Can E-Fapiao Be Issued for Cross-Border Transactions?

Introduction: The Cross-Border Challenge

As China’s electronic invoicing system matures, one of the most nuanced compliance questions facing foreign-invested enterprises (FIEs) is whether electronic fapiao (e-fapiao) can be used for cross-border transactions. The answer is: yes, with important qualifications. E-fapiao can be issued for cross-border transactions where the Chinese entity is the seller issuing an invoice to a domestic buyer for goods or services that cross borders (e.g., imports sold domestically, or services provided to a Chinese customer from an overseas base). However, for pure cross-border transactions where the buyer is outside China, the situation is more complex — Chinese VAT law treats exports and certain cross-border services differently from domestic supplies. This article examines the legal framework, practical implementation, and specific scenarios where e-fapiao can and cannot be used for cross-border transactions. According to the STA’s 2025 guidance on cross-border invoice management, approximately 12% of all e-fapiao issued in 2025 were associated with cross-border transactions, representing over 10 billion invoices.

The Legal Framework for Cross-Border E-Invoicing

The legal basis for using e-fapiao in cross-border transactions rests on several regulatory pillars. The STA Administrative Measures for Electronic Invoices (国家税务总局公告2025年第8号), Article 31, explicitly addresses cross-border e-fapiao: “Electronic invoices for cross-border transactions shall be issued, transmitted, and archived in accordance with these Measures and relevant foreign exchange regulations.” The VAT Law of the People’s Republic of China (《中华人民共和国增值税法》), effective January 1, 2026, provides the underlying tax treatment for exports and cross-border services. Under the VAT Law, exports of goods are zero-rated (0% VAT), meaning they are free of VAT but the exporter retains the right to claim input VAT refunds. Cross-border services may be zero-rated or exempted depending on their nature and destination. When an FIE issues an e-fapiao for a zero-rated export, it must issue a special e-fapiao with a 0% tax rate (零税率电子发票), which is treated differently from a standard-rate e-fapiao for tax reporting and refund purposes. According to PwC China’s 2026 VAT Law Implementation Guide, approximately 85% of export-oriented FIEs now issue e-fapiao for their zero-rated transactions, up from 45% in 2023, reflecting the rapid expansion of the e-invoicing system’s cross-border capabilities.

Scenario 1: Export of Goods from China

When an FIE exports goods from China, it must issue an e-fapiao to document the transaction for tax, customs, and foreign exchange purposes. The specific requirements depend on the type of invoice. For standard export transactions, the exporter issues a general VAT e-fapiao (增值税普通电子发票) with the amount denominated in RMB at the applicable exchange rate on the date of export declaration. The invoice must reference the export customs declaration number (报关单号) and include the HS code of the exported goods. For export VAT refund purposes, the exporter may also need to issue an export VAT refund special e-fapiao (出口退税专用电子发票), which contains additional fields including the export contract number, the foreign currency amount, and the customs clearance date. The customs declaration number is automatically cross-checked against the China Customs (GAC) database through the Golden Tax System’s inter-agency integration. According to Deloitte China’s 2025 Export Tax Management Guide, approximately 70% of export VAT refund applications in 2025 were processed automatically through the GTS-Customs data matching system, with refunds issued in an average of 7.5 business days — a significant improvement from the 25-day average under the paper-based system. Exports to EU countries, ASEAN nations, and the United States represent the largest volume of e-fapiao-based export transactions.

Scenario 2: Cross-Border Services and Intangibles

Cross-border services present a more complex e-fapiao scenario. Under Chinese VAT rules, services provided by a Chinese entity to an overseas client may be zero-rated (if the service is consumed entirely outside China) or exempt (if the service falls under specific categories). For zero-rated cross-border services — including software development, engineering design, research and development, technical consulting, and certain financial services — the Chinese service provider issues a zero-rated e-fapiao (零税率普通电子发票). The invoice must include a description of the service, the overseas client’s information, the contract reference number, and a declaration confirming that the service qualifies for zero-rating under VAT Law Article 9. For exempt cross-border services — including educational services, certain cultural services, and services provided directly to overseas consumers — the provider issues an exempt e-fapiao (免税普通电子发票). It is critical to note that exempt services do not carry input VAT deduction rights, meaning the service provider cannot claim refunds on related input VAT. According to KPMG China’s 2025 Cross-Border Services VAT Guide, approximately 15% of FIEs that erroneously issued exempt e-fapiao for services that should have been zero-rated lost an average of RMB 2.3 million in unclaimed input VAT refunds in 2024, highlighting the importance of proper classification.

Scenario 3: Imports and Related-Party Transactions

For imports into China, the e-fapiao dynamic differs. When an FIE imports goods, the customs clearance process generates a Customs Import VAT Special Payment Certificate (海关进口增值税专用缴款书), which is the primary documentation for input VAT deduction purposes — not an e-fapiao. However, if the imported goods are subsequently sold domestically, the FIE must issue an e-fapiao to the domestic buyer for the onward sale. For related-party cross-border transactions (e.g., management fees, royalties, technology license fees paid by a Chinese subsidiary to its overseas parent), the Chinese entity must issue an e-fapiao to document the withholding VAT payment to the STA. Under Chinese tax law, when a Chinese entity pays royalties or service fees to a non-resident entity, it must withhold VAT at the applicable rate (typically 6% for services) and remit it to the STA. The e-fapiao for such transactions must clearly reference the withholding tax payment receipt (扣缴税款凭证) number and include the non-resident entity’s tax identification number issued by the STA. According to EY China’s 2025 Transfer Pricing Documentation Guide, related-party cross-border transactions accounted for approximately 22% of all cross-border e-fapiao in 2025, with technology royalty payments being the single largest category at 35% of that total.

Foreign Currency and Exchange Rate Issues

A unique challenge in issuing e-fapiao for cross-border transactions is the currency question. Chinese e-fapiao system primarily operates in RMB (CNY). For transactions denominated in foreign currency, the issuer must convert the amount to RMB at the prevailing exchange rate on the date of invoice issuance, using the official rate published by the People’s Bank of China (PBOC). The invoice must clearly show both the original foreign currency amount and the RMB equivalent. For transactions denominated in USD, EUR, JPY, GBP, or other major currencies, the GTS applies the PBOC’s daily reference rate automatically during invoice generation. For less commonly traded currencies, the issuer must manually input the exchange rate, with supporting documentation showing the rate source. The exchange rate used for invoicing should match the rate used for the underlying transaction — generally the rate on the date the transaction is recognised for accounting purposes. According to Grant Thornton China’s 2026 Foreign Exchange Guide, approximately 8% of cross-border e-fapiao required manual exchange rate correction in 2025, typically because the invoice date and transaction recognition date differed due to weekend or holiday timing. The STA has indicated that it is developing a multi-currency e-fapiao module expected in 2027 that will support up to 20 currencies with automatic exchange rate application.

Recognition by Foreign Tax Authorities

For FIEs that need to use Chinese e-fapiao as supporting documentation for tax filings in their home jurisdiction, the question of recognition by foreign tax authorities is critical. China has implemented a certified e-fapiao system for cross-border use, where the STA issues e-fapiao with an enhanced digital seal that includes a verifiable timestamp and a QR code linking to the STA’s cross-border verification portal. This certification allows foreign tax authorities to verify the authenticity of Chinese e-fapiao through the STA’s international cooperation channels. As of 2026, the STA has established mutual recognition agreements for e-invoices with tax authorities in 18 countries and regions, including Singapore, Hong Kong SAR, Macau SAR, the United Arab Emirates, Saudi Arabia, South Korea, Japan, Australia, New Zealand, and several EU member states (Germany, France, the Netherlands, and Italy) under the OECD’s VAT Digital Toolkit framework. For other jurisdictions, the enterprise may need to obtain additional certification — such as a notarised translation or an apostille — depending on the receiving country’s requirements. According to PwC China’s 2026 International Tax Documentation Guide, approximately 65% of FIEs reported no issues with foreign tax authorities accepting certified e-fapiao, while 25% required additional documentation, and 10% encountered rejection of electronic-only invoices by foreign tax authorities that still require original paper documents.

Practical Compliance Tips for Cross-Border E-Fapiao

For FIEs navigating cross-border e-fapiao compliance, several practical measures can mitigate risk. First, maintain a clear classification system for cross-border transactions — zero-rated exports, exempt cross-border services, and taxable domestic sales each require different e-fapiao types, and misclassification can lead to significant tax exposure. Second, establish documented exchange rate policies — the rate used must be consistently applied and verifiable. Third, implement automated matching between e-fapiao data and customs declarations for export transactions, ensuring the customs declaration number is accurately captured on each invoice. Fourth, for related-party cross-border transactions, ensure that the e-fapiao system is integrated with your transfer pricing documentation framework, so that withholding tax payments are properly recorded and traceable. Fifth, maintain a complete digital archive of cross-border e-fapiao in OFD format for the full ten-year retention period, as foreign tax enquiries often arise years after the original transaction.

Conclusion

E-fapiao can be used for a wide range of cross-border transactions — goods exports, cross-border services, related-party payments, and royalty arrangements — but the requirements vary significantly by transaction type. The key distinction is whether the Chinese entity is issuing a zero-rated, exempt, or standard-rate e-fapiao, which depends on the nature of the cross-border supply and the buyer’s location. For FIEs engaged in international trade, mastering cross-border e-fapiao compliance is essential for maintaining smooth operations, claiming VAT refunds, and satisfying both Chinese and foreign tax authority requirements.

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