Many of us might wonder why the Chinese invoice reporting system was given the name of Golden Tax System. This name refers to the high value of the invoice information, comparable to gold, being VAT the main source of revenue for the Chinese state.[2] This also creates a direct link to the official colours of China: red and yellow/gold.
The Golden Tax System is a nationwide VAT monitoring system that was introduced in 1994. The GTS uses the online network of the Chinese tax authorities to closely control VAT special invoices issued by general VAT taxpayers. These invoices are known as fapiao[3] and are officially issued on paper and administered by the Chinese State Taxation Administration (STA). VAT taxpayers need to purchase fapiaos at their local tax boroughs[4], effectively meaning that businesses have to pay taxes before conducting sales. This system has a direct influence on the cash flow of Chinese companies and is a clear difference from the European VAT system where every tax has to be paid at the end of a period.
Source Summitto
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