(State Administration of Taxation: 27 December 1993)
Special invoices of Value-Added Tax (hereinafter referred to as "special invoices") shall be obtained, bought and used only by general taxpayers that pay Value-Added Tax, and not by small-scale taxpayers or non-Value-Added-Tax taxpayers.
General taxpayers shall not obtain, buy or use special invoices in any one of the following cases:
(1) The accounting system is unsound, I. e., it cannot accurately compute the output tax, input tax and the amount of Value-Added Tax payable as required under the accounting regulations and by tax authorities;
(2) Accurate information for the output tax, input tax, the amount of Value-Added Tax payable and other information relating to Value-Added Tax cannot be provided to tax authorities.
The content of "other information relating to Value-Added Tax" mentioned above should be defined by the taxation bureau , which is directly under the State Administration of Taxation;
(3) Engagement in the following activities and failure to correct itself within the time limit prescribed by tax authorities:
a. Printing special invoices without authorization;
b. Buying special invoices from individual persons or units other than tax authorities;
c. Using special invoices borrowed from other;
d. Providing special invoices for use by other;
e. Failing to issue special invoices in accordance with the requirements as prescribed in Article 5 of the Provisions;
f. Failing to preserve special invoices in accordance with the requirements under the Provisions;
g. Failing to file the information on the status of the purchase, use and inventory of special invoices as prescribed in Article 16 of the Provisions;
h. Failing to accept inspection by tax authorities according to the requirements under the Provisions.
(4) Sale of goods that fall within the tax-exempt items.
If any of the aforesaid cases occur with a general taxpayer that has obtained, bought and used special invoices, the tax authorities shall takeaway the special invoices retained by those taxpayers.
Except for the circumstances specified in Article 4 of these Provisions, general taxpayer selling goods (including those regarded as selling goods), taxable services, or non-taxable services on which Value-Added Tax shall be levied as prescribed in the Detailed Rules forth Implementation of Value-Added Tax (hereinafter referred to as "selling taxable items") must issue special invoices to purchasers.
Special invoices cannot be issued in the following circumstances:
(1) Selling taxable items to consumers;
(2) Selling tax-exempt items;
(3) Selling goods that have been declared export at the customs office or selling taxable services abroad;
(4) Using goods on items not subject to Value-Added Tax;
(5) Using goods on group welfare or for personal consumption;
(6) Presenting goods as gifts to others without a consideration; or
(7) Providing non-taxable services (except services on added-Added Tax shall be levied), transferring intangible assets, or selling immovable property.
Taxable items can be sold to small-scale taxpayers without issuing special invoices.
Special invoices must be issued in accordance with the following requirements:
(1) The writing must be legible;
(2) There shall be no alteration;
If a special invoice is filled out incorrectly, it should be affixed with the words "canceled for mistakes" and a new special invoice would be issued. If a special invoice that has been issued and becomes invalid as result of not being claimed by the purchasers, it shall also be handled as if the invoice is filled out incorrectly.
(3) All the items should be filled in;
(4) The special invoice and the goods must tally with each other, theamount specified on the special invoice and the amount of money collected must tally with each other;
(5) The content of all items are correct;
(6) All copies of the invoice shall be filled out at one time and the content and amount on all copies shall be consistent;
(7) The "invoice copy" and the "credit copy" shall be affixed with the special stamp for use by the financial department or for use in invoices;
(8) Special invoices must be issued at the time prescribed in Article6 of the Provisions;
(9) Counterfeit special invoices shall not be issued;
(10) Special invoices detached from invoice books shall not be used; and
(11) Special invoices that do not conform to the forms produced on a unified basis by the State Administration of Taxation shall not bemuse.
Any special invoices that do not conform to the aforesaid requirements will not be used, as tax crediting certificates and purchasers shall have the right not to accept them.
The time limit for issuance of special invoices is prescribed as follows:
(1) If accounts are settled by the methods of advance payment, bills of collection and acceptance, or by authorizing banks to collect payments, it is the day when the goods are dispatched;
(2) If accounts are settled by the method of payment on delivery, it shall be the day when the payment is received;
(3) If the accounts are settled by the methods of credit sales or hire purchase, it is the day of collection prescribed in contracts;
(4) If goods are sold through consignment agents, it is the day when the bills of consignment sales are received from consignee;
(5) For the transfer of goods from one establishment to another for sale by a taxpayer who maintains two or more establishments and keeps their accounts on a consolidated basis, if Value-Added Tax shall be levied on such goods according to the provisions, it is the day when the goods are transferred;
(6) For goods provided to other units or individual business operators in the from of investment, it is the day when the goods are transferred; or
(7) For goods distributed to shareholders, it is the day when the goods are transferred.
General taxpayers must issue special invoices at the prescribed time, neither earlier nor later.
Special invoices are basically in quadruplicate, as stipulated on unified basis, and each copy shall be used in accordance with the following provisions:
(1) The first copy is the "stub copy," which is kept by the seller for reference;
(2) The second copy is the "invoice copy," which is used by the purchaser as payment record for bookkeeping;
(3) The third copy is the "credit copy," which is used by the purchaser as a certificate for claiming input tax credit; and
(4) The fourth copy is the "bookkeeping copy," which is used by the seller as sales record for bookkeeping.
Except for the purchase of tax-exempt agricultural products and import of goods, the input tax on purchasing of taxable items shall not be credited against the output tax in any one of the following circumstances:
(1) Failing to obtain special invoices as stipulated;
(2) Failing to preserve special invoices as stipulated; or
(3) The special invoices issued by sellers do not conform to the requirements prescribed in Paragraphs (1) to (9) and Paragraph (11) ofArticle 5 of the Provisions.
"Failing to obtain special invoices as stipulated" mentioned in Article 8 of the Provisions refers to one of the following circumstances:
(1) Failing to obtain special invoices from sellers; or
(2) Obtaining only the "bookkeeping copy" or obtaining only the credit copy.
"Failing to preserve special invoices as stipulated" mentioned in Articles 2 and 8 of the Provisions refers to one of the following circumstances:
(1) Failing to institute a special invoices control system as required by tax authorities;
(2) Failing to assign a special person to safe-keep special invoices as required by tax authorities;
(3) Failing to assign a special place for the safekeeping of special invoices as required by tax authorities;
(4) Failing to bind "credit copies" into booklets as required by tax authorities;
(5) Unauthorized destruction of the basic copies of special invoices that have not been checked or examined by tax authorities;
(6) Loss of the special invoices;
(7) Damaging (or tearing apart) special invoices; or
(8) Failing to meet other requirements for the preservation of special invoices specified by the State Administration of Taxation or taxation bureau, which are directly under it.
If input tax on the purchase of taxable items has already been credited with the output tax in any of the cases mentioned in Article 8 of the Provisions, the credited amount shall be deducted from the input talon purchases in the period when the circumstances are discovered by tax authorities.
If, after goods have been sold and special invoices have been issued to a purchaser, the goods are returned or having a discount allowed, they shall be dealt with on the merits of each case and in accordance with the following provisions:
In case when the purchaser has neither paid for the goods nor booked them in the accounts, he or she should take the initiative to return the original "invoice copy" and "credit copy" to the seller. After receiving these copies, the seller should write the word "cancelled" on them and on the related "stub copy" and "bookkeeping copy," which may be used as certificates for deducting the output tax of the current period. Before the seller receives the special invoices returned by a purchaser, he or she cannot deduct the output tax of the current period. In case of discount allowed, the seller shall issue special invoices anew on the basis of the discounted prices.
If a purchaser has paid for the goods or though the goods have not yet been paid but have been booked in the accounts, the purchaser cannot return the "invoice copy" and "credit copy", he or she must secure a" goods returned" or "discount claimed" certificate (hereinafter referred to as the "certificate") issued by local competent tax authorities and send it to seller, so that the latter may use it as the legal certificates
for issuing a red- letter special invoice. Before receiving the certificate, the seller nay not issue any red-letter special invoice having received the certificate, the seller shall issue a red-letter special invoice to the purchaser in accordance with the amount and prices of goods returned or the amount of money discounted. The "stub copy" and" bookkeeping copy" of the red-letter special invoice can be used by the seller as certificates for deducting the output tax on says of the current period, while the "invoice copy" and "credit copy" can be used byte purchaser as certificates for deducting the input tax.
After receiving the red-letter special invoice, the purchaser should deduct the amount of Value-Added Tax specified on that invoice from the input tax of the current period. Any default or decrease of tax payment resulting from failure to make such deduction shall be regarded as tax evasion.
Taxpayers that use electronic computers in issuing special invoices must apply to the tax authorities for approval and the use of non-computer-printed invoices produced under the control and supervision of the tax authorities.
Generally taxpayers that meet the following conditions may apply to the tax authorities for the use of electronic computers in issuing special invoices:
(1) Have specialized electronic computer technicians and operators;
(2) Have the capacity and capability of issuing special invoices and printing out monthly reports of purchases, sales and inventories through electronic computers; and
(3) Can meet other conditions prescribed by taxation bureau , which are directly under the State Administration of Taxation.
Applicants for the use of electronic computers must file their applications with the tax authorities alongside the following information:
(1) An analog sample produced by electronic computer based on the form of special invoices (non-computer-printed invoices);
(2) The reports of purchases, sales and inventories of the latest month, which is in accordance with the accounting operation procedures, produced by electronic computer.
(3) The configuration of electronic computer equipment;
(4) Information about the specialized electronic computer technicians and operators; and
(5) Other information requested by the taxation bureaus, which are directly under the State Administration of Taxation.
Users of special invoices must truthfully record information on purchase and use (including cancelled) of invoices and any invoices left unused in the data columns appended to the every month.
The "goods returned" or "discount claimed" certificate is basically in triplicate: the first copy is "stub copy", which shall be kept by tax authorities for records; the second copy is "certificate copy", which the purchaser should send it to the seller and is to be used as the legal certificates for issuing red-letter special invoices; the third copy shall be retained by the purchaser.
Certificates must be issued by tax authorities and affixed with the stamp of the tax authorities; themselves cannot give certificates to the taxpayers for the issuance of the certificates.
Certificates shall be printed in accordance with the relevant provisions of the Detailed Rules and Regulations.
General taxpayers shall bind the certificate received into booklets as required by the tax authorities and keep them in accordance with the relevant certificate preservation provisions.
The State Administration of Taxation shall draw up the forms of special invoices and the format of "goods returned" or "discount claimed" certificates on a unified basis. Other organizations or taxpayers without authorization shall not alter them.
"Tax authorities" and "competent tax authorities" mentioned in the Provisions refer to the State Administration of Taxation and the tax-collecting authorities that are one level above of the taxation bureau which are directly under the State Administration of Taxation.
Provisions shall come into effect on January 1, 1994.
This translation, together with any explanatory material, is provided courtesy of Lehman Tax & Accounting.