If someone in China asks your business for a fapiao (发票), they are asking for a tax invoice issued through China's regulated invoicing system—not just a PDF invoice created in Word. The first practical question is whether the buyer needs a special VAT fapiao for an input VAT credit or a general fapiao as transaction evidence.
In China, a fapiao is a regulated tax document. It helps establish the transaction and the tax treatment, but it is not the only possible evidence for every corporate-income-tax deduction. China's tax authority recognises different internal and external vouchers for different kinds of expenditure. Input VAT credits have their own document and eligibility rules.
This guide explains what fapiao are, the main types, how the system now works, and the practical controls a company should have in place.
Why fapiao matter more than an ordinary invoice
Three functions sit on the same document.
Proof of the transaction. The fapiao is the recognised evidence that a sale took place.
The basis for many expense deductions. For many domestic VAT-taxable purchases from registered suppliers, a valid fapiao is the required corporate-income-tax deduction voucher. Other expenditure can be supported by other specified vouchers.
One common basis for VAT credits. A valid special VAT fapiao can support a general taxpayer's input VAT credit, subject to the use of the purchase and other rules. Import VAT and some other transactions use different prescribed documents.
The consequence is that fapiao management is not administrative housekeeping. Missing or defective fapiao directly affect taxable profit and cash tax paid.
The main types
Special VAT fapiao may support the buyer's input VAT credit if the buyer uses the general calculation method and the purchase is creditable. A business expecting an input credit should agree on the document type with the supplier before payment.
General VAT fapiao evidence the transaction and support expense deduction, but do not carry an input VAT credit entitlement for the buyer.
The right type depends on the parties' taxpayer status and the nature and use of the purchase. A general fapiao usually cannot simply be treated as a special VAT fapiao later.
How do you check a fapiao is genuine?
Use the State Taxation Administration's invoice verification platform and enter the details requested for the document type. Match the seller, buyer, amount, item description and invoice number to your contract and payment records. Verification confirms what the tax system records; it does not prove that goods or services were actually delivered. Keep the underlying contract, delivery evidence and payment record as well.
Digital fapiao
China has moved substantially to fully digital fapiao, which are issued and delivered electronically rather than printed on pre-purchased paper stock.
For a company, the practical effects are positive: issuance is faster, physical stock management largely disappears, and the records are easier to store and reconcile. The requirements for accuracy have not relaxed. The information on the document still needs to be correct, and the transaction still needs to be genuine.
If your company was set up before the transition or your finance process was designed around paper, the internal workflow is worth revisiting.
Getting set up to issue
A new company cannot issue fapiao on the strength of its business licence alone. Tax registration and invoicing setup are separate post-licence steps.
The sequence normally involves completing tax registration, confirming the company's taxpayer status, and arranging the issuance capability and the applicable limits. Companies expecting significant early revenue should raise their expected volumes at setup rather than discovering a constraint when a customer is waiting.
Taxpayer status matters here. General VAT taxpayer status allows issuance of special VAT fapiao and the crediting of input VAT. Small-scale taxpayer treatment is simpler but works differently. The right status depends on the business model, expected turnover and customer base, and it should be a considered decision.
The controls a company needs
Most fapiao problems come from process gaps rather than from misunderstanding the rules.
On the receiving side:
- require a valid fapiao for every expense, before payment rather than after;
- check the company name, tax identification number and amount on receipt, since corrections are more troublesome later;
- confirm that the type received is the type you needed;
- make sure the description matches what was actually supplied; and
- keep the records organised for the filing period they belong to.
On the issuing side:
- issue promptly and in the correct period, since timing affects revenue recognition and VAT;
- ensure the description reflects the actual goods or services;
- capture customer details accurately at the point of order rather than at issuance; and
- handle cancellations and corrections through the proper mechanism.
Where a document needs to be corrected or reversed, there is a defined process for doing so. Reissuing informally or adjusting outside the system is not an option.
Where companies get into trouble
Paying without agreeing when the fapiao will arrive. A supplier may issue it after payment under the agreed transaction terms. Record the required type, details and deadline in the contract or purchase order, and chase missing documents promptly.
Accepting a description that does not match. A fapiao describing something other than what was supplied is a problem for both parties.
Buying fapiao. Obtaining documents for transactions that did not occur is treated seriously and can carry significant consequences. There is no version of this that is safe.
Ignoring the cross-border gap. Overseas suppliers do not issue Chinese fapiao. Payments abroad are supported by contracts, invoices and the applicable tax and foreign-exchange documentation instead, and these arrangements should be planned rather than improvised.
Leaving it to year end. Fapiao issues are cheap to fix in the month they arise and expensive to fix in the annual reconciliation.
The Hainan dimension
For companies relying on Hainan's preferential corporate income tax treatment, fapiao records do additional work.
Eligibility for the 15% rate depends on conditions including that the main business falls within an applicable encouraged-industry catalogue and generates more than 60% of revenue. Demonstrating that revenue proportion relies on the company's invoicing and accounting records showing clearly which revenue arises from which activity.
If the descriptions on issued fapiao are vague or inconsistent with the business scope, the evidence supporting the tax position is weaker than it needs to be. Set the invoicing descriptions with that in mind from the first month.
Related reading
- China corporate tax for foreign companies
- China VAT for foreign-invested companies
- China bookkeeping and accounting costs explained
- Annual compliance for a foreign-owned company in Hainan
- Hainan's 15% corporate income tax: who qualifies?
Official sources
- State Taxation Administration: invoice verification platform
- State Taxation Administration: types of corporate-income-tax deduction vouchers
- State Taxation Administration: evidence for purchases from overseas
- State Taxation Administration policy and regulation database
- State Taxation Administration guidance on Hainan encouraged-industry conditions
Invoicing rules, digital fapiao arrangements and taxpayer thresholds change over time. Confirm the current requirements for your company's taxpayer status and industry.
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