What Any Business Should Know About Receipts in China

 

The fapiao is one of the most unique features of China: it is the official invoice collected by the government. A vapiao—unlike a “dan”—is printed on special paper that must be purchased from the tax authorities and allows a business to use the expense for tax deductions or refunds. Likewise, this government receipt is used for reimbursements from an employer.

Why does a company need to have a fapiao? The fapiao system enforces companies to stay within their business scope. If customers are unable to receive a fapiao, they will be unable to declare their purchases as expenses. Overall, there are three types of fapiao: VAT, business (BT) and consumption. The consumption fapiao is typically a 17% receipt associated with dining. The VAT is more complicated. Transactions included in the VAT system must be printed on a different type of fapiao. More importantly, there are two VAT fapiao: 1) to businesses and 2) to consumers.

Here’s one oddity: the government will estimate how many Fapiao a business can issue from the company size. Overall, taxpayers are categorized into General Taxpayers and small-scale taxpayers. Small firms, typically pay a lower VAT which does not vary. However, they cannot separate input from output VAT, they are not entitled export exemptions and reimbursements. The output VAT state the sales amount and output VAT of the transaction. The buyer may then use output VAT fapiao to offset his or her VAT liability. Since small-scale taxpayers cannot issue the Special VAT fapiao larger businesses are reluctant to do business with these entities.

How does one get General Taxpayer status? Since the government sets a tax threshold, a small scale taxpayer must first exceed the threshold. The threshold is an annual taxable turnover exceeding RMB 500,000 (for manufacturing enterprises), RMB 800,000 (for trading enterprises) or RMB 5 million. Other regulations such as such as office size and number of employees are applied.

New companies, typically have a quota of 25 fapiao, each with a limit of RMB 10,000. When the firm runs out, it must purchase new ones. This would lead to an eventually increase in the firm’s overall fapiao quantity (after some temporary increases). To purchase fapiao, a staff member needs to go to the tax office with the previous fapiao booklet, their employee ID card, the company fapiao seal and the tax certificate; within five days the company will be issued a fapiao booklet.

Getting more Special VAT is a bit more complicated and requires a VAT fapiao authentication device; it contains all the company information and transactions. More importantly, it contains the number of fapiao printers registered to that company. To get a printer, the company must bring a Notice on the Use of a Fapiao Printer to special firms which sell the item.

 

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