China: E-invoicing for newly registered taxpayers

China has recently announced a nationwide implementation of VAT e-invoices. The e-invoicing would be introduced to all the newly-registered taxpayers in China by the end of January 2021, covering all invoice recipients. 

E-invoicing is becoming popular due to its advantages in issuing, keeping, inspection and cost savings. An e-invoice is an electronic version of a VAT special invoice with the same legal effect, usage and requirements as those governing paper invoices.

All province or equivalent-level tax authorities are given the discretion to determine the quota for new taxpayers to obtain electronic VAT invoices for the first time within the national scope of the maximum invoice value and the maximum quantity per month. After the setting, taxpayers can still apply for a higher quota to meet their increasing business need.

After applying for the e-invoices online, taxpayers can issue e-invoices on an invoice service platform with a security token “Ukey” and arrange a remote delivery. Taxpayers can issue VAT special invoices either in electronic or paper versions. However, taxpayers should issue a paper version if a customer so requests.

In the event of any sales return, incorrect invoicing, cancellation of service or sales discounts, the invoicing party or the recipient can conduct an online application for a credit note. Taxpayers can then issue a credit note after obtaining the tax authority’s automatic verification online. For anyone intending to use e-invoices for tax return purposes, deduction of VAT input, export tax refund or any other tax refund, they are required to confirm the purposes via the VAT invoice online system.

E-invoices are also recognised as the qualified voucher for supporting any claims for the reimbursement of expenses and keeping the records for those taxpayers who adopt electronic bookkeeping practice.

E-invoices can facilitate a quick and safe transaction with the advantages of being easy to process, fast to collect, convenient to deliver, efficient to manage and economical in documentation. Furthermore, e-invoicing can enable enterprises to improve financial analysis, embark on electronic accounting and boost economic digitalisation. However, to date, it has only been introduced to new companies. It is expected that the new e-invoicing practice will soon cover all companies and sectors. Companies are advised to prepare for it, in terms of the selection of IT software and APPs, setting up an e-invoicing process with customers and suppliers and proper adjustments to bookkeeping measures.

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