As long as your expenses or purchases will be reimbursed from a company registered in mainland China, Fapiao (发票, fāpiào) must come to your concerns.

Why Fapiao is important?

A Chinese Fapiao stands for two functions. The first is similar to a receipt in most countries and the other is more important as presenting a governmental taxation monitoring function.

Any failure of collecting valid invoices, risks could be raised as below:-

1. Taxes compensation. It is common rule that turnover taxes should be covered by consumers. In the products sale-buy or service provide-consuming process, taxes duty is not completed so that is your duty to compensate the taxes liabilities.

2. A penalty. A penalty on delaying and being negligent on taxes liabilities. Take for example, if you reject to pay without valid invoice, then the suppliers could be forced to proceed proper taxation procedure in order to get valid invoices for you to pay.

3. Fail to be deducted from income. Invalid invoices are not allowed to be a deduction from income. This means that the valid amount would be subjected to 25% corporate income tax except for tax grants.

If VAT taxes are properly compensated, that helps a valid deduction from income for corporate taxes. However, the compensation process and penalty amount could differ locally.

How to authenticate a valid Fapiao?  

Authentic Fapiao will feature the tax authority’s seal, as well as an invoice number. A receipt without these two features cannot be considered as a valid Fapiao. 

As a consumer, it’s your obligation to request a Fapiao after a purchase. Therefore, if you need to get one, ask when you pay. Be clear and specify whether you want a personal or company Fapiao, and what title you wish to have printed on the Fapiao.  

Types of Fapiao

1. Non-VAT Fapiao

Most tear-off Fapiao is Non-VAT Fapiao. These Fapiao won’t go to a VAT deduction process. However, with the tax regulation reform, in theory, this type of Fapiao may disappear one day in future. . The tax rates could fall from 5% to 20% per different industries.

2. VAT invoices

VAT invoices can be sorted into two types based on two categories of issuers including invoices from General Tax Payer and the Small Tax Payer. VAT invoice from General Tax Payer can be used to apply tax deductions but from Small Tax Payer can’t be applied for tax deductions. The taxes rates for the Small Tax Payer is 3% and 6% for General Tax Payer in service industry and 17% for manufacturing in general speaking. There are special industries such as 13% or 7% also applied.

Examples of Fapiao

Below are a few examples of Fapiao in Shenzhen. These may vary from province to province, but basically these are in similar.  

General Tax Payer Purchase VAT Invoice

General Tax Payer Service VAT Invoice

Small Tax Payer VAT invoice

Non-VAT invoice- tear-off

Non-VAT invoice-Petrol

Non-VAT invoice-Taxi fee