Public Notice on Issues regarding the Issuance of VAT Invoices

On July 1st 2017, the State Taxation Administration started to officially implement the previously issued “Public Notice on Issues regarding the Issuance of VAT Invoices” (State Administration of Taxation 2017 no. 16).

The new requirement when issuing general VAT invoices is as follows:
the company that acts as the buying party when demanding the selling party to issue VAT invoice must provide to the selling party the company’s full name, tax payer’s identification number or the uniform social credit code.

Otherwise invoices will not be able to be used for reimbursements and will not be considered by the tax authorities as valid tax receipts. Meaning that companies will not be able to use them for tax related purposes such as tax, tax refunds, credit etc.

Objectives:

1. To facilitate companies when verifying the authenticity of invoices, to strengthen the companies financial management and streamline tax matters.

2. To make the filler of the invoice truthfully write the invoice content. In fact some sellers at the request of buyer agree to write the content and value in the invoice as they see fit and not according to the real transaction.

Paragraph 2 of the notice in particular states “the selling party, when issuing invoice, should do it according its actual line of business; the purchasing party when obtaining the invoice, cannot demand to make changes neither to the article name nor to the amount”    (国家税务总局公告2017年第16号)

3. To create a higher level of clarity and transparency for the parties involved. Sellers need to indicate in details the name of the articles sold and cannot anymore indicate the general product category. For companies, for instance, this would facilitate reimbursement procedures and have better clarity in their ledgers accounts.

Important to mention that this regulation regards companies only, individuals when demanding the sellers to issue invoice don’t have to give any personal information to the seller.

Invoices in China, also called fapiao, are legal receipts registered at the local tax bureau. We believe this public notice aims to contribute bolstering China’s consumer model through a stricter regulation concerning the issuance of fapiaos. If successfully implemented throughout China we expect this will lead to an increase in the level of transparency both inter and intra company as well as to a better organization, beneficial to both companies and SAT figures.

See public notice details here:

http://www.chinatax.gov.cn/n810341/n810755/c2644618/content.html