Invoice management in Chinarussonxiao
Definition: Invoice refers to payment vouchers when purchase and sale of goods, the provision or receipt of services and other business activities.
Given space limitation, in this article we only focus on the VAT invoice which is a commonly used invoice for most companies during their daily business operations.
All companies and individuals who sell goods and products, provide labor services and engage in other business activities should issue invoices truthfully to the payer and affix company seals.
VAT invoice has more information than other invoice, besides the normal contents in a tax invoice, the VAT invoice shall also include the address of the purchaser, the tax registration number of the purchaser, the VAT rate, the tax amount, the name and address of the supplier and its tax registration number.
Invoices must be stored in a safe place in company and managed by a dedicated person. Financial specialist is usually responsible for the invoices filling and ensure the compliance with tax authority regulations. Company must build invoices inventory report internally and save all invoices copies for at least 5 years in case of future tax inspection.
What should be carefully reviewed when invoices are issued by an individual or a self-employed company?
Here comes with some important points to be checked:
- Having real business behind every invoice, remember to NEVER issue an invoice for a purpose different from reality.
- To prove the real business, the contract must have reasonable business purpose. When signing the contract pay more attention to the details of the content, point in time, procedures, processes, goals to be achieved, etc.
- Having a real registered address and real business premises
If most of the self-employed companies are registered in the tax centralized address, it will become a key factor for tax inspection.
- A true cash flow, means the money is collected through a company-to-company bank account to trace all financial transactions.
- Having reasonable pricing. Significantly high or low prices are suspected of artificial profit shifting. In particular, whether the pricing of transactions with related parties is reasonable, as this is the key concern of the tax authority inspection.
Invoice management plays an important role in a company’s internal control and is an important part of the financial system. In order to ensure that the company’s assets are safe and comply with tax related regulations, we must well manage daily invoicing by clarifying the purpose of invoicing, preparing all kinds of invoicing support documents, and standardize the cash flow, which is especially important for an individual or a self-employed company.
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