Digitalization of accounting: China’s step into the future with e-invoices

lettpublished on 25 March 2024 | reading time approx. 2 minutes

After starting the pilot program in Shanghai City, Guangdong Province and Inner Mongolia Autonomous Region from 1 December 2021, China has fully launched the digitized electronic invoices (“e-invoices”) nationwide from 1 December 2023.

What are e-invoices? »
Advantages of e-invoices »
How to examine and archive e-invoices? »
Our Observation »

What are e-invoices?

Unlike traditional paper invoices, e-invoices do not require assessment of the category of invoices, tax control equipment, or application for blank paper invoices. E-invoices could be issued online through the electronic service platform of the Chinese tax bureau in unified format. After issuance, the e-invoices will be automatically sent to the tax digital account of the purchaser and the seller, and their tax system will capture the invoice information accordingly. The invoices could be saved in the formats of XML, OFD, PDF and other layout files.

Advantages of e-invoices

Compared with paper invoices, the use of e-invoices can be applied directly through the network without delivering time and is no longer restricted by equipment and paper medium in the process of issuance. And e-invoices can be delivered to customers in a safer and faster way, facilitating timely payment collection for enterprises.

In the meanwhile, as invoice recipient, enterprises and employees can also obtain invoices through the network, which helps enterprises to effectively check invoices through online inspection platform and book the cost and expenses in a timely manner. In addition, with the help of an ERP and other management systems, e-invoice data may directly be interfaced with the accounting system, and processes such as bookkeeping can be simultaneously completed while importing data.

Furthermore, the process on issuing credit invoices is simplified. If the relevant e-invoice is not verified and booked by the purchaser, the seller can directly issue the credit e-invoice in full amount. If the e-invoice is verified and booked by the purchaser, both seller and purchaser can initiate the procedures of application for issuing credit e-invoice.

How to examine and archive e-invoices?

In addition to the internal approval process, the accounting staff should pay attention to the following in the reimbursement process:

Consistency and Completeness: First, it should be checked whether the invoice content matches the economic business operations and whether the information is complete.

Authenticity Verification: The e-invoices should be verified through the national invoice verification platform or the digital tax account.

Comparison with Previously Recorded Invoices: After verification, the e-invoice should also be compared with already recorded and reimbursed invoices. If there are duplicate invoices, the reimbursement should be rejected.

Archiving: Finally, the verified invoices are properly archived by the responsible accounting staff for centralized storage. A book for the received e-invoices is set up to record the invoices.

If a company uses the printed e-invoice in paper form as a supporting document for reimbursement accounting, the electronic file of this invoice must also be saved and stored.

Our Observation

After the implementation of e-invoices, the use of e-invoices also brings higher management requirements to enterprises, such as data archiving and prevention of duplicate entries etc. Meanwhile, as invoice recipients, enterprises and employees can also obtain invoices through the network. This enables enterprises to effectively check invoices through an online inspection platform and record costs and expenses in a timely manner.

With the full implementation of e-invoices, the tax authorities will rely on big data analysis to monitor various indicators of taxpayers and master the knowledge of all elements of enterprises’ invoices as well as upstream and downstream invoices, which make it easier for tax authorities to detect abnormal transactions of the enterprises. In this regard, enterprises shall start self-inspection as early as possible according to the risk points of invoice audit and establish a complete set of compliance processes for invoices, funds and business.