Simplifying Taxation: China's Introduction of Electronic Invoices for Travel Expenses

Introduction:

China has recently taken significant steps in simplifying its taxation system, particularly in relation to electronic invoices for travel-related expenses. This article provides an overview of the key changes announced by the Chinese tax authorities and explores their implications for individuals and businesses.

Background:

China has been at the forefront of adopting electronic tickets since the introduction of e-tickets in 2000. However, recent developments have brought about a shift in the landscape. On March 20, 2019, the Ministry of Finance, the State Administration of Taxation, and the General Administration of Customs jointly announced that starting from April 1, 2019, domestic air tickets, train tickets, bus tickets, and other passenger ticket vouchers could be utilized as VAT input tax deduction vouchers. This announcement brought about substantial benefits, with a rebate amounting to 9%. However, the prerequisite for tax rebate eligibility was that all tickets had to be in printed form and securely stored as supporting documents for tax filing. Now, significant changes are already on the horizon.

Introduction of Electronic Invoices:

The tax authorities have made official announcements in three provinces, introducing two new types of electronic invoices: the "Electronic Invoice (Electronic Flight Itinerary)" and the "Electronic Invoice (Railway E-Ticket)". These innovative invoices aim to simplify and streamline the invoicing process for railway and air tickets. Sources suggest that final testing of these electronic invoices is underway with three major airlines - China Eastern, China Southern, and Sichuan Airlines - as well as a handful of state-owned enterprises in the pilot phase.

Furthermore, the tax authorities have unified the issuance of invoices for individual railway and air tickets within the "Personal Income Tax App". This integration eliminates the need for individuals to obtain separate printed invoices for these travel expenses.

According to the official statement released by the tax bureau, individuals can now acquire digital invoices through the electronic invoice service platform or directly apply for them within the platform. These digital invoices will be automatically collected and categorized in the Personal Income Tax App, using the "Natural Person Taxpayer Identification Number" as the unique identifier. This identification number acts as a code for individuals in various tax-related matters, and after completing real-name registration on the Personal Income Tax App, accessing the identification number becomes convenient.

When individuals receive invoices, the Personal Income Tax App categorizes them in the "My Invoice Folder" module, distinguishing between buyers (including travelers) and sellers. In the "My Purchases" and "My Sales" tabs, individuals can easily track and manage the digital invoices they have obtained or applied for.

The app provides a user-friendly experience by allowing individuals to view, export, download, and reject invoices within the platform. Additional features include the ability to scan QR codes for invoice issuance, maintain invoice recipient information, and most importantly, directly send invoices to employers for reimbursement. Travelers can conveniently send digital invoices to their employers' tax digital accounts' recipient box using the "Invoice Push" function on the Personal Income Tax App.

Notably, the invoice issuance process for individual travelers follows a specific procedure. Travel Management Companies (TMCs) are now required to include accurate identification type and number information for travelers when purchasing tickets, specifically for services such as passenger transport and civil aviation/railways. The Personal Income Tax App then automatically collects these invoices, allowing taxpayers to push the issued electronic railway and air tickets to their respective employers for reimbursement.

Conclusion:

China's recent introduction of electronic invoices for travel expenses, coupled with their integration into the Personal Income Tax App, represents a significant leap toward simplifying taxation procedures for individuals. Through this app, individuals can conveniently manage and categorize their invoices, facilitating smoother reimbursement processes and enhancing efficiency in tax-related matters. These advancements reflect China's ongoing commitment to leveraging technology to improve its taxation system, benefiting both individuals and businesses. While an official timeline has yet to be announced, it is anticipated that these features will be rolled out in Q1 of 2024.

Disclaimer: This article is intended for general information purposes only and does not constitute legal or professional advice. For specific guidance on taxation matters in China, it is recommended to consult with a tax professional or relevant authorities.