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Accounting Service |China Fapiao Issue

China’s ‘Fapiao’

A fapiao is a legal receipt that serves as proof of purchase for goods and services. The larger fapiao invoice system, however, is an essential component of China’s tax law, and compliance for businesses.

China’s tax authorities require businesses to use fapiao to compel companies to pay tax in advance on their future sales. In this way, fapiao serve as a paper warranty against tax evasion, unlike other countries where invoices serve as a tax receipt.

The State Administration of Tax (SAT) prints, distributes, and administers fapiao. These authorities then require all businesses to purchase relevant fapiao, according to their business scope.

Foreign businesspeople and companies should take the time to understand the fapiao system: individuals need fapiao to reclaim business expenses, while companies must record all business transactions on a fapiao. A solid understanding of the system is therefore a critical requirement.

Types of Fapiao

There are two major categories of fapiao – general fapiao and special value-added tax (VAT) fapiao. The main difference between the two is that the latter can be used for tax deduction purposes, while the former cannot.

Since the VAT fapiao is used for tax deduction purposes, it will contain a lot more detailed information including the trader’s tax code, address, telephone number, and bank account information.

Additionally, the purchase amount on a VAT fapiao is usually explicitly broken down into its taxable and non-taxable components, while the amount shown on the general fapiao is usually a tax-inclusive figure.

Given the different types of fapiao, companies should check with an accountant to confirm which type of fapiao they need before making any fapiao purchases with the tax authority.
 
 

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