In China, fapiaos, meaning official invoices, play a central role in business transactions, accounting, tax compliance, and reimbursement management. Unlike ordinary commercial invoices or receipts used in many other jurisdictions, fapiaos are regulated tax documents used to evidence the sale of goods, provision of services, and other business activities.
For foreign investors and overseas companies operating in China, understanding the fapiao system is essential. Incorrect issuance, collection, verification, or storage of fapiaos may affect tax deduction, accounting treatment, reimbursement, and overall compliance.
China’s fapiao system has undergone significant digital transformation in recent years. Following the revised Administrative Measures of the People’s Republic of China on Invoices in 2023, the amended implementing rules in 2024, and the nationwide promotion of fully digitalized electronic invoices from 1 December 2024, businesses are now increasingly expected to manage fapiaos through digital platforms and tax digital accounts.
Overview: What are fapiaos?
A fapiao is an official invoice issued and received in business activities such as the purchase and sale of goods, provision or acceptance of services, and other commercial transactions. It serves several important functions.
Firstly, fapiaos act as proof of business transactions. Individuals commonly use fapiaos to support business expense reimbursement, while companies use them for accounting records, cost recognition, and tax compliance.
Secondly, fapiaos are closely connected with value-added tax (“VAT”) administration. They help the Chinese tax authorities monitor transactions, verify tax reporting, and deter tax evasion. For businesses, properly obtained fapiaos are often necessary to support input VAT deduction and legitimate expense recognition.
China’s current invoice framework covers both paper invoices and electronic invoices. Electronic invoices have the same legal effect as paper invoices, and China has been actively promoting the use of electronic invoices.
Who administers fapiaos?
The State Taxation Administration (“STA”) is responsible for the nationwide administration of invoices in China. Provincial tax authorities administer invoice matters within their respective regions in accordance with their duties.
The STA also determines or regulates key matters such as invoice types, formats, coding rules, data standards, scope of use, and electronic invoice service arrangements.
Who can issue fapiaos?
Fapiaos can generally be issued by registered taxpayers in China. For overseas companies, this typically means that a mainland China legal entity, such as a foreign-invested enterprise, must be established before fapiaos can be issued in its own name.
Chinese taxpayers are generally classified into two categories for VAT purposes:
Small-scale taxpayers
Small-scale taxpayers are generally businesses with annual taxable sales below the threshold prescribed under China’s VAT rules. They are subject to simplified VAT treatment and, in many cases, cannot credit input VAT against output VAT in the same way as general taxpayers. Their ability to issue certain types of VAT invoices may also be more limited.
General taxpayers
General taxpayers are businesses that exceed the relevant sales threshold or voluntarily register as general taxpayers. They are generally subject to standard VAT rates depending on the nature of goods or services provided. General taxpayers may credit eligible input VAT against output VAT, provided that the relevant invoices and supporting documentation meet regulatory requirements.
Main types of fapiaos
Traditionally, businesses often refer to two main types of VAT fapiaos: general VAT fapiaos and special VAT fapiaos.
General VAT fapiao
A general VAT fapiao is commonly used as proof of payment or transaction where a special VAT fapiao is not required or not applicable. It is often used in transactions involving consumers or where input VAT deduction is not relevant.
Special VAT fapiao
A special VAT fapiao is generally used where the purchaser is entitled to claim input VAT deduction. It contains more detailed tax information and is an important document for VAT credit purposes.
Under the paper invoice system, special VAT fapiaos traditionally included multiple copies, such as the invoice copy, deduction copy, and accounting copy. With the expansion of electronic and fully digitalized electronic invoices, the structure and handling of invoices are becoming increasingly digital and simplified.
What are digitalized electronic fapiaos?
A major development in China’s invoice system is the nationwide promotion of fully digitalized electronic invoices, commonly referred to in Chinese as “数电发票”.
From 1 December 2024, the STA officially promoted the nationwide application of digitalized electronic invoices. A digitalized electronic invoice is a type of electronic invoice under China’s invoice administration rules. It is characterized by:
- full digitization of invoice elements;
- nationwide unified invoice numbering;
- intelligent granting of invoice issuance quotas;
- automatic information flow between tax authorities and taxpayers through tax digital accounts; and
- the same legal effect as paper invoices.
Digitalized electronic invoices exist in digital form and generally comprise a single electronic copy. They are no longer managed in the same way as traditional paper invoices with multiple physical copies.
Types of digitalized electronic invoices
Digitalized electronic invoices may include several categories, such as:
- electronic invoice, special VAT invoice;
- electronic invoice, general invoice;
- electronic invoice, itinerary air e-ticket;
- electronic invoice, railway e-ticket;
- electronic invoice for motor vehicle sales;
- electronic invoice for used vehicle sales; and
- invoices generated for specific business activities, such as construction services, refined oil, scrapped product purchases, freight transport, immovable property transactions, agricultural product purchases, and other designated scenarios.
The specific invoice format may vary depending on the transaction type and applicable business label.
What information is included in a digitalized electronic invoice?
The basic information on a digitalized electronic invoice generally includes:
- invoice name;
- invoice number;
- issue date;
- purchaser information;
- seller information;
- item name;
- specification and model;
- unit;
- quantity;
- unit price;
- amount;
- tax rate or levy rate;
- tax amount;
- total amount;
- total price and tax amount;
- remarks; and
- invoice issuer.
Digitalized electronic invoice numbers are 20 digits. The digits reflect information such as the calendar year, provincial tax authority region code, issuing channel, and sequential numbering.
How are digitalized electronic fapiaos issued?
Digitalized electronic invoices are issued through China’s unified electronic invoice service platform. The platform provides free invoice issuance and use services for eligible taxpayers.
Unlike the older paper-based process, digitalized electronic invoices reduce reliance on physical invoice forms, tax control devices, and manual handling. Taxpayers may issue, deliver, query, download, print, and verify digitalized electronic invoices through the relevant electronic systems.
However, the issuance of digitalized electronic invoices is subject to identity verification, such as real-person authentication, in accordance with applicable invoice administration rules.
Invoice quotas under the digitalized system
Under the digitalized electronic invoice system, tax authorities grant taxpayers a total invoice quota through the electronic invoice service platform. This quota represents the maximum invoice amount, excluding VAT, that a taxpayer may issue within a calendar month.
The quota is determined and dynamically adjusted based on factors such as:
- the taxpayer’s tax risk level;
- tax credit rating;
- actual business operations; and
- other information available to the tax authorities.
If a taxpayer’s actual business circumstances change and an adjustment to the total invoice quota is needed, the taxpayer may apply for adjustment, subject to confirmation by the competent tax authority.
How are digitalized electronic fapiaos delivered?
Issued digitalized electronic invoices may be delivered automatically through the electronic invoice service platform. Invoice issuers may also deliver them by email, QR code, download, print, or other permitted methods.
If an invoice is delivered by download and print, the invoice face may display information such as the number of downloads and prints.
What should invoice recipients do?
After receiving a digitalized electronic invoice, the recipient should properly verify and manage the invoice through the relevant tax systems.
Where the recipient intends to use the invoice for input VAT deduction, refined oil consumption tax purposes, export tax refund, tax refund agency procedures, or related purposes, the invoice recipient should confirm the invoice use through its tax digital account.
Entities and individuals may also use their tax digital accounts, individual income tax app, electronic invoice service platform, or the national VAT invoice verification platform to query, download, print, export, and verify digitalized electronic invoices.
Red-letter fapiaos
Where an invoice has already been issued but a sales return, invoicing error, service suspension, sales allowance, or similar adjustment occurs, the parties may need to issue a red-letter invoice.
For electronic invoices, a red-letter invoice should be issued in accordance with applicable rules. Under the digitalized electronic invoice system, if the original blue-letter invoice has not been confirmed for use or accounting entry, the invoice issuer may generally initiate the red-letter write-off process and issue the red-letter digitalized electronic invoice directly.
If the invoice has already been confirmed for use or accounting entry, either the issuer or recipient may initiate the red-letter write-off process, and the counterparty may need to confirm the relevant red-letter invoice information. If the confirmation is not completed within the prescribed period, it may be automatically cancelled.
Businesses should pay close attention to red-letter invoice procedures, particularly where the original invoice has already been used for VAT deduction, export tax refund, or accounting purposes.
Invoice data security and compliance
As China’s invoice system becomes increasingly digital, invoice data security has become an important compliance area.
Tax authorities are required to establish invoice data security management systems. Businesses and individuals handling invoice data must also comply with relevant STA requirements and assume data security protection obligations. They must not store invoice data beyond permitted quantities, misuse invoice data, illegally sell invoice data, or unlawfully provide invoice data to others.
Companies should ensure that their accounting, finance, tax, and IT teams have clear internal controls for invoice issuance, receipt, verification, storage, access rights, and data retention.
Practical implications for foreign-invested enterprises
Foreign-invested enterprises operating in China should pay close attention to the following practical points:
- Fapiao issuance is closely linked to tax compliance. Invoices should accurately reflect real business transactions and should not be issued before the relevant business activity occurs.
- Digitalized electronic invoices are now a core part of China’s invoice system. Businesses should ensure that they are familiar with the electronic invoice service platform and tax digital account functions.
- Invoice quotas may affect business operations. Companies with growing sales volume should monitor their available invoice quota and apply for adjustment where necessary.
- Input VAT deduction depends on proper invoice management. Purchasers should verify invoices and confirm the intended use through the relevant tax systems where required.
- Red-letter invoice procedures should be handled carefully. Incorrect treatment of sales returns, invoice errors, discounts, or service suspensions may create tax and accounting risks.
- Invoice data should be protected. Businesses should adopt appropriate policies for invoice data access, storage, use, and retention.
How CW can help
As the system continues to shift from paper-based invoices to fully digitalized electronic invoices, companies need to ensure that their finance, tax, and internal control processes remain compliant and efficient.
CW can assist with:
- advising on fapiao and VAT compliance requirements;
- supporting company setup and taxpayer registration matters;
- assisting with invoice issuance and invoice quota matters;
- reviewing accounting and reimbursement procedures;
- advising on digitalized electronic invoice implementation;
- supporting VAT deduction and invoice verification processes;
- advising on red-letter invoice handling; and
- helping businesses strengthen internal controls over invoice data and tax compliance.
With practical experience supporting foreign-invested enterprises in China, CW can help businesses understand and manage fapiao-related requirements with confidence.
Contact us to find out how we can assist your business in China.