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Missing Fapiao: Its Consequences and How to Deal with It

Posted by: Zhorea Garcia
Category: Tax and Regulations
Missing Fapiao Its Consequences and How to Deal with It

A missing “fapiao” may have serious consequences and requires immediate action from the taxpayer. This is because fapiaos or invoices signify a great liability, especially for companies to prove their adherence to China’s tax laws. A fapiao contains a unique serial number that tax authorities used to audit tax records and clear taxpayers of any tax issues.

Read our post about Chinese Fapiao – What Is It and Why Does It Matter?

This article will give you a brief guide on the process you need to go through when you lose your fapiao. Keep reading!

Why is it important not to lose a fapiao?

Fapiao in China is more than just proof of payment or purchase. The Chinese tax administrators issue a standard fapiao to monitor taxes paid on every business transaction. So, it is crucial that companies can provide this to their customers. However, there are times when companies avoid issuing a fapiao to limit replenishment and therefore, reduce the cost of purchasing it from the government.

Especially, for expatriates in China, fapiaos are important to avail of non-taxable benefits including education costs, car leasing, home leaves, medical insurance, training, and house rental costs.

Have a look at our article about Rental Fapiao: How to Reduce Costs on Your Housing

Presenting fapiaos to your employers will allow them to refund or reimburse your expenses while they can also claim it as non-taxable on their end. Hence, your expenses will be considered as a non-taxable, business-related expenditure of the company.

On the other hand, if employers fail to submit the required fapiao during tax filing, the authorities will treat the missing amount of fapiao as an added income tax.

Is there a punishment for missing fapiao?

According to China’s implementing rules for invoice management, mishandled or missing fapiaos correspond to a fine of not more than RMB 10,000. It is subject to administrative penalties, although each local tax authorities may impose a varying amount.

In July 2019, the State Taxation Administration, through Public Notice 48, amended the requirement for administering tax certificates including lost invoices. As part of China’s efforts to simplify its taxation system, modifications in the administrative procedures are continuously being promoted. For instance, it is no longer required to make an invalidation statement for lost invoices or tax receipts. Previously, one must make an announcement of lost fapiao in the newspaper. In addition, other requirements such as tax registration certificate and business license among others are also no longer necessary when handling certain tax matters.

How to deal with a lost or stolen fapiao?

Report the missing fapiao immediately to the tax authorities.

According to the provisions on invoice management, a taxpayer with a missing fapiao due to loss or theft should report the situation on the day that it is not found.

Dealing with the lost invoice depends on the type of fapiao, whether it is a special VAT invoice, unified sales invoice for motor vehicles, or an ordinary VAT invoice.

Special VAT invoice

The special VAT invoice usually consists of three copies, one is kept by the vendor and the other two are kept by the purchaser. Where the purchaser lost the fapiao for VAT input deduction and the invoice for own bookkeeping, the original copy from the vendor can be used. The invoice should bear the special seal of the seller or vendor.

Unified sales invoices for motor vehicles

According to the provisions on the issuance of lost motor vehicle sales invoices, there are three steps to take if you lost your fapiao.

  1. First, obtain a sealed copy of the seller’s invoice.
  2. Then, go to the nearest local tax authority to register and obtain a seal.
  3. After that, the seller or vendor of the motor vehicle will re-issue the sales invoice.

The steps above should also apply when you (as a purchaser) lost your invoice before you could even register your vehicle and undergo the purchase tax procedures.

General or ordinary VAT invoice

The purchaser or buyer can use a copy of the seller’s invoice bearing the seller’s seal.

What are abnormal input VAT invoices?

Abnormal input VAT invoices are invoices that may imply a high risk as they may have been issued by a company that is blacklisted or under investigation. Thus, these kinds of invoices are treated “abnormal” and could result in a disallowed deduction, or transferred out VAT input.  Furthermore, the tax authorities will recover the processed VAT refund corresponding to the amount of abnormal input VAT invoice.

According to STA’s announcement No. 38, the following special VAT invoices will be considered as abnormal input VAT invoices:

  • Non-issued special VAT invoice or issued but not uploaded due to lost or stolen special tax control equipment;
  • Undeclared or unpaid special VAT invoices;
  • Special invoices which are deemed “inconsistent”, “missing” or “invalid”;
  • Issued by “untraceable enterprises”.

Conclusion

The Chinese fapiao system is a method used by tax officials to prevent corruption and enforce accountability. Thus, invoices help in tracking tax payment and curtailing tax evasion. Moreover, asking for fapiao is a legal right and should be provided by businesses. In the same way, both individual customers and businesses must be responsible for keeping fapiaos safe and secure so as to avoid future problems.

Contact us

Our team of local and foreign experts can assist your business in matters regarding your accounting and financial works. Moreover, you can take advantage of our easy-to-use, 24-hour access management tool like Kwikdroid.

Kwikdroid is a Cloud-based accounting and company solution that allows your company to standardize your business operations. It helps you generate electronic invoices by scanning your fapiao and automatically uploading them into one single storage.

S.J. Grand also offers Cloud ERP services for your business if you are currently experiencing difficulty in managing your operations amid the COVID-19 pandemic. Check out our IT services page for more details.

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Author: Zhorea Garcia

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