Taking effective on April 1, Administrative Measures for Network Invoices were formulated for strengthening the administration of ordinary invoices. However, some customers may have their own concerns whether electronic commerce is affected by it.
Ⅰ.Network Invoices will be the Future Trend of Invoice Administration
In December 2010, the State Council amended the Administrative Measures of the People’s Republic of China for Invoices and clearly stipulated in Article 23 that the State shall actively promote the use of network invoice management systems for invoicing. In February 2013, the State Administration of Taxation further promulgated Administrative Measures for Network Invoices for regulating the issuance and application of network invoices. Therefore, as a long-term mechanism to combat false invoices, there is no doubt that the application of network invoices will be the future trend of invoice administration.
In fact, the application of network invoices may bring numerous conveniences to taxpayers. On one hand, taxpayers may check invoice information on official websites or by scanning two-dimensional codes to avoid false invoices and economic losses. Since invoice codes and invoice numbers are generated automatically and randomly by the system and there are security codes and two-dimensional codes on network invoices, to fake invoices becomes more difficult. On the other hand, taxpayers may save plenty of time and energy by dealing with invoice issues on-line in the network invoice system. In addition, with the improvement of invoice system and tax administration, the copies of each invoice may reduce correspondingly and tax authorities may not require taxpayers to purchase Fiscal Cash Registers, which may further reduce the tax burden of taxpayers.
As for tax authorities, they could collect invoice information timely through the invoice system and compare such information with taxpayers’ tax returns and financial statements. These may assist the tax authorities to detect violations or illegal activities such as reporting less sale revenues or reporting more expenses, which meanwhile enhance the effectiveness of tax collection and prevent the losses of taxes.
However, the available scopes for checking network invoices are now limited to province, which means the taxpayers could only check network invoices within a province. As for cross-provincial invoices, taxpayers are not able to check contemporarily. Generally speaking, the network invoices mainly refer to ordinary invoices and taxpayers still need to use Fiscal Cash Registers to issue VAT invoices.
Ⅱ.Network Invoices are not targeted at Taxing E-Commerce
It could be concluded that the application of network invoices is a significant progress of tax administration and meanwhile bring conveniences to taxpayers. But some customers mistook the meaning of network invoices and thought that all on-line shops would pay taxes due to the application of network invoices and these shops may shift the tax burden to final consumers by increasing the sales prices.
According to the tax law, electronic commerce is not listed as exempted item and therefore subjects to tax. In practice, some large on-line suppliers (e.g. JD, Amazon, etc) are taxpayers and able to provide invoices for customers. Only those small on-line suppliers without business registration or tax registration may not pay any taxes because of tax administration difficulties, which obviously cause the injustice between on-line shops and entity shops. With improvement of tax collection, such injustice may be corrected eventually.
In short, the network invoices mainly focus on invoices issues covering industrial, commercial, construction, real estate, services, etc. As for taxing electronic commerce, it still needs extensive discusses and surveys to solve real problems rising from real practice.
For more information or advice on the above tax issues, please feel free to contact us by Tianyong Liu (firstname.lastname@example.org) or Lingyan Hu (email@example.com). You can visit our website at www.hwuason.com or our tax blog at www.chinataxblog.com.
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