After the end of the fiscal year, which ends in China always by 31 of December, all companies in China (including Wholly-Owned Foreign Enterprises (WFOE), Joint Venture and Representative Offices) have statutory annual requirements that can be separated into 3 types:
First of all, these entities are required to do the year-end statutory audit which only qualified CPA firms in China are allowed to carry out.
Based on the statutory audit report, the entity is then obliged to calculate and process the Annual Corporate Income Tax Filing.
Finally, the entity then needs to publish information relating to the audit report, the CIT filing and other certificates on the Annual Publication Report.
1. Statutory Annual Audit
Statutory Annual Audit report is the general financial report, which has to conform to the Chinese GAAP standards, and must be conducted by a Certified Public Accountant (CPA), authorized in China. This report would obtain the annual statutory audit report with auditor’s opinion on whether the financial statements reflect a true and fair view of the financial position, operating results and cash flow in all material aspects. Certain requirements for this audit report may differ across the regions, so it is advised that companies make sure what the local rules dictate and what additional rules that the company has to conform to. It is estimated that under normal circumstances the audit procedure would take around 2 months to conclude. Audit reports presented to the tax authorities must be in Chinese, but can also prepared for foreign companies in English language to be used for group reporting. This audit report should best be completed during February – March in the fiscal year.
2. Annual Corporate Income Tax (CIT) Filing
The next step following the audit report is to proceed with the Annual Corporate Income Tax (CIT) Filing. Corporate Income Tax, which is taxed at 25%, needs to be reconciled by the tax authorities to see if the corporate income tax has been paid fully. In case of deficient payment or overpayment, companies can apply for reimbursement or payment of supplementary tax. Bear in mind that the deadline for the CIT filing is May 31st, and companies may be asked to provide additional documents by the authorities, which may extend the process of annual compliance. Please be informed that penalties are imposed on corporations that fail to abide the deadline schedule as prescribed by the authorities.
3. Annual Publication Report
Once the statutory audit report and annual CIT filing of the annual compliance has been completed, the companies will still need to proceed with publishing information related to the audit report, the CIT filing and other certificates on the Annual Publication Report. At several government authorities such as the MOFCOM, AIC, SAFE and Finance Authority, this information needs to be provided and updated on an annual basis normally per 31st June deadline. Depending on the business scope, district of the city in China where the company has been registered, differences may occur or additional documents may be required.
Annual compliance is a crucially important process for every company in China and which requires diligence and good coordination. As China’s regulatory environment is changing rapidly and new legislations are introduced on a regular basis, a keen eye to the developments is necessary. Although we are not a CPA firm, we can manage this process for you with trusted audit partners and make sure your audit report conforms to the Chinese GAAP and the Annual Corporate Income Tax and Annual Publication Report is filed correctly and on time.
If you require more information or need our support about annual compliance in China, please do not hesitate to contact us at firstname.lastname@example.org.