(Source: https://pltfrm.com.cn)
Compliance with China’s invoicing and receipt rules, known as “fapiao” system, is a critical aspect of tax compliance for foreign companies operating in China. The fapiao system is unique and strictly regulated, serving as both an invoice and a tax receipt. Here’s how foreign companies generally comply with these rules:
- Understanding the Fapiao System: A fapiao is an official invoice issued by the Chinese tax authorities, which serves as proof of purchase or sale of goods and services. It’s crucial for tax deduction and VAT refund purposes. There are two main types: general fapiao and special VAT fapiao.
- Obtaining the Right to Issue Fapiao: To issue fapiaos, foreign companies must apply for and obtain permission from the local tax bureau. This involves submitting relevant documentation and information about the business.
- Using Government-approved Software or Machines: Fapiaos are issued through government-approved invoicing software or fapiao machines. These systems are designed to prevent tax evasion and ensure that all transactions are recorded and reported to the tax authorities.
- Issuing Fapiao for All Transactions: Companies must issue a fapiao for every transaction, including sales of goods and services. Failure to issue fapiaos can result in fines and other penalties.
- Recording and Reporting: All fapiaos issued and received must be recorded and reported to the tax authorities regularly, typically on a monthly basis. This is crucial for VAT filing and other tax purposes.
- Keeping Fapiaos for Audit Purposes: Businesses must retain their fapiaos for a specified period, usually at least 10 years, for audit and inspection purposes.
- Handling Lost or Invalid Fapiaos: There are strict procedures for handling lost, damaged, or invalid fapiaos, including reporting to the tax authorities and issuing replacement fapiaos.
- Complying with VAT Requirements: For VAT purposes, special VAT fapiaos are critical. They allow businesses to deduct input VAT from their output VAT. Foreign companies must ensure they issue and receive the correct type of fapiao based on their VAT status and transaction type.
- Training Staff: Foreign companies should train their staff, especially those in finance and accounting roles, to understand and properly manage the fapiao system.
- Seeking Professional Advice: Due to the complexities and potential for changes in regulations, foreign companies often seek advice from local tax professionals or consultants who are familiar with China’s tax system and invoicing requirements.
- Using Digital Fapiaos: China is increasingly adopting digital fapiaos. Foreign companies should stay abreast of developments in digital invoicing and adapt their systems accordingly.
By carefully navigating these rules and processes, foreign companies can ensure compliance with China’s invoicing and receipt regulations, thereby avoiding legal issues and ensuring smooth business operations.
PLTFRM is an international brand consulting agency that works with companies such as Red, Tiktok, Tmall, Baidu, and other well-known Chinese internet e-commerce platforms. We have been working with Chile Cherries for many years, reaching Chinese consumers in depth through different platforms and realizing that Chile Cherries exports in China account for 97% of the total exports in Asia. Contact us and we will help you find the best China e-commerce platform for you. Search pltfrm for a free consultation!
