China has introduced a ‘Special’ invoice that allows e-invoicing. The initial project started in some regions on December 21, 2020 and has been extended to other regions since January 21, 2021.
The electronic VAT special invoice has the same legal status as a paper invoice. A digital signature shall be applied to the electronic invoice instead of an official invoice stamp. In December 2020 the e-invoice was allowed in 11 regions and from January 21, another 11 regions were added.
The advantage of the e-invoice is that it can be delivered directly without physical delivery.
The electronic VAT special invoice is in Open Fixed-layout Document (OFD) format and the Chinese authorities have developed a designated Reader for electronic invoices.
No doubt that the VAT special invoice digitization shall bring a huge improvement to the China VAT invoice management system.
Please note that currently, local tax authorities have not issued local practical policies on the electronic VAT special invoice scheme yet.
China business should analyze the impact of the VAT special invoice digitization and evaluate whether their operating systems (ERP) are ready for the digitization. Having the right digital/ ERP environment will help businesses to transit from the paper invoice age to electronic invoice age smoothly.
Crowe will pay close attention on further requirement released.
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