Processing Chinese invoices (called fapiao) can be such a hassle to almost every business operating or filing their tax returns in China.
Company owners frequently encounter misalignments, errors in balancing and reconciling statements and entries, tax reporting, and others.
These mismatches can lead to not only inaccurate financial reports but also tax liabilities, for which Chinese tax officials can penalize them, among other repercussions.
This is why, in this post, we will look into the fapiao receipt system, the issues your clients face when processing fapiao, and the solution you can offer them as an accounting or expense management software company.
What is Fapiao?
A fapiao is an official Chinese invoice or legal receipt that a seller provides to its customers for every purchase transaction made in China and within its business scope.
It differs from regular receipts because the country’s State Administration of Tax (SAT) prints it on a special paper and recognizes it for tax refunds or deductions.
SAT issues this Chinese invoice and requires businesses to acquire it. The agency also uses fapiao to monitor Chinese VAT payments and prevent tax evasion.
It’s also worth pointing out that depending on the type of company you’re running (if you’re considered as “General Tax Payers”), you can use Special VAT fapiaos for your tax deductions. You’d also be allowed to issue special invoices, procure the software and printer that the company would use.
SAT does this by compelling businesses to acquire fapiao in the amount of their next year’s projected sales. In effect, they are paying their Chinese VAT dues in advance.
Chinese tax authorities implement this system, so business owners don’t under-declare their revenue, especially for offline vendors like restaurateurs and taxi operators who prefer transacting in cash.
On the business owners’ end, using fapiao indicates their compliance to declare their taxable income from the purchases their customers made.
The Chinese invoice lets them follow the legal standards set by SAT, and in so doing, avoid penalties and accusations of evading their tax obligations.
The fapiao also allows them to keep a record of all their business transactions, accounting, and Chinese VAT deductions.
Different kinds of fapiao also correspond to the scope and nature of the merchants’ enterprises, which is why they need to ensure they’re getting the type applicable to them.
The Issues Companies Are Facing
Merchants can certainly benefit from using fapiao for their businesses.
However, when they process the Chinese invoice, they can face issues that disrupt their business operations, particularly in accounting and tax calculation.
While all bookkeeping information is available on fapiaos, integrating it with their financial reporting system for accounting and reconciliation is where things can get complicated.
First, accountants who cannot read Chinese languages instantly have difficulty understanding the contents of the receipt and what the figures refer to.
As a result, they cannot record the transaction properly. They also risk noting the wrong numbers for accounting entries and end up settling fines for incorrect tax payment amounts.
Second, fapiao accounting can bring inaccurate reports about their financial health.
Bookkeeping based on fapiaos documents figures typically misstated for a particular period.
Financial reports present the date of fapiao issuance but not that of product or service delivery, including associated costs.
Store owners also experience delays in identifying expenses and costs, which their accountants may not record until they obtain the input fapiaos from their suppliers.
When merchants receive their fapiaos late, their reports don’t correctly reflect business profitability for a specific period. They also lessen the Chinese input VAT amount needed for deducting taxes.
Third, enterprises can incur early tax payments.
If losses in one financial quarter offset their profits in another within a fiscal year, they need to claim back in the next year the corporate income tax they pay quarterly in advance.
Such a process eats up their time and compels them to show evidence that they indeed lost money over the financial year.
When that happens, Chinese tax authorities often implement a full-range tax audit before they refund the business’ quarterly prepaid tax.
Taggun.io’s Fapiao OCR Functionality
The good news is, we recently released a new feature that allows us the special capability of extracting specific information from fapiaos.
Not only that, we can even read the information in the QR code from the Chinese invoice.
The accounting or expense management software companies that we service can request for the fapiao features to be enabled on their account by sending us an email. The Fapiao related data will be returned in the “entities” properties from the verbose endpoints.
- We identify if the file or image is recognized as a Fapiao, instead of a normal receipt.
- We can extract the key transaction information like total amount, tax amount, and date for Chinese receipts. Through this functionality, companies can avoid having to encode these pertinent info into their system manually.
- We can also extract the special Fapiao information like invoice code and invoice number.
- We can return the information stored from the QR Code.
The example of JSON response:
If you have customers who have staff traveling to China or you just want to enter the Chinese market, then our new functionality allows you to serve your multinational customers better when filing their tax returns in China.
The new capabilities can streamline your clients’ tax filing and accounting operations and increase their efficiency and productivity.
Because recording transactions are done in real-time, business accountants have the chance to detect and correct any errors as early as possible — allowing them to avoid hefty fees and penalties that they otherwise would have incurred for reporting inaccurate information.
We also assist in providing accurate reports so your clients can make rightly informed management decisions, govern resources cost-efficiently, fine-tune strategies, and more.
Your customers can even significantly minimize their staff’s workload so they can accomplish more tasks, focus on more critical aspects of your business, organize their schedules better, and others. At the very least, their productivity skyrockets. They can even save on manpower costs with the automation aspect that our technology brings.
Can your expense management and accounting software extract information from Chinese invoices?
If it can’t, then consider integrating Taggun into your software to raise its competitiveness, and so you can serve your customers better.
To learn more about how Taggun works and how it can take your business to the next level, feel free to email or call us. We’ll be glad to assist you. Cheers!