Chinese E-invoice or Fapiao: Everything You Need to Know

Introduction:

In recent years, China has been making significant strides in digitalizing its invoicing system, transitioning from traditional paper fapiao to Chinese E-invoice (e-fapiao) or electronic invoice. This shift has brought about numerous changes and challenges for businesses operating in China, particularly foreign-invested enterprises. Many questions arise, such as: What exactly is an e-fapiao? How does it differ from paper fapiao? What are the benefits of using e-invoices? How can businesses adapt to this new system? This article will help you understand everything you need to know about Chinese e-invoices or fapiao, providing a comprehensive guide to navigating this digital transformation.

Chinese E-invoice: The Uniqueness of Chinese “Fapiao”

Before introducing Chinese E-invoice, we first need to understand the characteristics of China’s invoicing system. Many foreigners who first come to China often equate the “Fapiao” here with the “Invoice” abroad, treating it as an ordinary receipt. However, in China, Fapiao is not a general receipt, but a tax voucher with a special status and strict requirements.

Chinese Fapiao is uniformly supervised, issued, and provided with special anti-counterfeiting measures by the tax authorities, rather than being printed by enterprises themselves. When issuing an invoice, it is necessary to provide information such as the taxpayer identification number and full name of the issuer and recipient, and transmit data through the tax control system, rather than filling it out arbitrarily. The types of invoices, applicable tax rates, format and text are also strictly regulated. Issuing false invoices, forging invoices, or transferring invoices illegally will lead to legal liabilities.

All enterprises engaged in production and business activities in China must obtain tax invoices. After receiving an issued invoice, they must also declare and pay taxes as required. It can be said that invoices run through the entire process of business operations and are the cornerstone of tax management. Therefore, whether state-owned enterprises or foreign-invested enterprises, they must attach great importance to and strictly abide by the various regulations of China’s invoice management.

The Introduction and Popularization of Chinese E-invoice

Traditional paper invoices have problems such as high cost, slow issuance, and difficult storage. In order to improve invoicing efficiency and facilitate taxpayers, China began to promote E-invoice in 2015. After a few years of exploration, electronic invoices have been fully rolled out in the fields of enterprise and consumer-oriented businesses, from catering and supermarkets to manufacturing and modern services, all accelerating the application of electronic invoices.

In early 2020, the State Administration of Taxation departments of China jointly issued a document, clarifying that from December 21, 2020, when taxpayers apply for special VAT invoices, ordinary invoices, and motor vehicle sales unified invoices, the competent tax authorities should all issue electronic invoices and no longer issue paper invoices. In 2021, more than 20 billion electronic invoices were issued nationwide, accounting for over 60% of all invoices. Actually, the companies in China started fully using digital Electronic invoices (E-invoice) on August 1, 2023, and will no longer issue paper VAT special invoices or VAT ordinary invoices.

Chinese E-invoice use technical means such as electronic signatures and electronic seals to ensure the authenticity and tamper-proofing of invoice information. After enterprises and consumers receive electronic invoices, they no longer need to obtain paper invoices. They can view them on computers or mobile phones, or print them into paper ticket samples. Electronic invoices have the same legal effect as paper invoices and can be used as enterprise account vouchers, tax vouchers, consumer rights protection vouchers, etc.

The Advantages and Conveniences of Chinese E-invoices

Compared with traditional paper invoices, Chinese E-invoice have significant advantages:

1. High invoicing efficiency: Chinese E-invoice do not need to be purchased, bound or stamped. They can be issued online with one click after submitting information, greatly saving invoicing time.
2. Convenient and fast receipt: The invoice recipient can check and receive Chinese E-invoice online in real-time, without the need for on-site pickup or waiting for mailing, which is very convenient.
3. Easy storage and retrieval: Electronic invoices are stored in the form of electronic data, which can be quickly searched and stored for a long time, and are not easily lost or damaged.
4. Lower cost: Chinese E-invoice are provided free of charge by the tax authorities, and enterprises do not need to purchase and print them, which can significantly save invoicing costs.
5. Strong data processing: Electronic invoice data can be directly imported into financial and tax systems to automatically generate statistical reports, which is convenient for analysis and management.

How Enterprises Apply for and Use Chinese E-invoice

Enterprises need to follow these steps to apply for and use electronic invoices:

1. Go through invoice type verification at the competent tax authority where the company is registered. General taxpayers who meet the conditions can choose to use electronic invoices or paper invoices by themselves, while small-scale taxpayers can only use electronic ordinary invoices for the time being.
2. Purchase tax control invoicing equipment and electronic seals. Enterprises can choose their own computers as the invoicing terminal or purchase dedicated tax control invoice machines. Electronic seals can be obtained from local qualified CA certification authorities.
3. Register an account on the electronic invoice service platform. Enterprises must log in to the electronic invoice service platform of the local area or the national unified VAT invoice comprehensive service platform to complete user registration. See the operation guide on the website of each local tax bureau for details.
4. Enter invoicing information. Enterprises log in to the electronic invoice platform, enter invoicing elements such as the buyer’s name, taxpayer identification number, bank of deposit, account number, and total price and tax amount to issue electronic invoices.
5. Send electronic invoices. After the electronic invoice is successfully issued, it will be automatically sent to the designated buyer’s mobile phone number or email address. Enterprises can also log in to the electronic invoice platform to query and download.

Points to Note for Foreign-invested Enterprises Using Chinese E-invoice

So, for foreign investors who set up wholly foreign-owned enterprises (WFOEs) in China, what are the special points to pay attention to when using electronic invoices?

1. After establishing a WFOE, go to the competent tax authority where the company is registered as soon as possible to go through tax registration and obtain a taxpayer identification number, in preparation for applying for electronic invoices.
2. When purchasing tax control equipment and electronic seals, choose qualified suppliers and consult the local tax authorities to ensure compliance with technical standards and management norms.
3. The legal representative of the WFOE needs to personally go to the tax authority to handle invoice type verification and register an account on the electronic invoice service platform. If entrusting others to handle it, a legal and valid power of attorney must be provided.
4. When issuing electronic invoices, carefully review whether the buyer’s information is accurate and complete, especially the authenticity of the taxpayer identification number. For those with inconsistent tax numbers and unit names, handle with caution.
5. Properly keep and use the enterprise’s electronic seal, and do a good job in the security protection of the information system to prevent leakage or theft of electronic invoice data. If there are abnormal situations such as loss or theft, report to the competent tax authority in a timely manner.
6. Regularly check the electronic invoices issued by the enterprise to ensure that the information is complete and accurate and consistent with the actual business. If erroneous or void invoices are found, handle them according to the prescribed procedures.
7. Promptly import the issued electronic invoice information into the WFOE’s financial system, store it separately from paper invoices, and ensure that the accounts are consistent with the facts to provide accurate data support for tax declaration and financial accounting.
8. Consult the competent tax authority on electronic invoice policies, participate in relevant training, and improve the understanding and operation ability of electronic invoice business. Seek help in a timely manner when encountering questions to avoid non-compliance risks.

Conclusion:

In short, electronic invoicing is the general trend, and foreign-invested enterprises should actively embrace this trend. Making good use of Chinese E-invoice can not only improve the internal operational efficiency of enterprises, reduce costs, and promote digital management but also better adapt to the requirements of China’s tax management and reduce tax risks. GWBAM believes that through practical exploration, foreign-invested enterprises will surely be able to quickly master the skills of using Chinese E-invoice or Fapiao and take on the wings of digitalization for their own development.