This case will introduce you with some typical problems concerning the procedure of payments for goods and services in China and will explain what does fapiao mean.

1. Fapiao??? This case will introduce you with some typical problems concerning the procedure of payments for goods and services in China and will explain what does fapiao mean.By Anna Taskaeva www.china-business-connect.com @BusinessChina0 e-Learning China Business

2. Brief Summary Chinese Consultancy WOFU assists a Dutch Company to rent and sell their products in China to Chinese company. Most of WOFU’s clients are internationally oriented. WOFU ’s scheme: Chinese company pays the Dutch company and the Chinese company receives then a Dutch invoice. WOFU receives a commission from the Dutch company on their European account. It is scenario of repeat payments. But when WOFU agreed on the price with Chinese company they were asked whether WOFU issued Chinese invoice, so called FAPIAO (Fapiao (发票) are official invoices, registered at the local tax bureau, which are used as some kind of final proof-of-purchase of a good or service) for payment.

3. WOFU thinks: Chinese company should pay to Dutch company directly Chinese company thinks: According to Foreign Exchange Policy in China they cannot transfer money to overseas account. All deals conducted in China should be settled in RMB. If WOFU is not able to provide the fapiao for them they claim a discount.

4. Questions to decide??? Is it true that Chinese companies can’t pay directly to a Foreign company? Do they need an import / export license to do so? The Chinese Customer doesn’t have an import / export license. Are there other ways for this Chinese company to transfer the money to the Dutch company.

5. PROBLEM Is WOFU allowed to receive the payment from the Chinese customers? WOFU wonders about issuance of fapiao to the Chinese company

6. THE ISSUES Chinese companies cannot directly transfer money to a foreign account without import/export license, because government controls the currency. Chinese company needs such invoice for tax reduction. If WOFU cannot provide such invoice, the Chinese company will need to pay a tax and the discount is to cover this tax part.

7. Reason Chinese company needs the invoice is that they need to issue invoice to their client. So they can actually transfer this tax to their buyers. It's VAT tax, so it's important when they make sales. Otherwise they will need to buy this invoice from some illegal ways which can be hassle and also cost to them.

8. The Options Plus Can make all future operations with Chinese company much easier WOFU helps Chinese company to settle separate RMB and USD facilities in bank or quota to remit funds outside of China. Minus It is very difficult, waste of money and time

9. The Options WOFU finds an import/export agency to make this payment and this agency acts like a company that has the import/export license and can work with payments on foreign currency. Chinese company pay RMB to the agency, and the agency issues invoices with tax and then they pay to WOFU or to Dutch company. However, a consultancy fee occurs which is around 1% but it depends on the order size.

10. As a conclusion China company does not have any right to require fipiao, i.e. WOFU does not have contract with it. It is better to choose the second option because it gives guarantee not to fail future transactions with Chinese company and it less risky. Financial and time cost are also not so high.

11. Thank You info@china-business-connect.com www.china-business-connect.com @BusinessChina0 www.linkedin.com/groupRegistration?gid=2985397 www.facebook.com/group.php?gid=116437748381020 www.xing.com/net/pri28db51x/e-Learning-China-Business www.china-business-connect.ning.com