In 2016, China’s Business Tax to VAT reform legally enabled many consumer-facing industries to issue electronic normal VAT invoices (not eligible for input VAT claim) to their customers. Since this tax reform, the past year has seen China make an increased effort to focus on the electronic normal VAT invoice (not eligible for input VAT claim) to be adopted by more consumer-facing sectors. Nevertheless, compared to the development of normal VAT invoices, we have seen very little progress from a policy perspective when it comes to the digitalisation of special VAT invoices (eligible for input VAT claim).
Push to e-invoicing for key industries and big telecommunication companies
We have however in 2017 seen the first signs of e-invoicing being made compulsory. The State Administration of Taxation issued a policy that encourages local tax administrations to push certain key industries such as e-commerce, telecommunications and public utilities to use VAT normal e-invoices more extensively, as well as publishing e-invoicing guidance and standards for these suppliers. In particular, the Beijing State Tax Bureau issued a policy which made VAT normal e-invoicing mandatory for the three big telecommunication companies in Beijing (China Mobile, China Telecom and China Unicom).
E-invoicing potential being seen in China
While the tax administrations are making an effort on a policy level, market players have also discovered the potential of e-invoicing in China. Several Chinese mobile payment giants have already incorporated e-invoice issuance and archiving functionality to their services, in order to facilitate better payment management. More specifically, for transactions in sectors such as e-commerce, catering, transportation and logistics, individual consumers can use one and the same access for both the payment and e-invoice issuance. The combination of mobile payment and e-invoice issuance makes it possible to have less human intervention in the invoicing process. This also makes it easier for China to accept e-invoicing.
Conclusion: Some progress, but digitalisation of special VAT invoices slow
As China is fairly technologically advanced, it is natural to see the quick adoption of e-invoicing in private sectors as well as the recognition of the value of e-invoicing. But when it comes to the policy and legislation level, it is a bit surprising to see that the state tax administration is not yet ready to open the possibility for the digitalisation of special VAT invoices, which is more of an interest for large businesses.
