China managed VAT by invoice, therefore VAT invoice management is a key point, and the Chinese tax authorities have been using information technology on VAT collection and management. China is now working on using modern information technology to upgrade and improve the original VAT invoice management system (“New System”).
The New System relies on digital code, digital certificate, internet and other modern information technology. It innovative applications allowed tax authorities to have a real time and comprehensive grasp of all VAT invoice information, and to carry out big data analysis to further strengthen the tax collection management of VAT, and other taxes.
Innovative applications will cover all types of taxpayers and invoices, integrate VAT invoice data nationwide, collect all information on the invoice, report real-time, handle ID check, data encryption & provide secure transmission, and classify & capture all invoice items for data analysis & risk management control.
In order to carry out big data analysis and application of invoice items and further strengthen tax collection management and macro analysis, Chinese tax authorities compiled a catalogue called “Tax Classification and Coding for Goods and Services”; it covers over 4000 types of goods and services, this coding function is also added to the New System. When issuing invoices, the taxpayer shall choose the matching classification code, this is an important information and is upload to the tax authorities system simultaneously. The introduction and use of classification codes allows invoice items to be standardized and digitalized, and lays sound foundation for data mining application under the New System.
In light of the above, the question now become how can taxpayers incorporate technology into their VAT compliance function to work in parallel with the New System.
If you have any further questions regarding this topic, do not hesitate to contact Alan Wu, Indirect Tax Leader Beijing on +86 (10) 6533 2889 or firstname.lastname@example.org
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