What is Fapiao and why is it important?

You’ve probably never heard of Fapiao before. Fapiao are very much like invoices. In fact, they can be considered as invoices as well as tax and VAT records. In the event that you are a traveller in China or if you’re planning to expand your business to China, you’ll have to deal with fapiao sooner or later. Chinese fapiao is a rather complicated system, and it can seem overwhelming for foreigners. So on that note, we’re going to explain all you need to know about fapiao in China.

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What is Fapiao in China?

Fapiao (in Chinese: 发票) refers to the receipt and payment vouchers issued and collected during the purchase and sale of goods, provision or acceptance of services and engagement in other business activities. The tax authorities of the State Council of the People's Republic of China are uniformly responsible for the management of invoices throughout the country¹.

Issuing organization of fapiao:

Special VAT fapiao are printed by enterprises determined by the competent tax authorities under the State Council. Other fapiao shall be printed by enterprises determined by the tax authorities of provinces, autonomous regions and municipalities directly under the Central Government in accordance with the provisions of the competent tax authorities under the State Council. It is prohibited to print, forge or alter ‘fapiao’ privately¹.

What's included in a fapiao?

A fapiao typically contains fapiao name, fapiao code and number, fapiao coupon and purpose, customer name, bank and account number, product name or business project, unit of measurement, quantity, unit price, capital and case amount, invoicer, invoice date, invoicing company (or individual), company name (or seal), etc².

To avoid duplicate or missed invoices, each fapiao needs to have a distinct operative account number³.

Why is fapiao important?

For individuals:

• Fapiao serves as a proof of reimbursement from the individual to the company.
• It also serves as a crucial foundation for customers to ask sellers for product exchanges, returns, or repairs.

For companies:

• Fapiao is one of the most important bases for the tax authorities to assess the legality and compliance of a company.
• Companies can use the fapiao to obtain tax benefits in accordance with the tax law.
• If a company suffers a loss of goods, it can use the fapiao to claim compensation from an insurance company.

For government:

• Fapiao is an important tool for national financial management.
• Tax authorities rely heavily on fapiao to manage tax sources and enforce tax collection³.

How many types of fapiao in China (2024) and which one is the most popular?

There are eight types of Fapiao available in China⁴:

1. Special VAT fapiao: General taxpayers and small taxpayers who voluntarily use the VAT fapiao management system to issue special fapiao on their own can get and use Special VAT fapiao. They can be used as input credit and are usually in folded paper format
2. VAT e-fapiao: This fapiao is the electronic version of the VAT fapiao. The General Administration of Taxation (GATS) had proposed to realize the electronic VAT special fapiao for new taxpayers by the end of 2020.
3. **General VAT invoice:**Available in folded, rolled and electronic format form. They are usually issued when purchasing goods, and available to both general taxpayers and small-scale taxpayers. Nominal tax is usually not deductible or credited as input.
4. Uniform fapiao for the sale of motor vehicles: According to state regulations, the seller must issue a fapiao at the time of receipt of payment for the sale of a motor vehicle, which serves as proof that the motor vehicle is licensed.
5. Used car sales fapiao: Used car sales companies are required to issue a fapiao at the time of collecting payment for the sale of a used car.
6. **General-purpose machine-printed fapiao: **The usual recipients of this fapiao are taxpayers who have not reached the threshold or businesses in certain specialized sectors.
7. Quota fapiao: The amount of single fapiao is fixed and can be issued without printing. It is usually used by individual quota households and enterprises in some special industries.
8. Other special fapiao: such as e-ticket itinerary for railway and other transport industries, scenic spot tickets, etc.

Electronic fapiao is currently the most popular type of fapiao in China. Among the many benefits of e-fapiao are real-time, interactive, affordable, and simple storage. The e-fapiao issued through the new VAT fapiao management system has the same legal effect as the paper fapiao supervised by the tax authorities⁵.

Fapiao and tax: relations and features all you need to know

You already have a general idea of the close connection between taxation and fapiao from the previous paragraphs. The following is a summary of several aspects:

• Determining the source of tax: Fapiao records the income and expenditure of the enterprise, which helps the tax department to confirm the source of tax of the enterprise.
• Approval of taxable amount: The tax department approves the taxable amount based on the enterprise's fapiao. The fapiao provides a legal basis for the tax payment behaviour of enterprises.
• **Facilitating the implementation of tax incentives:**when the government implements tax incentives for certain industries or products, enterprises can enjoy the relevant incentives with fapiao and reduce the tax burden.
• **Reflecting the business situation of enterprises:**Fapiao can reflect the income and expenditure of enterprises, which can help the tax authorities understand the business situation of enterprises and thus improve the efficiency of tax collection and management.
• Compliance invoicing: Enterprises should issue compliant fapiao in accordance with national tax policies. Non-compliant invoicing may lead to the risk of tax omission, mispayment or fines.
• Tax payment records: Tax authorities will verify tax payments based on enterprises' fapiao records and tax returns.

Fapiao for foreign companies, things to know in advance!

When trading with overseas enterprises, Chinese foreign trade enterprises are generally required to issue fapiao in accordance with the requirements of customs and taxation.

Fapiao is the basis for tax classification of export commodities by the Customs and must be provided when the Customs implements tax inspection to ensure that enterprises can declare customs normally. In addition, foreign trade enterprises can use VAT Fapiao as the export tax refund declaration vouchers⁶.

For foreign-invested enterprises and foreign enterprises in China, the Interim Provisions on the Management of Fapiao for Foreign-Invested Enterprises and Foreign Enterprises issued by the former State Administration of Taxation in 1991 have been repealed¹.

However, foreign-invested enterprises and foreign enterprises, like Chinese enterprises, are required to issue fapiao and pay taxes in accordance with the Provisional Regulations of the People's Republic of China on Value-added Tax, the Provisional Regulations of the People's Republic of China on Business Tax, the Income Tax Law of the People's Republic of China for Foreign-invested Enterprises and Foreign Enterprises, and other laws or regulations in China⁷.

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