10 May 2012
Invoice Management
Definition of Invoice
An invoice refers to a proof of payment in a transaction involving the sale of goods, provision of labour service, or other business activities. It is also a document supporting that a payment and receipt has taken place, an official document for financial payment and receipt, a primary document in accounting, and an important tool in auditing for taxation purpose.
An invoice is different to a financial receipt. Financial receipt refers to a proof of payment issued by state organs, public service units, social bodies, supervisory departments with administrative and management functions, and other organisations appointed by the government, to units or individuals after receiving administrative or public service fees and collecting government funds from them in the course of performing government functions in accordance with the provisions of laws, regulations and legally binding administrative rules. Such receipt is an official document for financial payment and receipt, a primary document in accounting, and an important base on which financial and auditing departments conduct inspection and supervision. Finance departments at all levels are the responsible organs managing financial receipts.
Invoices are generally in triplicate, namely the stub copy, invoice copy and accounts copy. Value-added tax (VAT) invoices have one more copy, which is the deduction copy.
Application for Purchase of Invoice
(a) First-time Application for Purchase of Invoice by Taxpayer
(i) Application by taxpayer
After units and individuals completing tax registration according to law have collected their tax registration certificate, they may apply to the supervisory tax department for the purchase of invoices by presenting the following documents and materials:
List of Documents and Materials to be Submitted
|
Type of invoice ------------------------------------------------------- Documents and materials required |
Unified general invoice | Special Invoice for International Marine Transport, Special Invoice for National Marine Vessel Agent | Unified Invoice for Insurance Agent Service | Unified Invoice for Road & Inland River Cargo Transport (Self- issued)” |
Special Invoice for Customs Broker |
| 1. Invoice Purchase Application Approval Form in duplicate stamped with official seal and special seal for local tax invoice (special seal for local tax invoice is oval shaped, 4.5 cm in length, 3 cm in height and with a border of 0.1 cm. Engraved in the upper part of the oval is the full name of the unit or individually-owned business, with the tax registration number in the second line and the words “Special seal for invoice” in the third line) | √ | √ | √ | √ | √ |
| 2. Original of the copy of local tax registration certificate | √ | √ | √ | √ | √ |
| 3. Original and photocopy of the applicant’s identity document | √ | √ | √ | √ | √ |
| 4. Original and photocopy of approval document issued by the Ministry of Transport | √ | ||||
| 5. Original and photocopy of Notice of Approval of International Marine Transport Enterprise issued by the provincial transport department | √ | ||||
| 6. Original and photocopy of one of the following insurance agent business licences issued by the China Insurance Regulatory Commission: Insurance Brokerage Legal Person Licence, Insurance Assessment Institution Legal Person Licence, Insurance Agency Legal Person Licence, Insurance Agent Business Licence, Part-time Insurance Agent Licence | √ | ||||
| 7. Original and photocopy of Qualification Certificate of Taxpayer of Self-issued Invoice of Cargo Transport Business Tax | √ | ||||
| 8. Original and photocopy of the Customs Declaration Registration Certificate of Customs Declaration Enterprise of the PRC of enterprises engaged in customs brokerage business | √ |
Remarks: Photocopies of all documents and materials for submission must use A4 paper; photocopies furnished by taxpayers must bear the official seal of the unit concerned or the signature of the person-in-charge; photocopies of second generation resident’s identity document should be printed on both the front and reverse sides.
Notes: For taxpayers whose first-time purchase of invoice exceeds 20 books or 1,000 copies of handwritten invoices with thousandths place and above, taxpayers purchasing fixed-amount invoices at Rmb1,000 or above, and taxpayers purchasing computer-generated or electronic invoices, they are also required to provide other materials as requested by the supervisory tax department.
(ii) Acceptance and verification by tax department
After the tax department has examined and verified correct the documents and materials submitted by the taxpayer, it will confirm the type and quantity of invoices to be purchased and sell the invoices to the taxpayer. In the case where the documents and materials submitted by the taxpayer do not meet requirements, the tax department should notify the taxpayer to re-submit the right papers.
(b) Further Purchase of Invoice by Taxpayer
(i) Application by taxpayer
When a taxpayer applies for the purchase of invoice, the method “examining the old and supplying the new” generally applies. For further purchase of invoice after going through application for first-time purchase, the following documents and materials are required:
|
Type of invoice |
Unified general invoice |
Unified Invoice for Road & Inland River Cargo Transport (Self-issued) |
| 1. Invoice Purchase Application Approval Form in duplicate stamped with official seal and special seal for local tax invoice (special seal for local tax invoice is oval shaped, 4.5 cm in length, 3 cm in height and with a border of 0.1 cm. Engraved in the upper part of the oval is the full name of the unit or individually-owned business, with the tax registration number in the second line and the words “Special seal for invoice” in the third line) | √ | √ |
| 2. Original of the copy of local tax registration certificate | √ | √ |
| 3. Invoice purchase book | √ | √ |
| 4. Tax disk | √ |
Remarks: Photocopies of all documents and materials for submission must use A4 paper; photocopies furnished by taxpayers must bear the official seal of the unit concerned or the signature of the person-in-charge.
(ii) Acceptance and verification by tax department
After the tax department has examined and verified correct the documents and materials submitted by the taxpayer, it will sell the invoices to the taxpayer at the confirmed type and quantity. In the case where the documents and materials submitted by the taxpayer do not meet requirements, the tax department should notify the taxpayer to re-submit the right papers.
Examination and Cancellation of Invoice
(a) Examination of Old Invoice
(i) Application by taxpayer
Units and individuals obtaining invoices using the “examining the old and supplying the new” method must examine and cancel their invoices on a monthly basis.
(ii) Acceptance and verification by tax department
The tax department will verify the invoices and materials submitted by the taxpayer, as well as record the amount set out in the invoices and the usage of invoices. For invoices requiring physical examination and cancellation, the responsible officer will stamp a special seal for invoice examination and cancellation bearing his name and the date on the stub copy of the invoices which have been examined and cancelled before the taxpayer can purchase new invoices. In the case where the invoices and materials submitted by the taxpayer do not meet requirements, the tax department should notify the taxpayer to re-submit the right papers.
(b) Cancellation of Invoice
(i) Application by taxpayer
Under the following circumstances, the invoices of a taxpayer must be submitted for cancellation:
Invoices purchased by units and individuals which have not been used for a year counting from the date of purchase must be submitted for cancellation;
In the event any units or individuals undergo merger, joint operation, branching, relocation, closure or tax deregistration and have to proceed with change of tax registration or tax deregistration, they should apply to the tax department for cancellation of the invoices already printed and purchased;
In the event the tax department decides to alter or replace the design of the invoices or change the invoice verification seal, the units or individuals concerned must submit their unused invoices to the tax department for cancellation within the timeframe set by the tax department;
In the event any units or individuals have committed serious acts of violation of tax management and invoice management and the tax department deems it necessary to have their invoices cancelled, the tax department will retrieve the invoices for cancellation;
The stub copies of used invoices which have expired their retention period stipulated in the Measures for the Administration of Invoices may be submitted for cancellation upon verification by the supervisory tax department;
Invoices which have been damaged by mould, water, fire or rat bites beyond use should be submitted for cancellation.
(ii) Acceptance and verification by tax department
The tax department will verify the invoices and materials submitted by the taxpayer and record the particulars on the submission and cancellation of the invoices. Two tax officers will be responsible for cutting the corner of the invoices for cancellation purpose and supervising the cancellation process. In the case where the invoices and materials submitted by the taxpayer do not meet requirements, the tax department should notify the taxpayer to re-submit the right papers.
Lost Invoices
In the event a unit or individual has lost its invoices, a written report must be made to the supervisory tax department on the day or the day after the invoices are lost (if that day falls on a holiday, it can be deferred accordingly), a public announcement must be made in the media stating which copy of the lost invoice would be annulled, and a Lost Invoice Statement Application Approval Form must be filled in.
The loss of invoices already issued should be handled according to the following procedures:
When a unit or individual loses an invoice already issued and the payee has not given the invoice copy to the payer, it should, by presenting a written confirmation issued by the payer certifying that the invoice copy has not been received, apply to the tax department for re-issue of the invoice by furnishing the tax payment proof in connection with the invoice and a written statement. If a payer loses an invoice, it can enter the amount into its books by using a photocopy of the payee’s accounts copy or a photocopy of the tax department’s stub copy verified by the tax department as legal proof. To verify a lost invoice, the tax department has to write down the words “same as original” and stamp an official seal on the photocopy of the invoice;
When an invoice issuer loses an issued invoice copy, it should re-issue an invoice and give it to the receiver for entering into its books. On the re-issued invoice, the name of the receiver of the lost invoice, the invoice code and number, amount, and invoice issuing unit must be put down in the remarks column;
When an invoice receiver loses an issued invoice copy, the invoice issuer should furnish it with a photocopy of the original stub copy or accounts copy on which is marked the words “This document is furnished by my unit and it is the same as the original” and stamped with its official seal. This document should also be verified by the supervisory tax department of the issuer, marked with the words ”same as original” and stamped with the special seal of the tax department. It is then handed by the invoice issuer to the invoice receiver as legal proof for book-keeping. For lost invoices with only the invoice copy left, the invoice issuer should provide as legal proof for book-keeping a written proof containing such information as the name of the invoice receiver, the unit quantity of the goods or services purchased, the unit price, specifications, amount, invoice code and number, as well as the words “same as invoice data” and the special seal of the tax department.
Supply of Invoice
The invoices purchased by taxpayers are mainly supplied in two ways:
(a) Examining the Old and Supplying the New
Under the “examining the old and supplying the new” system, units and individuals can purchase new invoices after they have submitted to the tax department for inspection the stub copies of the invoices issued. This system applies to the supply of all fixed-amount invoices. After the launch of the online report system, fixed-amount invoices can be examined and cancelled online direct and the stub copies are not required to be submitted to the tax department. In order to shorten the time needed by taxpayers to issue invoices and ensure that tax is collected on time and in full amount, for invoices supplied under the “examining the old and supplying the new” system, taxpayers are required to have their old invoices examined or submitted for cancellation within one year as from the day the invoices are purchased.
(b) Bulk Supply
Under the “bulk supply” system, when units and individuals purchase invoices, the tax department would set a reasonable quantity of invoices to be purchased within a certain period (generally six months to one year) based on the scale of their business and the actual volume of use. The main recipients of “bulk supply” are taxpayers printing their own invoices (e.g. telecommunications departments issuing telephone bills).
Invoice Issuance
(a) In the case where an enterprise or individual receives payment for the sale of goods, provision of service or other business activities, the payee should issue invoices to the payer. Under special circumstances, the payer will issue invoices to the payee.
(b) When enterprises and individuals engaged in production or other business operations purchase a good, receive a service or conduct a business activity and make payment, they should ask the payee for an invoice and must not change the description or amount shown on the invoice.
(c) Invoices should be issued in serial order within a specified period of time. All copies of an invoice should be issued at the same time to accurately record the details of a transaction and stamped with the issuer's official seal or special invoice seal.
(d) No individual or enterprise should borrow or transfer any invoices or issue invoices on others' behalf. Unless approval is granted by the tax department, the invoice books should not be detached for use. The scope of use for special invoices should not be extended casually.
(e) Invoices which fail to meet the relevant requirements cannot be used as financial proof. Enterprises and individuals may refuse to accept such invoices.
(f) Starting from 1 July 2003, VAT general taxpayers in Beijing, Tianjin, Shanxi, Jilin, Heilongjiang, Jiangsu, Ningbo, Anhui, Fujian, Xiamen, Qingdao, Henan, Hubei, Hunan, Guangdong, Shenzhen, Guangxi, Hainan, Sichuan, Chongqing, Yunnan, Gansu and Ningxia are required to issue VAT invoices by anti-forgery VAT invoice system. Since then, handwritten VAT invoices have been disallowed for input VAT claim purpose (except for the VAT invoices issued by tax departments on behalf of small scale VAT payers).
(g) In addition, starting from 1 August 2003, handwritten VAT invoices have been disallowed for input VAT claim purpose in Hebei, Inner Mongolia, Shanghai, Guizhou, Shaanxi, Qinghai and Tibet (but tax departments can continue to issue VAT invoices on behalf of small scale VAT payers). Any handwritten VAT invoices issued on or after 1 August 2003 cannot be used as input VAT claim evidence across the whole country (except for the VAT invoices issued by tax departments on behalf of small scale VAT payers).
Storage of Invoices
(a) An enterprise or individual that issues invoices should set up an invoice register recording the usage of invoices and report to the supervisory tax department on such usage on a regular basis.
(b) When an enterprise or individual applies for changes or cancellation of tax registration, the invoices and invoice books should also be changed or cancelled at the same time.
(c) An enterprise or individual should take good care of its invoices and keep them in good condition pursuant to the rules of the tax department.
(d) Stub copies of issued invoices and invoice registers should be retained for five years after which time they should be destroyed upon checking by the tax department.
Inspection by Tax Department
Enterprises and individuals involved in printing and using invoices are subject to inspection by the tax department. They must fully cooperate with inspectors from the tax department by providing true and accurate information.
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