What is invoice issuance for individuals? Do you need to pay tax? How to do it? A detailed explanation in one article!

I. What is invoice issuance for individuals?

Invoice issuance for individuals refers to the situation where, after an individual conducts business with a company, the company requires the individual to provide an invoice as the basis for bookkeeping and tax deduction. Since the individual cannot provide a corresponding invoice, the individual directly conducts temporary tax registration in their own name at the tax service hall, and the tax service hall issues an invoice on their behalf.

For example:

SmallLiIntroduced a project to a construction company. After negotiation between both parties, the construction company agreed to pay Xiao Zhang a 1 million intermediary fee (introduction fee), but required Xiao Zhang to provide an invoice; otherwise, the construction company could not record this 1 million expenditure as cost in its books. Because XiaoLiAnd having no enterprise under their name, so to issue an invoice they can only go to the tax service hall to handle invoice issuance for individuals.

Such situations are very common in real life. Whether it is engineering project intermediaries, professional training service providers, or design services, as long as there is a situation where an individual provides services to an enterprise and needs to issue an invoice, invoice issuance for individuals is an effective solution.

II. Does invoice issuance for individuals require tax payment?

When a natural person goes to the tax hall to apply for invoice issuance on their behalf, relevant taxes and fees must be paid, mainly as follows:

1. VAT: From January 1, 2023, for individuals issuing invoices on their behalf, a single amount not exceeding 500 yuan is exempt from VAT; if it exceeds 500 yuan, VAT is paid at a rate of 1%.

2. Surcharges and stamp tax: the amounts of these two taxes are relatively small and are not elaborated here; their combined tax rate is approximately 0.6%.

3. Individual income tax: the calculation and payment of individual income tax focuses on the tax authority's determination of the nature of the income. When an individual issues an invoice on behalf of themselves at a tax service hall, the tax bureau will determine based on the actual business situation whether the income belongs to business income or remuneration for labor services.

Situation 1: Business income

If it is business income, the tax authority will assess individual income tax on a deemed basis, with a deemed assessment rate generally around 0.5%. Individual income tax can be paid directly at the time of invoicing, and a tax payment certificate is issued. In this case, the individual does not need to file the annual comprehensive individual income tax settlement in the following year, and the invoiced enterprise can directly receive the invoice for booking without fulfilling withholding obligations.

It should be noted that this situation can currently only be invoiced in regions with tax preferential policies. If an individual goes to a tax bureau in a region without preferential policies to issue the invoice, the preference cannot be enjoyed. To learn about regions with tax preferential policies and the operating procedures, you can contact Liangxiang She for relevant information!

Situation 2: Remuneration for labor services

If it is remuneration for labor services income, the tax authority will not directly collect individual income tax at the invoice issuance stage; in this case, the invoiced enterprise needs to withhold and remit it, withholding in advance at a rate of 20%-40% of remuneration for labor services income, and the individual needs to file the annual settlement in the following year.

III. Advantages of invoice issuance for individuals

1. No cumbersome procedures such as registration, account opening, or deregistration of the entity are required, saving substantial effort and time.

2. There is no fund risk; funds are paid directly by the invoice recipient enterprise to the individual, and the process is simple.

3. No need to be present in person; the whole process can be completed by submitting materials online, saving time and effort.

4. Conducting invoice issuance for individuals through tax incentive parks can allow enjoyment of individual income tax preferential policies, with an extremely low tax burden, basically within 2.5%. Tax payment certificates are issued simultaneously at the time of invoicing, and annual individual income tax comprehensive settlement is not involved.

5. Invoices are issued by the tax bureau, authenticity is guaranteed, and they can be verified online at any time.

IV. Kailing Technology invoice issuance for individuals solution

Kailing TechnologyThe invoice issuance for individuals management platform provides individuals and enterprises with a comprehensive, efficient, and convenient invoice issuance service solution by improving invoicing efficiency, ensuring data security and compliance, and supporting remote invoicing and multiple invoicing categories. The platform will strictly comply with China Golden Tax Phase IV requirements, ensuring invoice standardization and legality, and reducing tax risks.

Adopt the invoice issuance platform solution：

▪ With the timeliness of issuance to individuals as the ultimate goal, break the traditional operating model and shorten the processing time for invoice issuance for individuals for VAT invoices to 1 day

▪ SubmitHighThe invoicing compliance rate of individuals (natural persons), raising compliance to 100% and effectively improving the reimbursement and settlement efficiency of individuals (natural persons).

▪ Improve the refined management of disbursements to natural persons (individuals), achieve real-time data query and full-process traceability, provide a data foundation and business experience for the subsequent building of a full-process management platform for invoice issuance for individuals, and rebuild the disbursement process for natural persons (individuals).

Kailing TechnologyAs a flexible and efficient tax solution, invoice issuance for individuals provides a legal and compliant way to issue invoices for business dealings between individuals and enterprises, greatly facilitating freelancers, part-time workers and other groups, while also helping enterprises achieve financial compliance and pre-tax deductions, creating a win-win situation for all parties.

As a comprehensive business-finance-tax digitalization solution service provider, Kailing Technology provides business-finance-tax management digital transformation products and operational services for various government agencies, institutions, and large, medium, and small enterprises. The product line includes:

Solutions for businesses including sales contract management system, procurement contract management system, fully digitalized Leqi interface project, output automatic invoicing system, employee expense control and reimbursement system, input VAT invoice management system, supply chain collaborative reconciliation system, image OCR recognition system, automatic financial bookkeeping system, and electronic accounting archives system, comprehensively driving the digitalization process across various fields.

If you have any business-finance-tax digital transformation needs, welcome to contact us. Beijing Kailing Technology will serve you wholeheartedly.