Chine

Expanding scope of issuer on Full digitized e-fapiao There have been multiple announcements made by the Chinese State Tax Administration (STA) recently regarding the expansion of  the fully digitized e-fapiao project.   With effect from March 2023, selected taxpayers in the following provinces will be required to issue fully digitized e-fapiao via the government portal:  

• Yunnan  
• Jilin  
• Henan  

All taxpayers in China are now able to receive fully digitized e-fapiao issued from pilot taxpayers. 

New regions included to fully digitized e-fapiao project There has been an increasing movement towards fully digitalized e-fapiao since China took off the zero-COVID policy. The State Tax Admin has announced that starting from 28 Jan, selected taxpayers from Shanxi, Qingdao, Dalian, Chongqing and Tianjin will be required to issue fully digitized e-fapiao using the unified e-invoicing platform built by the STA.     Here is an updated overview of how the Fully Digitized E-fapiao operates to date:      Who can issue fully digitized e-fapiao: Selected taxpayers in Guangdong (exc Shenzhen), Shanghai, Sichuan, Xiamen, Inner Mongolia, Shanxi, Qingdao, Dalian, Chongqing and Tianjin. Pilot taxpayers in these regions should issue fully digitized e-fapiao via the government portal, which provides taxpayers with access to 24-hour online services to issue, deliver, and verify their fully digitalized e-fapiao free of charge.   Who can receive fully digitized e-invoice: all taxpayers in China can accept the fully digitized e-fapiao issued from pilot taxpayers.  

Exempt VAT for small scale taxpayers till 31 Dec 2023 China's State Administration for Taxation recently published a notice on VAT incentives for small taxpayers. From January 1 to December 31, 2023, small businesses with monthly sales under 100,000 yuan will be exempt from VAT.  Furthermore, the STA clarified that from January 1, 2023, until December 31, 2023: 

• Taxpayers in the production services industry can benefit from an additional 5% VAT deduction based on the input VAT deducted in the current period. 
• Taxpayers in the lifestyle services industry can benefit from an additional 10% additional VAT deduction based on the deductible input VAT in the current period. 

New extensions of fully digitized e-fapiao We have seen many developments since China launched its fully digitized e-fapiao in November 2021. Recently, Sichuan (province) and Xiamen(city) have joined the programme as issuers of fully digitized e-fapiao. This means selected pilot taxpayers in these two regions are now capable of issuing fully digitized e-fapiao to all taxpayers in China. In light of these changes, we wanted to provide an overview of how the fully digitized process operates to date: Issuer of sales invoices:  In Guangdong (exc Shenzhen), Shanghai, Sichuan, Xiamen, Inner Mongolia, pilot taxpayers in these regions should issue fully digitized e-fapiao via the government portal, which provides taxpayers with access to 24-hour online services to issue, deliver, and verify their fully  digitalized e-fapiao free of charge. Receiver of purchase invoices: all taxpayers in China can accept the fully digitized e-fapiao issued from pilot taxpayers. Fully digitized e-fapiao is one of the key projects being undertaken to reform China’s Golden Tax System. For a more in-depth understanding of how this project operates, you may refer to our previous blog on fully digitized e-fapiao.

Further expansion of the Fully Digitized e-fapiao As announced by the Chinese State Tax Administration (STA), the scope of recipients for fully digitized e-fapiao will be extended to 15 more provinces from 28 August 2022. In other words, all taxpayers in China are now able to receive fully digitized e-fapiao issued by pilot taxpayers from Guangdong, Shanghai, and Inner Mongolia.   Additionally, a new feature has been added to the national e-portal, which enables pilot taxpayers to issue the fully digitized e-fapiao in batches by uploading the invoice data in a standardized Excel file.  Fully digitized e-fapiao has the same legal effect as paper fapiao and standard e-fapiao, with the originals required to be stored in China for 30 years. 

Developments on the fully-digitalized e-fapiao system The fully digitalized e-fapiao system has progressed swiftly since its launch, below is a timeline of key events:

• Dec 2021: China kicked off the Fully digitized e-invoice pilot with selected taxpayers in Guangdong, Inner Mongolia, and Shanghai. taxpayers should use the dedicated e-invoicing portal to issue and transmit fully digitized e-invoice.
• April 2022: the pilot expanded further in Guangdong and Inner Mongolia.
• May 2022: Taxpayers in Sichuan joined the pilot as “Receiver”, receiving fully digitized e-invoice from taxpayers in Guangdong, Inner Mongolia and Shanghai.
• June 2022: State Tax Administration (STA) announced an expansion of the "Receiver" scope across the country in phases.
• June 2022: the STA announced that 5 more provinces (Shenzhen, Beijing, etc) to join the pilot as “Receiver” starting on 21 June
• July 2022: the STA further confirmed 9 more provinces to participate the pilot as “Receiver” from 18 July

Although the STA intends to achieve fully invoice digitization by 2025, the top-tier provinces are expected to reach the goal earlier. We are closely monitoring the developments in China and will continue to inform our customers of any updates.

The launch of “Fully Digitalised e-fapiao” pilot programme

China has launched a new pilot programme introducing “Fully digitalized e-invoice”, this is an important initiative to comprehensively promote the digital upgrade and intelligent transformation of tax collection and management, with the goal of achieving 100% invoice digitalization across the country by 2025. The pilot was first implemented on 1st December 2021, with selected taxpayers in Shanghai, Guangdong, and Inner Mongolia.

There are two types of fully digitalized e-invoice: fully digitalized special VAT e-invoice and fully digitalized general VAT e-invoice, which have the same legal effect as the paper invoice and the normal e-invoice currently in use. To remind you of the differences between General and Special VAT invoices:

• General VAT Invoice: This invoice type does not allow for VAT deduction and is typically used for B2C and tax-free transactions. The General VAT Invoice is a simplified invoice type and paperless has been allowed for years for general VAT invoices
• Special VAT Invoice: This invoice types allows for VAT deduction, and is typically used for B2B transactions

A major upgrade in this pilot is the elimination of special tax control equipment (e.g. UKEY), pilot taxpayers will instead use a national unified e-tax service platform to issue, deliver and validate e-Fapiao24/7 for free. Once the invoice data is entered in the system, the platform will issue a unique invoice number, meaning that taxpayers no longer need to apply for invoices via their local tax bureau. In addition, this platform creates a Tax Digital Account for each taxpayer, which automatically collects invoice data, allowing taxpayers to search, print, and download invoices from the platform.
The e-tax service platform aims to serve as a one-stop shop for all invoicing needs, it will be also available in the form of software and mobile app in the near feature. Furthermore, this pilot has abolished the OFD file format requirements, pilot taxpayers can send the fully digitalized e-invoice through their Tax Digital Account, QR code, or by email.

While fully digitalized e-invoice is still in the pilot stage, we expect widespread promotion and implementation soon. It is recommended that enterprises continue to pay close attention to the latest developments and evaluate the potential impact on their business. Of course, Tungsten Network will stay close to China’s e-invoicing pilots, and we will keep you up to speed.

Looking to achieve nationwide coverage of fapiao digitisation by 2025

China has set to roll out e-special VAT fapiao to all taxpayers by the end of 2021, with the expectation to achieve nationwide e-fapiao coverage by 2025.

The STA (State Tax Administration) has launched a public e-invoicing platform aiming to provide free e-invoicing support 24/7 (inv-veri.chinatax.gov.cn). Suppliers/Buyers can access this website to:

• perform validation checks on both paper and electronic invoices issued within the last 5 years. Each invoice can only be checked 5 times per day.
• download relevant certificates and software, e.g. OFD reader, e-invoice generator for UKEY users.
• learn more about e-invoicing in china via online resources, e.g. how to identify the validity of paper fapiao.

It’s noticeable that this platform has access restrictions to foreign browsers and may not work on Apple IOS systems.

La Chine élargit son programme pilote de facturation électronique

En décembre, l'administration fiscale d'État chinoise a annoncé une nouvelle extension du programme pilote à 38 régions du pays. Le projet pilote permet à certains contribuables chinois d'émettre volontairement des factures électroniques spéciales avec TVA. Le projet pilote a débuté en septembre 2020.

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Extension du projet pilote e-Fapiao sur la TVA spéciale 

Le projet pilote chinois de facturation électronique pour les factures à TVA spéciale prend rapidement de l'ampleur. Le pilote était déjà en place dans 11 régions et a maintenant été étendu à 25 autres régions. Le projet est quelque peu retardé. En effet, la facturation électronique devrait désormais être disponible à l'échelle nationale au cours de l'année 2021. (Le plan initial prévoyait une couverture complète du pays d'ici la fin de 2020).

L'initiative de facturation électronique à TVA spéciale vise à remplacer le processus Fapiao existant, entièrement basé sur papier, et oblige les contribuables à utiliser des factures officielles prénumérotées et à se rendre dans les agences locales du Trésor public pour produire ces factures.

Les entreprises sont généralement sélectionnées et certifiées pour le projet pilote. Les entreprises certifiées utilisent la « plate-forme du service public pour les factures électroniques avec TVA » de l'État via leur terminal de connexion « U Key », qui est un composant matériel fourni par les agences locales du Trésor public. Sur la plate-forme du service public, les contribuables sollicitent l'approbation du type et du nombre de factures qu'ils émettront au cours d'une période donnée. La plate-forme publique est également utilisée pour le stockage permanent des factures. Les corrections de factures (notes de crédit/ Avoirs) peuvent également être émises à l'aide de la plate-forme de services (en utilisant des Fapiaos spéciaux dont les lignes sont en rouge).

La Chine met en œuvre des plans visant à renforcer la fonctionnalité de la loi sur la TVA

L'administration fiscale de l'État chinois a publié une mise à jour sur plusieurs thèmes liés à la fiscalité, notamment un plan de développement pour les factures électroniques spéciales avec TVA.