This blog was last updated on February 26, 2024
In December, the expansion of China’s B2B e-invoicing pilot program, that enables certain taxpayers to voluntarily issue VAT special electronic invoices, was announced by China’s State Taxation Administration (STA). These e-invoices can be used to claim input VAT so are generally used for B2B purposes whereas VAT general invoices cannot so are commonly used for B2C transactions.
The pilot project started in September 2020, enabling certain taxable persons established in Ningbo, Shijiazhuang and Hangzhou to issue VAT special invoices in electronic form.
Since 21 December 2020, new taxpayers established in 11 regions including Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Anhui, Guangdong, Chongqing, Sichuan, Ningbo, and Shenzhen were added to the e-invoice initiative.
Starting from 21 January 2021, the e-invoicing expansion plan for new taxpayers adds 25 more regions: Beijing, Shanxi, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Fujian, Jiangxi, Shandong, Henan, Hubei, Hunan, Guangxi, Hainan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, Dalian, Xiamen and Qingdao.
The new initiative adopted nationwide
According to the STA’s announcement, taxpayers in the regions included in the pilot program will be eligible to issue special electronic VAT invoices under the conditions established in those jurisdictions.
The special e-invoice will be optional for newly registered taxpayers in these regions, whereas the recipients can be established in any region. Therefore, the taxable persons located in the selected areas will be able to voluntarily issue special e-invoices regardless of where their customers are located within China.
If the receiver of the invoice would prefer a paper invoice, the issuing party must accommodate this request and issue a special paper invoice in line with the relevant requirements for such invoices.
The local Bureau will handle the verification of invoice types for new taxpayers who apply for VAT invoices for the first time. Each province’s tax authorities can determine the criteria for the type of VAT invoices that new taxpayers can use for the first time, including the special electronic VAT invoices.
Electronic signature
To meet the requirements of the e-invoice reform, the special e-invoice needs an electronic signature instead of the original invoice stamp. This requirement is in line with the Electronic Signature Law of China that recognizes electronic signatures as having equal legal force as a handwritten signature or seal.
Electronic invoice verification
The STA has optimized and upgraded the comprehensive service platform for VAT invoices, enabling taxpayers to check the special electronic invoices and verify the electronic signature.
If the recipient loses or damages the issued special e-invoice, they can download it after verifying via the national VAT invoice verification platform by providing the invoice code, invoice number, date of issuance and the invoice amount excluding tax.
Amending electronic invoices
In the event of a sales return, an error in the invoice, suspension of taxable services or a sales discount, the issued e-invoice can be amended. To do this the taxpayer will need to issue a credit note, known as a red-letter special invoice, conforming with all the requirements established by the local tax authority and the applicable regulations.
What’s next for e-invoicing in China?
As China’s B2B e-invoicing pilot program expands, we are getting closer to full-scale e-invoicing possibilities. The Chinese Government acknowledges the special electronic invoice’s benefits for its fast and convenient issuance, accelerating the settlement of transactions for both parties, shortening the payment cycle and reducing costs.
Simultaneously, the introduction of special e-invoices helps promote the further popularization of electronic financial accounting for enterprises, positively boosting the digital construction of the entire economy and society. It’s quite likely that once the optional e-invoicing has been rolled-out broadly enough it will be converted to a mandatory scheme, providing benefits for global trade.
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