In this article, we are reporting on the legal requirements for e-invoicing in Asia, especially for the digitization of VAT invoices. This can be explained by tax changes that have caused many countries to switch to e-invoicing faster than expected. Forecasts are already predicting that by 2025, 75% of all B2B invoices globally will be digitally exchanged in real-time.
In times of digitization, automated, and digitized invoice processes have become essential. The switch to electronic invoicing makes it possible to save up to 80% of costs compared to paper invoices. In addition, resources such as personnel, time, and raw materials can be saved and errors minimized.
In India, the first consultations to discuss an e-invoicing system began as early as August 2019 and were first published in December 2019. Although the deadlines have been postponed in the meantime also due to the Corona Pandemic, the obligation to use electronic invoicing for B2G transactions has been in place since October 1, 2020.
WHEN: From January 2021 onwards, there will also be an e-invoicing obligation for B2B transactions. According to the Billentis report from 2021, this will only apply to companies with annual sales of more than 500 crores (EUR 58 million) and will apply to all B2B transactions nationwide from April 1, 2021
WHAT: Invoices, credit notes, debit notes for B2B and B2G transactions, including exports, must be digitized
HOW: A unique IRN and WR code is assigned when approving the invoice data, which must always be provided when issuing the paper, PDF, or JSON invoice
Government sources have also announced that the existing e-Waybill procedure is to be replaced in favor of the e-invoicing system. The Indian government has also launched the Simpol initiative, which aims to establish standards and protocols for a seamless flow of invoice data from one company to another. With this, India is also laying further foundations for potential B2B automation and the advancement of e-invoicing in Asia.
South Korea is considered the leader in e-invoicing in Asia because its system has been running successfully for many years. All companies and individual taxable persons with a turnover of KRW 0.3 billion (approx. $250,000) or more are affected by the digitization of VAT invoices.
WHEN: The system has been in operation since 2011. An issued e-tax invoice must be transmitted to the NTS within one day of its issue
WHAT: the obligation includes invoices, amended invoices (credit notes and debit notes) covering B2B, B2G, and B2C transactions (under certain circumstances) Cross-border transactions are excluded.
HOW: before issuing an electronic invoice, the supplier must be authenticated and registered with the National IT Industry Promotion Agency (NIPA) for the system used to issue and transmit the electronic invoice. Thereafter, the supplier has four different methods to issue electronic tax invoices. These include the NTS (E-Sero Portal) system, ERP system (direct integration), Application Service Provider (ASP), or telephone or the tax office.
In Vietnam, compared to many other Asian countries, electronic invoicing has only become truly relevant in the past two years. An obligation to digitize applies to most taxable persons who sell goods or provide services in Vietnam.
WHEN: From November 1, 2020
WHAT: all invoices issued for transactions carried out in Vietnam must be digital
HOW: as a method, taxpayers can use XML with or without a unique verification code from the tax office.
The term “fapiao” can be translated as invoice in China, but it also describes official invoices that are administered by the tax authorities and are intended to serve the system for tax tracking. This system is called the “Golden Tax System” and was implemented a few years ago, and is now running in its third version “Golden Tax System III”. As a country known for its modern and innovative technologies, this system is no exception and has created consistency within the tax administration to minimize tax evasion.
E-invoicing applies to all taxable persons providing goods or services in China.
WHEN: Various pilot programs have been running in some regions of the country since September 2020 to test e-invoicing for B2B transactions as well. Companies can voluntarily join this pilot phase.
WHAT: A distinction is made in China between two types of fapiao.
- General VAT fapiao: this type of invoice is issued as evidence of payment and does not allow VAT deduction. Usually, this type is used for B2C and tax-free transactions, it is simpler and a process for issuing electronic invoices has already been in place for several years.
- Special VAT fapiao: this type of invoice is issued by general taxpayers to customers when they sell goods or provide taxable services. It is also possible to deduct VAT and therefore it is normally used for B2B transactions.
HOW: Invoice data, including invoice transmission data, is transmitted to the tax administration via the Golden Tax System
According to the 2021 Billentis Report, China now wants to revise its invoice management measures. Specifically, electronic invoices are to be given the same legal status as conventional paper invoices.
Indonesia is also considered one of the pioneers of e-invoicing in Asia, thanks to its CTC e-invoicing reform. This reform affects all taxable companies.
WHEN: The system has been in operation since July 2016
WAS: Part of the electronic processing are invoices, credit notes, debit notes for B2B and B2G transactions. B2C transactions are excluded.
HOW: To use the e-invoicing system, taxpayers must obtain an electronic certificate and then request a series of serial numbers for electronic invoices from the tax administration. All outgoing and incoming invoices must be reported to the tax administration and approved. In the final stage, taxpayers would also report their periodic VAT returns (SPT) electronically. There are three different methods to issue e-faktur pajak (electronic invoices): a desktop application, a web-based application (portal), or a host-to-host application.
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