China Implements the use of digital invoices in the Civil Aviation Sector

What Are Fully Digitized Electronic Invoices?

The initiative introduces a streamlined invoicing method replacing traditional paper documents with electronic invoices—referred to as electronic itineraries. These invoices serve dual purposes: they function as a record of transaction details and as an official tax document.

Key components of the electronic itinerary include:

• Invoice number (20-digit unique identifier).
• Passenger and buyer details.
• Itinerary information and associated costs (e.g., fares, taxes, VAT amounts).
• Civil aviation development fund charges.
• A scannable QR code for verification.

This initiative facilitates transparency, traceability, and compliance with modern accounting standards.

How Will This Affect Air Transport and Agency Enterprises?

The reform applies to public air transport enterprises and air transport sales agents registered in China. These entities are required to:

1. Issue electronic itineraries to passengers via official websites, mobile apps, service hotlines, or email.
2. Ensure accuracy in invoice details based on the buyer’s provided information.
3. Maintain robust electronic itinerary information systems to securely upload data to tax authorities.

For businesses, this shift mandates greater accountability while simplifying the invoicing process for passengers.

Guidelines for Implementation

To ensure smooth adoption, the policy outlines several critical measures:

1. Dual-System Transition:
   • Paper itineraries for flights before September 30, 2025, remain valid for reimbursement but cannot coexist with electronic itineraries for the same transaction.
   • Encouragement for businesses to adopt paperless processes for managing electronic invoices.
2. Red-Letter Invoice Process:
   • If inaccuracies occur, enterprises must issue a corrected invoice (red-letter electronic itinerary) through a defined protocol involving buyer confirmation.
3. System Integration:
   • Tax authorities will integrate electronic itineraries into the Tax Digital Account system, enabling streamlined access for buyers to query, download, and confirm usage.

Implications for VAT Taxpayers

General VAT taxpayers benefit significantly from this reform:

• Input VAT is directly calculated based on the electronic itinerary’s VAT amount.
• VAT deductions can be processed through digital accounts, aligning with broader tax reform policies.

The policy ensures that electronic itineraries are seamlessly integrated into tax reporting systems, enhancing efficiency for taxpayers and regulators alike.

Opportunities and Benefits

1. For Airlines and Agencies:
   • Reduction in costs associated with printing and distributing paper invoices.
   • Improved customer experience with instant digital access to itineraries.
2. For Passengers:
   • Convenient access to invoices via digital platforms.
   • Enhanced accuracy and ease in expense reporting for reimbursements.
3. For Tax Authorities:
   • Real-time visibility into transactions for better tax compliance.
   • Integration with the national VAT invoice inspection platform for streamlined audits.

Challenges and Considerations

The transition to fully digitized invoices demands:

• Upgrading existing systems for digital invoicing and tax data integration.
• Training personnel to manage and troubleshoot new processes.
• Addressing potential data security concerns as systems become increasingly digitized.

However, these challenges are counterbalanced by long-term benefits in operational efficiency, regulatory compliance, and environmental impact.

Strategic Implications

This move aligns with China’s broader digital transformation agenda, showcasing the government’s commitment to integrating technology into public and private sectors. By digitizing aviation invoices, China not only modernizes its civil aviation sector but also sets a precedent for other industries to follow suit.

As the implementation date approaches, businesses must prepare by upgrading their systems and processes to align with the new requirements. Early adoption of these measures will position companies at the forefront of China’s ongoing digital evolution.

The transition to fully digitized electronic invoices represents a milestone in China’s efforts to modernize its financial infrastructure. With its clear framework and focus on efficiency, this initiative promises to transform the civil aviation sector while benefiting stakeholders across the value chain.