,

China Expands B2B E-Invoicing Pilot

Victor Duarte
January 20, 2021

From 21 January 2021, the e-invoicing pilot program in China will be expanded

In December, China’s State Taxation Administration (STA) announced the expansion of the pilot program that enables certain taxpayers operating in China to voluntarily issue VAT special electronic invoices. 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 recognises electronic signatures as having equal legal force as a handwritten signature or seal.

Electronic invoice verification

The STA has optimised 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 the e-invoicing pilot program expands, we are getting closer to full-scale e-invoicing possibilities in China. 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 popularisation 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.

Take Action

Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Victor Duarte

Victor is a Regulatory Counsel at Sovos. Based in Stockholm and originally from Venezuela, he obtained a Law degree and a specialisation degree in Tax Law in his home country. Victor also earned a Master´s degree in European and Internal Tax Law from Lund University in Sweden.
Share This Post

Latin America Tax Compliance VAT & Fiscal Reporting
March 22, 2023
Argentina: New Perception VAT Regime on Sale of Food and Products for Human Consumption

Argentina has recently expanded its perception VAT (Value Added Tax) collection regime to ensure efficient tax administration. It has included selling food and other products for human consumption, beverages, personal hygiene, and cleaning items under its scope. The Argentinian Federal Administration of Public Revenue (AFIP) established this through Resolution No. 5329/2023 in early February 2023. […]

North America Tax Information Reporting
March 22, 2023
What is the Combined Federal State Filing (CF/SF) Program?

The IRS created the Combined Federal State Filing (CF/SF) program more than 20 years ago to help alleviate the administrative burdens on small businesses reporting 1099 information to states. This program integrates federal and state filings. The IRS uses information filed in federal filings and then forwards relevant information to states on a business’ behalf. […]

Italy VAT & Fiscal Reporting
March 21, 2023
Pre-filled Italian Annual VAT return – an innovative change

On 10 February 2023, the Italian Tax Authority introduced the possibility for 2.4 million professionals and companies to view and download the pre-filled Annual VAT declaration related to transactions carried out in 2022. This return must be submitted by 2 May 2023. Who does this impact? The service is available for taxpayers defined by the […]

North America Unclaimed Property
March 16, 2023
California Begins Voluntary Compliance Program Rollout

The California Voluntary Compliance Program (VCP) is now available, according to an announcement from the California State Controller. For the first time, we are hearing from the State Controller’s Office (SCO) regarding the VCP authorized by the California legislature in September 2022. The announcement on the SCO’s website provides guidance concerning the upcoming program and […]

North America ShipCompliant
March 15, 2023
A Continued ‘Normalization’ in DtC Wine Shipping – What Does That Mean?

Sovos ShipCompliant’s recent 2023 Direct-to-Consumer (DtC) Wine Shipping Report, released with our partner Wines Vines Analytics, showed the first-ever decline in both value (-1.6%) and volume (-10.3%) of shipments. While these numbers are concerning, it’s important to look at the industry in its entirety and keep in mind the overall context of pandemic responses from […]