Meaning
National electronic invoicing networks managed by the State Taxation Administration are used to monitor, validate and record all commercial transactions in China. The tax control invoice system utilizes specialized software and hardware to prevent tax evasion by tracking sales in real time. This system generates official VAT invoices, known as fapiaos, which are required for companies to deduct expenses and claim input tax credits.
It applies to all registered corporate taxpayers, who must connect their accounting software to the central database.
Invoicing Protocol
Generating a valid digital or paper invoice requires the company to input the transaction details into the official tax terminal. The tax control invoice system automatically registers the transaction with the provincial tax bureau before generating the invoice number. This prevents businesses from issuing unauthorized or fraudulent invoices to their customers.
Quota Regulation
Limits placed on the total value of invoices a company can issue within a single month help the tax bureau control tax risk. Under the tax control invoice system, new enterprises are assigned a maximum invoicing limit that can only be increased after demonstrating consistent compliance. If a company exceeds this quota, it must apply to the tax bureau for a temporary increase, which requires presenting the underlying commercial contracts.
Digital Audit
Automated reconciliation of the tax data submitted by the buyer and the seller reduces the need for manual tax audits. The tax control invoice system continuously cross-checks the input VAT claimed by buyers against the output VAT declared by sellers. This real-time tracking ensures that any discrepancy is flagged for immediate review by tax inspectors.
