China

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.

China weitet sein E-Invoicing-Pilotprojekt aus

Im Dezember kündigte Chinas State Taxation Administration (STA) eine weitere Ausweitung des Versuchspilotprojekts auf 38 Regionen des Landes an. Das Pilotprojekt ermöglicht bestimmten chinesischen Steuerzahlern, auf freiwilliger Basis elektronische Umsatzsteuer-Sonderrechnungen auszustellen. Das Pilotprojekt startete im September 2020.

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China weitet sein E-Invoicing-Pilotprojekt aus

Im Dezember kündigte Chinas State Taxation Administration (STA) eine weitere Ausweitung des Versuchspilotprojekts auf 38 Regionen des Landes an. Das Pilotprojekt ermöglicht bestimmten chinesischen Steuerzahlern, auf freiwilliger Basis elektronische Umsatzsteuer-Sonderrechnungen auszustellen. Das Pilotprojekt startete im September 2020.

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Pilotprojekt für elektronische Rechnungen mit ausgewiesener Mehrwertsteuer in China verlängert 

Chinas Pilotprojekt für elektronische Rechnungen mit ausgewiesener Mehrwertsteuer (e-Fapiao) nimmt schnell an Fahrt auf. Das Pilotprojekt wurde zuerst in 11 Regionen eingeführt und wird jetzt auf weitere 25 Regionen ausgeweitet. Es kam jedoch zu leichten Verzögerungen: Die elektronische Rechnungsstellung soll nun im Laufe des Jahres 2021 im ganzen Land verfügbar sein. (Der Originalplan sah vor, dass dies bereits bis Ende 2020 der Fall hätte sein sollen).

Die Initiative für e-Fapiao soll den bisherigen Fapiao-Prozess ablösen, der rein papierbasiert ist und vom Steuerzahler verlangt, von der Regierung vornummerierte Rechnungen zu verwenden, die nur vor Ort in den Steuerbehörden des Landes erstellt werden können.

Für gewöhnlich werden Unternehmen von der Regierung ausgewählt und zertifiziert, um an diesem Pilotprojekt teilnehmen zu können. Zertifizierte Unternehmen melden sich über ihr „U Key“-Anmeldeterminal – eine Hardwarekomponente, die von den regionalen Steuerbehörden bereitgestellt wird – bei der „öffentlichen Serviceplattform für elektronische Rechnungen mit ausgewiesener Mehrwertsteuer“ an. Auf der öffentlichen Serviceplattform kann der Steuerzahler die Genehmigung für den Typ und die Anzahl der Ausgangsrechnungen beantragen, die er in einem bestimmten Zeitraum ausstellt. Rechnungen werden außerdem auf der öffentlichen Serviceplattform permanent gespeichert. Rechnungsberichtigungen (Gutschriften) können ebenfalls über die öffentliche Serviceplattform vorgenommen werden (über besondere e-Fapiaos mit roter Kopfzeile).

China entwickelt Pläne zur Verbesserung der Funktionalität des Umsatzsteuerrechts

Die staatliche Steuerverwaltung Chinas (STA) hat eine Stellungnahme zu mehreren steuerlichen Themen veröffentlicht, einschließlich eines Entwicklungsplans für besondere elektronische Umsatzsteuerrechnungen.

China entwickelt Pläne zur Verbesserung der Funktionalität des Umsatzsteuerrechts

Die staatliche Steuerverwaltung Chinas (STA) hat eine Stellungnahme zu mehreren steuerlichen Themen veröffentlicht, einschließlich eines Entwicklungsplans für besondere elektronische Umsatzsteuerrechnungen.