In China, invoices (or “fapiao” in Chinese) are more than just ordinary receipts. Contrary to other countries, where invoices are usually used simply to record a transaction, in China they are also the way in which the government monitors the tax paid on any transaction. Fapiao are printed, distributed, and administrated by tax authorities, and taxpayers are required to purchase the invoices they need from the tax authorities according to their business scope.
Fapiao can mainly be sorted into two categories – general invoices and special value-added tax (VAT) invoices. Although these terms are often used interchangeably, there are notable differences between the two.
First, the latter can be used for tax deduction purposes, while the former cannot. Second, as the VAT invoice is used for tax deduction purposes, it will contain a lot more details with respect to the trader’s information, including tax number, address, telephone number, bank account information. Finally, the purchase amount on a VAT invoice is usually explicitly broken down into its non-tax and tax components, while the amount shown on the general invoice is usually a tax-inclusive figure. It is therefore important to check with your accountant with regard to which type of invoice you need according to the purpose intended.
General invoices are used as evidence of payment where special VAT invoices do not apply. They are used by the following taxpayers:
■Business tax taxpayers;
■VAT small-scale taxpayers; and
■VAT general taxpayers who are not allowed to issue special VAT invoices (e.g., commercial business general taxpayers who engage in retail of cigarettes, liquor, food, clothing, shoes and hats, makeup, and other consumer goods).
In other words, enterprises or individuals who are not able to issue special VAT invoices should issue general invoices when selling commodities, providing taxable services, or conducting other operating activities.
Special Value-Added Tax Invoice
Special VAT invoices are issued by general taxpayers to their customers when selling commodities or providing taxable services. They cannot be issued in the sales of tax-free commodities.
A special VAT Invoice basically comprises of three copies as follows:
■Bookkeeping copy – the bookkeeping voucher for the issuer;
■Deduction copy – the tax deduction voucher for the customer who made the purchase; and
■Invoice copy – the bookkeeping voucher for the customer who made the purchase.
For the common consumer spending money in China, a fapiao can be used as valid proof of expenditure where one needs to reclaim any expenses made (e.g. on a business trip). Sometimes foreigners are also required to provide a fapiao from rented or purchased accommodations as proof of residency for visa purposes.
It should be noted that the responsibility to obtain a fapiao lies with the consumer, as a fapiao will not always be offered. However, by law all businesses are required to produce a receipt at the customer’s request at the time of purchase. If a business owner is unable to produce a valid invoice, the customer has the right to report it to the authorities by dialing 12366 – the national tax authorities’ helpline.
Furthermore, consumers can now verify whether an invoice is genuine by simply contacting the above-mentioned helpline or by checking the invoice’s unique bar code against records at www.chinatax.gov.cn.
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