key role in the calculation of the value-added tax.

A special VAT fapiao consists of 3 sheets of paper:

  • Accounting sheet: sales of goods accounting and tax amount
  • Deduction sheet: for the buyer to calculate input tax
  • Invoice sheet: a copy of the transaction, the receiver is the original voucher of payment

The general VAT fapiao has two sheets. It doesn’t have a deduction sheet because the tax is not deductible.

Invoice system in China

The tax authority, the State Administration of Tax (SAT), is the invoice authority, which manages and supervises the printing, receiving, purchasing, issuing, obtaining, keeping and handing over and canceling invoices. SAT is promoting electronic general invoices. On August 31, 2020, the electronic special invoice was first implemented in Ningbo, China.

There is a standard upper limit of the number of VAT fapiao that can be issued every month for newly established companies, equal to25 special fapiao valued at RMB 10,000 per fapiao and 50 general fapiao valued at RMB 10,000 per fapiao. Companies can apply for more fapiao or fapiao with a higher amount of value.

Mishandling fapiao can lead to severe illegal problems. Make sure to understand the proper way to provide fapiao to minimize liability. If it is necessary, consult with professional people to know more about the fapiao practices.

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