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3 Important Things to Remember For Compliance and Taxation in China

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In China, every foreign invested enterprise (FIE) is required to follow the specified compliance and taxation processes devised by the government in order to ensure compliance with the business and taxation laws of China. It’s a very important part of operating a business in China and requires careful consideration and diligence.

With the rapid change in the regulatory environment of China, and new legislations coming into effect, it’s important to educate yourself on compliance processes to avoid adverse outcomes. Here are three important things all businesses should keep in mind.

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Prepare an annual audit report

In China, joint ventures (JVs), foreign invested commercial enterprises (FICEs), and wholly foreign owned enterprises (WFOEs) are required to produce an annual audit report which can be a complicated and lengthy process.

The annual audit report mainly contains three documents:

  • A balance sheet
  • An income statement
  • A cash flow statement

In order to comply with Chinese financial and accounting standards, the annual audit should be undertaken by an externally licensed accounting firm(s). Moreover, the audit report must be signed by a Certified Public Accountant (CPA) registered in China.

This procedure may take around two months. However, companies must have their audit report completed by the end of April to ensure that they meet the tax reconciliation deadline (May 31st).

Furthermore, audit reports that are submitted to tax authorities must be prepared in Chinese (*English can also be used in case of group reporting).

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Prepare CIT reconciliation report

The next step after the submission of the audit report is to prepare annual Corporate Income Tax (CIT) returns. In China, businesses need to pay CIT on a monthly or quarterly basis, depending on their level of income. Tax authorities perform a reconciliation process to ensure that the CIT has been paid fully—at a rate of 25 percent.

In the case of underpayment or overpayment, companies may apply for payment of supplementary tax or reimbursement from the taxation authorities.  It’s important to remember that the deadline for CIT filings is May 31st. Moreover, companies may be asked to provide additional documents; which may further extend the compliance process.

It’s also important to bear in mind that the State Administration of Taxation (SAT) requires companies to create an Annual CIT Reconciliation Report and submit it within five months from the previous year’s year-end. This enables the authorities to validate if all tax liabilities of your business are met.

Annual reporting to AIC

Once the process of submitting the annual audit report and the CIT filing has been completed, the company will proceed to publish information pertaining to the audit report, the CIT filing, and other certificates on the Annual Publication Report.

There are several government authorities to whom a business is required to provide this information, including—but not limited to:

  • State Administration for Industry and Commerce (AIC)
  • Ministry of Finance (MOF)
  • Ministry of Commerce (MOFCOM)
  • State Administration of Foreign Exchange (SAFE)
  • National Bureau of Statistics (NBS)

A business can update this information once every year before the deadline of June 31st.

At Business China, we offer expert legal advice to all our clients, which can help them set up a company in China while ensuring compliance with the local laws.

From accounting and VAT refund services to the preparation of the annual report, we offer a variety of services to our clients who want to ensure compliance with the legal and taxation laws in China.

If you want to open company in China and learn about their legal and taxation issues, feel free to give us a call on +86-020-2917 9715 or simply email to
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