E-Fapiao (fully digitalized E-Fapiao) in China: full adoption as of December 2024
On November 24th, China’s State Taxation Administration (STA) announced the official nationwide implementation of fully electronic invoices (e-fapiao).
The implementation will come into effect on December 1st, 2024. This decision follows the successful pilot program which has been implemented smoothly in several regions. By 2025, China aims to have transitioned to Fully Digitalized E-Fapiao.
China has emerged as one of the world leaders in electronic invoicing adoption, known as Fully Digitalized E-Fapiao (电子发票).
The Chinese government has announced the beginning of mass adoption of the fully digitalized electronic invoice. The nationwide implementation will come into effect the 1st of December, 2024. The pilot program has obtained optimization in the business sector, improved administrative efficiency, and helped digital transformation on both economic and social levels.
To back the implementation, the STA has established a unified nationwide e-invoicing service platform. The government has developed this platform, called Leqi Platform. The Lequi platform allows businesses that fulfill certain criteria connect with the Tax Authority via API’s, automating the transaction of information.
The government's objective is to achieve full digitalization of invoice management by converting all data from paper invoices into digital format and enabling the tracking of the documents' life cycle. This reform integrates various types of invoices into a single electronic invoice format, which holds the same legal validity and performs the same function as the current paper "fapiao."
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Phases of the electronic invoice in China
In 2012, the STA launched a pilot program in order to implement electronic invoicing in sectors such as ecommerce and transport. The initiative started in larger cities such as Beijing, Shanghai and Shenzhen with a focus on facilitating the operations of large online sales platforms.
Between 2019 and 2021, the STA pushed fiscal reforms to standardize the use of electronic invoicing at a national level. In 2020, the Chinese Tax Bureau (CTB) ordered new taxpayers in the country to adopt the new electronic invoicing system for B2B called Golden Tax System or Fapiao System. The rest of taxpayers could adopt this system on a voluntary basis.
Golden Tax System III - Fully digitalized e-Fapiao - 3 数电发票
The so-called Golden Tax System III phase started in December, 2021. As of December 1st, 2023, all regions of the country allowed pilot companies to issue fully digitalized e-fapiao through the e-invoice service platform.
The fully digitalized e-fapiao is a new type of invoice that differs from the normal VAT e-fapiao and the traditional paper Fapiao. It contains 17 items: dynamic QR code, invoice number, issuance date, buyer information, seller information, project name, specification and model, unit, quantity, unit price, amount, tax rate/levy rate, tax amount, total, ad valorem, and tax total (in words and figures), remarks, and invoice.
There are six kinds of fapiao co-existing in China during the country’s ongoing fapiao system reforms. The six types are special VAT fapiao, general VAT fapiao, special VAT e-fapiao, general VAT e-fapiao, fully digitalized special VAT e-fapiao, and fully digitalized general VAT e-fapiao.
Golden Tax System IV - Natural System - 4 全电发票
The objective of this phase is to transform tax management from ‘managing taxes through invoices’ to ‘managing taxes through big data’. This model is accessible exclusively to companies with an annual turnover of more than 50 million RMB (roughly 6 million Euro) and with annual invoices issues in excess of 50,000.
Effective December 1st, 2024, the STA announced the promotion of fully digitized electronic invoices (e-fapiao) for civil aviation passenger transportation. This announcement specifies that public air transportation companies and air transportation sales agencies registered in China can issue electronic invoices for domestic passenger transportation services. The electronic itinerary serves as a fully digitized invoice which contains essential information such as invoice number, domestic and international identification, passenger identification details, itinerary information, fare, fuel surcharge, VAT amount and rate, and Civil Aviation Development Fund.
Electronic invoicing in China operates through a validation or clearance model:
- The invoice is sent in XML format to the State Taxation Administration (STA).
- The national platform validates the invoice and includes the required elements: validation confirmation, Key ID, and QR Code.
- Once validated, the platform sends it to the invoice issuer in PDF or OFD format.
- The invoice issuer then sends it to the recipient.
Unlike paper invoices, digital invoices exist only in digital format and are issued as single copy documents. Each digital invoice features a unique 20-digit number, structured to include the last two digits of the calendar year, a regional code for the provincial tax authority, a digit indicating the channel of issuance and a sequential code.
>China’s Electronic Invoice - e-Fapiao
In China, the term "fapiao" denotes the invoice. A fapiao is a legally recognized physical receipt issued on paper, distributed, printed, and overseen by the State Taxation Administration (STA), serving as evidence of the purchase of goods and services in China. Companies operating in China are required to obtain fapiao from the STA before conducting sales, essentially settling taxes before finalizing transactions. Depending on the industry and projected revenue, companies are obligated to procure various types of fapiao, each with a restricted maximum quantity. These fapiao types include general fapiao, general fapiao with VAT, and special VAT fapiao.
>Types of e-Fapiao
E-Fapiao serves as the digital counterpart of the traditional fapiao and comes in two categories: general and special. Much like its paper counterpart, general e-Fapiao is generated for commercial transactions involving a product or service, and the Value Added Tax (VAT) is non-deductible. On the other hand, special e-Fapiao permits the deduction of VAT and falls within the realm of business-to-business (B2B) transactions.
The fiscal digitization initiative in China has progressed in two phases, differentiating between non-deductible invoices, referred to as General e-Fapiao, and deductible invoices, known as Special e-Fapiao.
General e-Fapiao Electronic Invoice
The initial invoices to undergo digitization were General e-Fapiao in 2015. Given their non-deductible nature for recipients, their implementation was relatively uncomplicated compared to Special fapiao. In 2017, the government opted to broaden the application of General e-Fapiao to high-frequency transaction sectors, including e-commerce, telecommunications, finance, and express mail, as part of an effort to encourage greater adoption of electronic invoicing.
Special e-Fapiao Electronic Invoice
Building on the success of General e-Fapiao, in 2020, the government chose to digitize deductible invoices by introducing Special e-Fapiao through Announcement No. 22 (2020) regarding the "Implementation of VAT Electronic Invoices among Newly Established Taxpayers." This regulation was progressively embraced by all Chinese provinces throughout 2021. In both instances, the utilization of e-Fapiao is obligatory for new taxpayers and voluntary for other companies.
>e-Fapiao: Provinces Adhering to the e-Fapiao Program for Electronic Invoice Issuance
The pilot program's schedule for allowing electronic invoice issuance by regions is as follows:
September 2020: The pilot program in China began allowing electronic invoice issuance in Ningbo, Shijiazhuang, and Hangzhou.
December 2020: The pilot program expanded to Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Anhui, Guangdong, Chongqing, Sichuan, and Shenzhen.
January 2021: The pilot program expanded to include Beijing, Shanxi, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Fujian, Jiangxi, Shandong, Henan, Hunan, Guangxi, Hainan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, Dalian, Xiamen, and Qingdao.
December 2021: China launched a new pilot program called the fully digitized invoice, starting with three provinces: Shanghai, Inner Mongolia, and Guangdong. The "fully digitized invoice" is a new type of electronic invoice that simplifies issuance for both B2B and B2C purposes through the national electronic invoice platform in China.
The pilot program schedule is as follows:
- October 2022: Sichuan
- November 2022: Xiamen
- January 2023: Shanghai, Chongqing, Qingdao, Dalian, Tianjin, and Shaanxi
- March 2023: Henan, Jilin, Shenzhen, Ningbo, Fujian, and Yunnan.
- October 2023: Beijing, Hunan, Shandong, Anhui, Qinghai, Ningxia, and Guizhou
- November 2023: Tibet
>EDICOM’s e-Fapiao Solution - China Golden Tax System
Through the EDICOM Global e-Invoicing platform, companies can generate, transmit, receive, and archive diverse e-Fapiao invoices, encompassing both general and special types, in compliance with the stipulations of the Chinese government. The entire workflow is automated and seamlessly integrated with their Enterprise Resource Planning (ERP) systems.
EDICOM integrates with the ERP systems to transmit information to the national platform and obtain the validated file containing all the components applied by the State Taxation Administration (STA) for legal validity. These components, including validation confirmation, Key ID, and QR Code, are reintegrated into the issuer's ERP system. Furthermore, EDICOM can concurrently send the e-Fapiao electronic invoice to the recipient through the designated channel, presenting options in both PDF and OFD (XML + PDF) formats.
The solution offered by the EDICOM International e-Invoicing Platform enables businesses to smoothly navigate the transition to the new electronic invoicing system across more than 80+ countries.
