Regulatory updates - China

Following the Pilot Program, which was gradually expanded to the whole country from 1 December 2021, the STA decided to officially promote e-fapiao invoices countrywide. Therefore, as of 1 December 2024, all taxpayers, not only the selected or newly registered ones, will be allowed to issue e-fapiao.

Prior to that, the STA announced the promotion of fully digitalized e-fapiao for civil aviation passenger transport services, which will also take place from 1 December 2024. Companies in the air transport sector will be allowed to issue e-fapiao for passengers using domestic transport services.

According to the STA announcement, digital invoices are classified as e-invoices and are legally equivalent to paper invoices. Moreover, to allow taxpayers to issue and manage e-fapiao smoothly, the STA will provide a platform for e-invoice services available nationwide.

The local STAs (State Taxation Administration) announced adding seven more regions to the fully digitalized invoicing pilot, including Anhui, Beijing, Guizhou, Hunan, Ningxia, Qinghai, and Shandong. Selected taxpayers in those regions can issue fully digitalized invoices from 1 November.

The e-fapiao receiving pilot has been deployed nationwide.

After the newly added provinces and regions, the coverage of e-invoice issuance pilots will be countrywide. 

The fully digitalized e-invoice (e-fapiao) issuance pilot started in early 2022, with the implementation in only a few provinces. Right now, the pilot is making rapid progress, as it has been implemented in more regions in the past few months. Selected taxpayers in the appointed sixteen regions can generate e-fapiao via the e-invoicing system.

The latest regions that joined the e-fapiao issuing pilot are the following:

• 30 November 2022- Xiamen
• 20 January 2023- Shanghai, expanding to cover all newly registered taxpayers
• 28 January 2023-Chongqing, Qingdao, Dalian, Tianjin, and Shaanxi provinces
• 22 March 2023 Henan and Jilin
• 30 March 2023 Shenzhen, Ningbo, Fujian province, and Yunnan province

Pagero continues to closely monitor the pilot developments in China.

China implemented a Fully Digitalized E-Invoice (FDEI) pilot in December 2021, starting with 3 provinces. Currently, one more region-Sichuan has joined the pilot program on 28 October 2022. Selected taxpayers in this region can issue e-fapiao on the Sichuan e-invoice service platform after they have authenticated themselves.

As we mentioned before, fully digitized e-fapiao (e-fapiao) is an advanced e-invoicing system, which can help taxpayers issue tax invoices more efficiently. The ability to receive e-fapiao has been deployed to all provinces. Along with Sichuan joining the pilot, it steps forward in accomplishing the plan of countrywide e-invoicing by 2025.

On 30 November, Shanghai, Guangdong, and Inner Mongolia released announcements, respectively, carrying out a new invoicing system pilot for selected taxpayers to issue fully digitized invoices (fapiao) as of 1 December 2021.  

Pilot taxpayers can use the National platform to issue, distribute, and verify e-fapiao instead of multiple platforms as before. 

The electronic invoice is not new in China. As Pagero mentioned before, special VAT e-invoices have already been launched in 2021, allowing newly registered VAT taxpayers to issue special VAT fapiao electronically through the National Invoicing system. However, the fully digitized e-fapiao is a brand-new version of the invoice, and it reduces the pre-processing procedure from the taxpayers. 

Features of the new e-invoice in the pilot program 

• No hardware devices required: After user verification, taxpayers can issue e-invoices without the “Ukey” or any other tax control equipment.
• Fapiao automatically assigned: In this pilot, taxpayers do not need to apply for fapiao numbers and fapiao quantities beforehand. A unique fapiao number will be assigned automatically when a fully digitized invoice is issued in the National invoicing system.
• Invoice amount cap: Instead of having a limited amount per invoice, the tax authorities will determine the total monthly amount a company can issue. This amount will be based on the risk level, the credit rating, and the operation of the business.
• Fully digitalization: Fully digitized fapiao can be delivered in a structured format, waived OFD obligation. Once fully digitalized e-fapiao is generated, the structured invoice will be automatically sent to the digital tax account of both trading parties.

During the pilot program suppliers may issue red invoices directly via the platform only if the original invoice has not been deducted yet; no red-letter confirmation form (Confirmation form) is required. For invoices that have been deducted, the issuer or the recipient should file the Confirmation Form before issuing a red-letter invoice. 

What is the next step? 

Currently, six types of invoices, Special/General VAT fapiao, Special/General VAT e-fapiao, and Special/General fully digitized e-fapiao, are working in parallel. However, according to the announcement from the State Council, the Chinese government aims to introduce country-wide e-invoicing by 2025. Very important for businesses operating in China to be prepared so that the transition to electronic invoicing is as smooth as possible.