Preparing for the Coming E-Fapiao Era
Published: June 2021Over the last few months, China has been quickly expanding the pilot program on electronic special value-added tax (VAT) fapiao (hereafter special VAT e-fapiao). First trialed in Ningbo, Hangzhou, and Shijiazhuang, China expanded the pilot program on issuing special VAT e-fapiao to 11 regions from December 21, 2020 and then another 25 regions from January 21, 2021. China is joining the growing trend throughout the world: digitalization. In this issue of China Briefing magazine, we demonstrate the opportunities and risks associated with e-fapiao implementation.
Over the last few months, China has been quickly expanding the pilot program on electronic special value-added tax (VAT) fapiao (hereafter special VAT e-fapiao). First trialed in Ningbo, Hangzhou, and Shijiazhuang, China expanded the pilot program on issuing special VAT e-fapiao to 11 regions from December 21, 2020 and then another 25 regions from January 21, 2021. China is joining the growing trend throughout the world: electronic invoicing.
Being easier to obtain, issue, delivery, and store, the new invoicing process will lead to more cost-effective and environmentally friendly business practices. The high automatable nature of e-fapiao enables enterprises to further streamline their businesses, which will help them to achieve higher productivity, more accuracy, and enhanced internal control in risk management.
On the other hand, however, the e-fapiao implementation imposes challenges on businesses in the short-term, in terms of understanding the laws and regulations, developing relevant internal protocols, revising standard business processes, and upgrading relevant software and equipment to comply with the new reimbursement, bookkeeping, and archiving requirements. Besides, companies might be exposed to higher tax scrutiny with tax authorities gaining more control in tax administration enabled by the real time monitoring and the traceability of e-fapiao and the advanced technology.
CFOs and finance managers with responsibility for China operations are suggested to prepare for e-fapiao’s impacts on their existing systems and procedures as well as the benefits rooted in the digitalization management of VAT invoice.
In this issue of China Briefing magazine, we demonstrate the opportunities and risks associated with e-fapiao implementation. We begin by presenting an overview of the e-fapiao and explaining why it matters to every business. Then, we summarize the major compliance requirements of e-fapiao management, before providing two typical case studies of e-fapiao violations. Finally, we offer practical tips to help companies prepare for the coming e-fapiao implementation.
In this Issue:
- China’s E-Fapiao System at a Glance
- E-Fapiao Management in China: Regulatory Requirements and Compliance
- How Should Companies Prepare for the Special VAT E-Fapiao?