Increased Penalties for Invoice Fraud in China

By Zhang Yalin, R&P China Lawyers

In China, a simple receipt does not suffice to record a purchase in a company's accounting books. Only official tax invoices (called fapiao in Chinese) are accepted, making fraud with these invoices a particular problem to (foreign) businesses operating in China. In recent years, efforts to combat invoice fraud have been intensified, as exemplified jointly by the Supreme People's Court, the Supreme People's Procuratorate and the Ministry of Public Security in the Notice on Severely Cracking Down on Invoice-related Violations and Crimes of 6 January 2010.

On 20 December 2010, the State Council approved the amendments to the Procedures of the People's Republic of China for the Management of Invoices ("Invoice Procedures"), which have become effective on 1 February 2011 and are designed to regulate fake invoices and other invoice-related offences more strictly. Besides clarifying a number of invoice-related offences, the Procedures