China’s Golden Tax III VAT invoicing system

Yinghan Miao
March 29, 2018

As a part of the Golden Tax System, the well-known tax administration system in China, the Third Stage of this system named ‘Golden Tax III’ has been fully implemented for more than a year. The goal of this stage is to establish a consistent tax administration backed by information technology and to enable highly efficient processing of tax data in an automated manner across the State. An important component of the Golden Tax III is the VAT invoicing system, which not only allows online issuance of VAT invoices (finalized in paper form) but also uploads all issued VAT invoice information immediately to the tax administration’s back-end database and stores the information there. When the performance of the VAT invoicing system became stable, the tax administration later issued policies and technical specifications requiring that all e-invoicing (VAT normal invoices) systems must be connected to the Golden Tax III VAT invoicing system, which means that e-invoicing in China is not an isolated area from paper invoicing process; it rather relies on the existing process to a large extent.

How does e-invoicing work in conjunction with the existing Golden Tax System?

E-invoicing systems in China can either be developed by the taxpayer itself or by an e-invoicing platform provider permitted by the tax administration. The connection of e-invoicing systems and the Golden Tax VAT invoicing facilitate the reuse of the existing set-up and process of the Golden Tax III VAT invoicing system, resulting in e-invoicing becoming an integrated part of the Golden Tax III project. The transmission and use of e-invoice data, therefore, follows the general requirements and processes for paper VAT invoices issued online. Under the Golden Tax III project, all invoice data including e-invoicing data is transmitted to the tax administration, which can be used as the reference for tax filing and invoice verification at a later stage. The Project also enables the recipients of VAT invoices to process invoice information for claiming input VAT credit digitally online.

Real-time reporting of invoice data

The reuse of the Golden Tax III VAT invoicing system has enabled direct reporting of invoice data while the taxpayer issues VAT invoices; the jurisdictional tax administrations are also able to process and analysis multi-sourced tax data of taxpayers, and identify taxpayers’ non-compliance activities by using the data. Therefore, taxpayers and relevant market players should rather view e-invoicing as an extension of the existing Golden Tax System where data reporting and transmission are more efficient, but the presence of the invoice itself can be dematerialized. Such real-time reporting of invoice data is already seen in Europe in countries such as Hungary, whose real-time reporting scheme is relatively well-regulated and established. Our experience from this is that the taxpayers who process VAT invoices electronically should also enhance their in-house invoicing processes in line with the reporting requirements and processes to avoid any possible tax risks.

What does the reuse of the Golden Tax System mean?

The Golden Tax System changes overtime in order to meet the needs of tax administration at different stages and points of time. With the Golden Tax System acting as the tool for tax administration covering all possible aspects, including the overall VAT invoice management, it is not difficult to foresee that regardless of the status of current B2B paper invoicing and B2C e-invoicing, or future general B2B e-invoicing when it becomes legally possible, they will all be tied to the Golden Tax System where all types of VAT invoices will be processed and regulated in a unified manner.

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Yinghan Miao

Yinghan Miao is a Regulatory Counsel at Sovos TrustWeaver. Based in Stockholm and originally from China, Yinghan’s background is in law and IT with a professional focus on international tax law, tax compliance, and cyber security. Yinghan earned her degree in Law in China and her masters in Law and IT from Stockholm University in Sweden.
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