In September, the Ningbo Municipal Taxation Bureau (NMTB) of the State Taxation Administration (STA) announced a pilot programme enabling selected taxpayers operating in China to issue VAT special electronic invoices on a voluntary basis.
China’s VAT invoices
China has two types of VAT invoices: VAT special invoices and VAT general invoices. The first type may only be issued by general VAT taxpayers and can be used to claim input VAT, whereas VAT general invoices can be issued electronically by small-scale taxpayers, but can’t be used to claim input VAT. So, VAT special invoices are used for B2B transactions, and VAT general invoices are commonly used for B2C transactions.
Currently, for deduction purposes, VAT special invoices must be printed and exchanged with the other trading parties in paper form. The parties involved in the transaction must also store the original invoice for any future audit. However, this new pilot programme announced by Ningbo could be the start of a new e-invoicing era in China.
Pilot programme for VAT special e-invoices
The programme’s aim is to promote and increase the use of e-invoices. Under the scheme, electronic VAT special invoices will have the same legality, basic purpose, and basic use regulations as the equivalent paper form VAT special invoice.
The NMTB relies on the VAT electronic invoice public service platform developed by the STA to provide taxpayers with free issuance services for this type of e-invoice.
Individuals and companies will be able to check the VAT special electronic invoice information through the national VAT invoice inspection platform; they can download the e-invoice through the national VAT invoice inspection platform, and verify the validity of the electronic signature in the document.
Who’s affected?
The list of taxpayers selected to participate in this pilot programme will be published on NMTB’s official website. Only taxpayers in that list will have the option to issue VAT special invoices electronically to taxpayers within the NMTB’s jurisdiction, which is the region under the programme’s scope.
What’s next?
Previous pilot programmes in China only focused on the issuance of VAT general e-invoices. The implementation of this pilot programme is a significant step forward for the Chinese Government’s ambitious plans to adopt e-invoicing for VAT invoices nationwide by the end of this year.
The success of this trial is key. It will determine whether the time is finally right to expand the scope to include other regions and whether a full implementation for electronic VAT special invoices in the country according to this aggressive timeline is an audacious goal or a de facto plan-in-the-making.
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