The Chinese fapiao and VAT liability

The Chinese fapiao, translated as invoice, is an official document that the government uses to monitor the Value added tax (VAT) paid on any transaction. For this reason, fapiaos are printed, distributed, and administered by the tax authorities. The limit amount that can be invoiced with each fapiao is capped according to the taxpayer’s circumstances.


Fapiaos shall be issued upon request as a tax receipt for sales of goods, the provision of labour services, the sales of services, and the sales of intangible assets or real estate.


Every taxpayer must apply with the competent tax authority to purchase the blank fapiaos. Newly established entities are allowed to buy blocks of fapiao with a limit amount of RMB 10,000 each. When the taxpayer can demonstrate to the tax authority the need for additional fapiaos or the possibility to issue fapiao with a higher limit amount (due, for instance, to an increase of the business), a specific application shall be submitted to reach a limit amount of RMB 100,000 for each fapiao.


Transactions with a value exceeding the limit amount of each fapiao shall be invoiced by issuing many fapiaos enough to cover the total amount.


VAT fapiaos can be sorted into two categories:

  1. General VAT fapiao

  2. Special VAT fapiao


Although the two are often used interchangeably, there is one significant difference: a special VAT fapiao can be used to deduct the VAT included in it, while the general VAT fapiao cannot, unless it is otherwise stipulated.


The VAT liability for sellers (and the VAT credit for buyers) arises at the time of the fapiao issuance, regardless of whether the payment has been performed.


The information to be included in the special VAT fapiao at the time of the issuance are:

  1. Date

  2. Buyer’s information (name, tax number, address, telephone number, bank, bank account)

  3. Type of goods or services (shall be selected from a list authorized and approved for each company)

  4. Description (manually input)

  5. Unit and quantity

  6. Unit price

  7. Net amount

  8. VAT rate

  9. VAT amount

  10. Total net amount

  11. Total VAT

  12. Total amount of the fapiao

  13. Seller’s information (name, tax number, address, telephone number, bank, bank account)

  14. Remarks (manually input)

  15. Company invoice seal (fapiaos without the seal are not valid)

When issuing a general VAT fapiao, which is very similar to the special VAT fapiao in the form and the content, some details about the buyer might be omitted.


The VAT rate to be applied in the fapiao depends on the type of taxable transaction:

  • 13% for sales of goods, provision of processing and repair services, and leasing of movable property

  • 9% for transport, postal, basic communication, construction services, transfer of land use rights, sale of real estate, agricultural products, food, and edible oil, tap water, heating, utilities, books, newspapers, magazine, audio, video products, e-publications, fertilizers and pesticides

  • 6% for services not included above

  • 3% applicable only to the category of small-scale taxpayers

The applicable VAT rate(s) is assigned or approved upon application by the competent tax authorities to the taxpayer based on its business scope (i.e., companies engaged in the trade of goods will not be able to issue fapiao at 9% for the sale of books and newspaper).


A certain number of items are exempted from VAT, such as the sale of ancient books, second-hand goods sold by individual sellers, instruments and equipment imported for scientific research, education, and experiments.


Revenue from mixed activities (for instance the sales of goods and the provision of services that are subject to different VAT rates) shall be accounted separately in order to avoid the application of the higher VAT. However, if the service is ancillary to the sales of goods (i.e., installation services for goods), the whole amount shall be subject to 13% VAT rate.


Import and sales of goods are subject to 13% VAT rate. Services that are not ancillary to the sales of goods can be subject to 6% VAT applicable to the provision of services.


The VAT liability shall be computed as the difference between output VAT and the input VAT during a reporting period. The output VAT is the VAT arising from the sales supported by the issuance of the fapiao (general or special VAT fapiao) and from sales without the issuance of the fapiao. The input VAT is allowed to be deducted by the taxpayer if the transaction is supported by a special VAT fapiao issued by the seller or by the import VAT receipt obtained from the Customs. Only input VAT from special VAT fapiao or Customs clearance documents can be claimed in deduction.


If the output VAT in the period is higher than the amount of input VAT that is allowed as a credit in the period, the taxpayer shall declare and pay the VAT payable within the filing deadline.


If the output VAT in the period is lower than the amount of input VAT that can be deducted in the period, the unutilized input VAT shall be carried forward to the next reporting period. If the taxpayer is eligible, the excess of input VAT can be refunded.


A special VAT treatment is provided to companies engaged in export sales.



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