Plus Relocation

What is a fapiao — and why is it important to business in China?

Fapiaos are special receipts critical to Chinese tax compliance. Regional Finance Manager Emily Fang has all the details in this Relo Tip Tuesday.

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Complete transcript: “Hi, I am Emily Fang, regional finance manager at Plus Relocation Shanghai. Today, I would like to introduce fapiao.

First, what is fapiao? A fapiao is a legal receipt that serves as a proof of purchase of goods and services. In this way, fapiao serves as a paper warranty against tax evasion, unlike other countries where invoices serve as a tax receipt.

The China tax bureau prints, distributes and administers fapiao. The fapiao system is an essential component of China’s tax law and compliance for businesses.

Second, why is fapiao so important to employees and companies? Employees must provide the fapiao to claim their business expenses, while companies must record all business transactions on a fapiao. An understanding of the system is therefore very important.

Finally, there are two types of fapiao – general fapiao and value-added tax fapiao. We usually call it VAT fapiao. The main difference between the two is that the latter can be used for tax deduction purposes, but the former cannot. Consumer expenses usually involve general fapiao.

For example, relocating employees should ask for fapiao from a taxi driver. Employees should do the same thing at restaurants for meal expenses, but they can give their company’s name to have it expensed properly. The machines in taxis cannot input companies’ names. I need to remind you that you must provide the original, appropriate fapiao to claim your expenses. Chinese companies do not accept copies.

The most important thing is that the fapiao, contract and funding transaction between a company and their client or supplier should be consistent. And names should be matched in all three.

Now you have a better understanding of fapiao. Thanks for watching!”