Introduction
In alignment with the “Opinions on Further Deepening the Reform of Tax Collection and Administration” issued by the Central Office and the State Office, a pioneering initiative to introduce comprehensive digital electronic invoices, commonly referred to as “all-electric invoices,” is being rolled out. This groundbreaking development aims to enhance the taxpayer experience and promote efficient tax collection and administration. This article provides an in-depth overview of the new era of all-electric invoices and outlines essential details for both taxpayers and businesses.
1. Expansion of the Pilot Program
Effective on May 23, 2022, the pilot program for all-electric invoices will extend to selected taxpayers in Shanghai, marking a significant milestone in the ongoing reforms. The Shanghai Tax Bureau of the State Administration of Taxation will determine the specific scope of this pilot program, encompassing taxpayers who utilize the e-invoice service platform. It’s important to note that not all taxpayers will be included, as those without internet access or network connectivity are exempted from the pilot program. Taxpayers can access the electronic invoice service platform through this link.
2. Legal Equivalence of All-Electric Invoices
All-electric invoices carry the same legal weight and utility as traditional paper invoices. Specifically, those labeled “VAT special invoice” are legally equivalent to existing VAT special invoices, while those marked as “ordinary invoices” mirror the functionality of traditional ordinary invoices.
3. Supervision and Key Components of All-Electric Invoices
Shanghai’s all-electric invoices are produced under the vigilant oversight of the Shanghai Tax Bureau. These invoices contain essential information such as a dynamic two-dimensional code, invoice number, invoice date, buyer and seller details, project specifics, quantity, tax rate, tax amount, and more. Furthermore, specific industries and application scenarios have tailored invoice styles to cater to their unique requirements.
4. Invoice Number Structure
All-electric invoices issued in Shanghai adhere to a unique 20-digit invoice number structure. This format comprises two digits representing the last two digits of the Gregorian calendar year, four digits for the administrative division code of Shanghai, one digit indicating the issuing channel, and the remaining digits serving as the sequence code and other information.
5. New Registration and Invoice Issuance
Newly registered pilot taxpayers who do not employ the VAT invoice management system to issue invoices will utilize the electronic invoice service platform for issuing all-electric invoices, paper special invoices, and paper general invoices. These digital documents maintain the same legal status and usage as their paper counterparts. Notably, the invoice password area will display the 20-digit invoice number, provided by the electronic invoice service platform and the national VAT invoice inspection platform’s website, replacing the invoice ciphertext.
6. Streamlined Issuance Process
After passing real-name verification, pilot taxpayers can issue invoices via the electronic invoice service platform without requiring specialized tax control equipment. No invoice type approval or receipt processes are necessary for all-electric invoices.
7. Management of Issuance Amounts
The tax authorities will manage the total amount of invoices issued by pilot taxpayers. This total amount serves as the maximum invoice issuance limit (exclusive of VAT) within a single natural month. Factors such as tax risk, tax credit, and actual business activities determine the initial issuance amount, subject to regular, temporary, or manual adjustments.
8. Digital Tax Account Functionality
Pilot taxpayers can access their tax digital accounts on the e-invoice service platform, which offers features such as invoice data retrieval, verification, downloading, printing, and purpose confirmation. Furthermore, the platform provides tax policy inquiries, application processes for issuance amount adjustments, and invoice risk warnings.
9. Invoice Delivery Options
Pilot taxpayers can choose to deliver all-electric invoices through their tax digital accounts or via email, QR codes, and other digital means.
10. Enhanced User Experience
Starting from May 23, 2022, pilot taxpayers are encouraged to utilize the tax digital account on the electronic invoice service platform for invoice purpose confirmation, risk assessments, information downloads, and more. This streamlines the user experience, replacing the previous use of the value-added tax invoice integrated service platform.
11. Verification and Deduction of VAT Input Tax for Agricultural Products
Pilot taxpayers can verify the purpose of VAT deduction certificates for agricultural products and calculate input tax deductions through the electronic invoice service platform. Special provisions may apply to those purchasing agricultural products for specific purposes, such as production or commissioned processing.
12. Invoice Entry Marking
Pilot taxpayers can mark invoices with specific indicators through the tax digital account on the e-invoice service platform. This function facilitates recordkeeping for full-electric invoice reimbursements and ensures compliance with relevant financial and archive regulations.
13. Handling Errors and Red Letter Invoices
In cases of invoice errors, sales returns, service suspensions, or discounts, pilot taxpayers can issue red letter all-electric invoices or red letter paper invoices through the electronic invoice service platform. Detailed procedures are outlined for cases requiring confirmation by the drawee.
14. Interactions with Other Taxpayers
The handling of VAT invoices involving multiple parties, including red letter VAT invoices, follows specific guidelines. The digital tax account on the electronic invoice service platform facilitates this process.
15. Invoice Verification and Information Access
Both organizations and individuals can verify electronic invoice information through the electronic invoice service platform or the National VAT Invoice Inspection platform at this link.
16. Future Developments
Notably, the electronic invoice service platform will not support the issuance of specific business full-electric invoices related to motor vehicles, tolls, and other select industries. The timeline for enabling this functionality online will be communicated separately. Until then, pilot taxpayers can continue to issue related invoices through the VAT invoice management system.
17. Taxpayer Status during the Guidance Period
Pilot taxpayers are regarded as general taxpayers during the guidance period and can apply for manual adjustments to their issuance amounts as per the relevant regulations.
18. Compliance and Enforcement
Taxpayers are reminded to use all-electric invoices in a lawful, truthful manner, avoiding any false reporting, offsets, or fraudulent activities. Tax authorities will bolster their supervision and risk mitigation efforts, taking strong measures against tax-related illegal and criminal activities.
19. Effective Date
This announcement comes into effect on May 23, 2022, simultaneously repealing the “Announcement of Shanghai Municipal Tax Bureau of the State Administration of Taxation on carrying out the Pilot Work of Comprehensive Digital Electronic Invoice (Announcement No. 3 of Shanghai Municipal Tax Bureau of the State Administration of Taxation, 2021).” Any unresolved matters will be addressed in accordance with this announcement.
Conclusion
The advent of all-electric invoices ushers in a new era of digital efficiency. By automating invoice management and providing real-time access to crucial financial data, all-electric invoices reduce the administrative burden on businesses and taxpayers alike. As this transformative technology continues to evolve, it promises to reshape the landscape of invoicing, taxation, and financial management for years to come.
Contact Us
If you have questions or concerns regarding to the new accounting and tax related regulations in China, please contact us at talktous@horizons-advisory.com to schedule a consultation session. Horizons can provide insight, expertise and the right solutions for you.
