Meaning
Official invoices printed on state-controlled paper or issued electronically through the national taxation platform serve as the legal basis for commercial transaction recording in China. The value added tax fapiao is the primary instrument used by the state to monitor transactions and prevent corporate tax evasion. This document allows businesses to deduct input tax paid on purchases from their output tax liabilities.
It must be generated using specialized taxation software and hardware provided by authorized government vendors.
Classification Category
These invoices are divided into general and special categories depending on the tax status of the buyer and the transaction type. Special invoices can be used by general taxpayers to claim tax credits, while general invoices are used for transactions where no credit is allowed. The issuance of a special invoice requires the supplier to register the buyer’s official tax identification number and bank account details.
This segregation helps the state revenue administration trace the chain of tax payments across different production stages to prevent tax leakage.
Auditing Requirement
Accounting teams must verify the authenticity of every invoice by matching the digital stamp with the national tax database before claiming any deductions. Discrepancies in the product descriptions or unit prices result in the immediate rejection of the tax credit. The physical paper invoices must be stored securely for at least ten years to comply with statutory audit guidelines.
This rigorous tracking eliminates informal cash transactions in the manufacturing supply chain.
Fiscal Impact
Failure to secure a valid invoice prevents a purchasing company from recognizing the transaction as a tax-deductible expense. This oversight increases the corporate income tax burden and reduces net profitability. It is therefore a standard operating procedure to refuse payment to suppliers until the invoice is delivered.
