- November 19, 2025
- Posted by: Kangming
- Categories: Compliance, Tax
No Comments
With the in-depth implementation of Golden Tax Phase IV and the comprehensive rollout of fully digitalized electronic invoices, China’s corporate tax administration environment is undergoing a profound transformation. Tax supervision has evolved from singular verification of invoice authenticity to comprehensive, precise, and real-time risk insights powered by big data analytics. This article examines the most fundamental element of an invoice—the item description—as its focal point, revealing tax risks that enterprises cannot afford to ignore in this new regulatory landscape, substantiated by real-world cases.
As illustrated in the fully digitalized electronic invoice sample above, an invoice contains multiple data points, with the item description serving as the primary checkpoint for risk screening.
I. Item Descriptions Themselves: A “Spotlight” for High-Risk Content
Certain specific item descriptions, due to their nature or common misuse, readily trigger alerts within the tax administration system.
- Non-Routine Business Items: Such as procurement of precious metals. If a non-jewelry or non-industrial manufacturing enterprise frequently purchases precious metals, the system will immediately flag such transactions. The critical issue lies in the enterprise’s ability to demonstrate relevance to its production and operations; otherwise, it faces the risk of denial of pre-tax deductions for corporate income tax purposes.
- High-Value Service Items: Such as consulting and advisory fees. Tax authorities focus not only on invoice authenticity but also conduct vertical comparisons (against the enterprise’s historical data) and horizontal benchmarking (against comparable industry peers). A high-value consulting fee representing an abnormal proportion of operating revenue must be substantiated by detailed contracts, deliverables documentation, and other supporting materials to verify its business substance.
- Sensitive Welfare-Related Items: Such as shopping vouchers (prepaid cards). Such transactions become fully traceable under the fully digitalized electronic invoice system. Improper handling by enterprises—failure to properly classify these as business entertainment expenses or employee welfare benefits and withhold individual income tax accordingly—creates a near-certain tax deficiency risk.
II. Cross-Tax Reconciliation: A “Truth Mirror” Under Big Data
The power of Golden Tax Phase IV lies in its automatic reconciliation of invoice item descriptions with data across different tax categories, rendering previously overlooked discrepancies clearly visible.
- Reconciliation with Stamp Duty: This represents the most definitive and unequivocal risk. For instance, when an enterprise receives or issues invoices for “processing services,” the system automatically compares this amount against the declared stamp duty tax base for processing contracts in the current period. Any discrepancy is precisely identified with virtually no room for contestation.
- Reconciliation with Property Tax: The amounts on construction industry invoices obtained by an enterprise are reconciled with fluctuations in property original values in the current period. If substantial construction invoices are recorded without corresponding increases in property original values, the enterprise may be challenged for underreporting property original values and consequently underpaying property tax. This necessitates clear demarcation and supporting documentation between capital expenditures and revenue expenditures.
Conclusion and Response Strategies
In this new era of “data-driven tax governance,” invoice item descriptions are no longer mere accounting entries but data-based representations of substantive business operations. Through big data analytics, tax authorities can easily penetrate invoice facades to directly examine the core of business transactions.
Corporate response strategies should focus on:
- Business Authenticity as the Foundation: Ensure every transaction, particularly those involving the aforementioned high-risk item descriptions, is supported by genuine business backgrounds and supporting documentation.
- Accounting Standardization as the Basis: Maintain strict classification of expenditure nature, ensuring accuracy and consistency in accounting treatment, VAT credit claims, and cross-tax filings (e.g., stamp duty, property tax).
- Complete Evidence Chains as the Shield: Establish and enhance internal documentation management systems to maintain complete evidence chains for any potentially challengeable transactions, preparing for potential tax audits.
Previous Articles: The Impact of Golden Tax Implementation