WFOEs operating in China can benefit from various financial services in China. But they also have certain obligations – including tax filings and meeting strict payment deadlines. This article provides a short summary.
Tax Filings & Payments Deadlines
Once a company is established in China (i.e., a tax registration number and business license in China are obtained), it also has to meet monthly, quarterly and annual tax filing requirements. These are not only required by law (failure to comply will be penalized), but also serve as periodical health-checks that ensure the company’s safe continuation.
Monthly and quarterly compliance
- Some tax filings are required only if the company employs individuals in China
- The due dates are subject to change in case of national holidays
An annual audit procedure is required by Chinese law, for all sorts of entities. The whole process takes several months, and starts right after the end of the financial year (December 31st).
It is important to differentiate between the annual audit procedure, which is required by law, and an operational audit in China, which helps companies become more efficient and increase profitability.
Generally speaking, it is customary to divide the annual audit process into three stages:
Stage 1 –annual audit report
The report consists of three documents (written in Chinese): a balance sheet, an income statement and a cash-flow statement. Note that some regions request additional documents.
The report must be conducted and issued by a Certified Public Accountant (CPA), from an authorized firm in China. The auditor will guarantee that the documents provided by the company reflect the real company’s financial situations.
- Deadline: March 31st (so it’s wise to begin as soon as the new year begins)
- Time needed: about two months
- Note: While you can start collecting documents before the fiscal year ends, the annual audit report must be prepared only after the new fiscal year begins.
Stage 2 – annual CIT tax filing (reconciliation report)
The reconciliation report verifies that tax filings and payments are conducted fully and properly. This double check is vital: due to discrepancies between Chinese accounting standards and local tax laws, the actual taxable income differs from the total profits. Today, as more digitization processes are embedded into business practices, the CIT reconciliation report can be submitted digitally.
- Deadline: May 31st (tax declarations deadline). However, companies have to be prepared to submit supporting documents upon demand till the end of the year.
- Remember: CIT is also filed on a monthly and quarterly basis.
Read more about accounting in China
Stage 3 – annual publication report
In the final stage, foreign companies are required to publish the data collected in the previous two stages, and submit a combinative report to several government authorities such as AIC (Administration of Industry and Commerce), MOFCOM (Ministry of Commerce), MOF (Ministry of Finance), SAFE (State Administration of Foreign Exchange) and NBS (National Bureau of Statistics).
- Deadline: June 31st (the reporting period usually lasts between April – June).
- Please note that the required documents vary between provinces and are based on business scope.
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Last updated: Feb 2023