Xiamen Bookkeeping and Auditing Service
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All FIEs (whether Representative Office or Limited Company) in Xiamen are required to prepare annual financial statements, including balance sheets and income statements for their annual Chinese audit. Tax compliance is especially important because an FIE can only repatriate profits to foreign investors after the Chinese tax bureaus are satisfied that all applicable taxes have been paid up. While tedious, this process is a good opportunity for companies to conduct an internal financial health check and to optimize tax efficiency, financial structure and processes, as well as internal control mechanisms for fraud prevention. Accordingly, an annual audit by a firm of certified public accountants registered in the PRC is required under Chinese law.
Xiamen Bookkeeping & Auditing - Annual License Renewals
Besides an FIE annual audit in Xiamen, Limited Companies, such as Wholly Foreign Owned Enterprises, Foreign Invested Commercial Enterprises and Joint Ventures (NOT Representative offices) also have to submit a range of other documents and licenses to the authorities for checking and renewal if necessary. The so-called annual renewal is a bureaucratic process, but also a good time to take stock and ensure all your paperwork is up to date. The Audited Financial Report, the Foreign Exchange Audit Report, and the Annual Report must be submitted to seven government departments. These documents must be submitted before June 30th each year.
Xiamen Bookkeeping & Auditing - Annual Tax Declaration
Every year, FIEs have to make annual tax declaration for annual audit in Xiamen. FIEs will also need to submit to both the national tax bureau and local tax bureau the Annual Taxation Consolidation Reporting Package, authorized by a CPA firm by the end of April each year. In this reporting package, a CPA firm shall verify all the taxes including VAT, Business Tax, Consumption Tax, Foreign Enterprise Income Tax (FEIT), and other taxes on the basis of the audit result.
Xiamen Bookkeeping & Auditing – Process of Annual Audit in Xiamen
Step 1 of Xiamen Bookkeeping & Auditing: Prepare Audit Report
All FIEs (including wholly-foreign owned enterprises (WFOE), joint ventures (JV) and foreign-invested commercial enterprises (FICE)) are required to hire external accounting firms to conduct an annual audit of the company’s financial reports. The audit report must be signed by a Xiamen-qualified Certified Public Accountant. The objective of a statutory audit is to ensure that companies meet Chinese financial and accounting standards, including proper use of Chinese GAAP.
Step 2 of Xiamen Bookkeeping & Auditing: Prepare Corporate Income Tax (CIT) Reconciliation
In Xiamen, CIT is paid on a monthly or quarterly basis in accordance with the figures shown in the accounting books of the company; companies are required to file CIT returns within 15 days from the end of the month or quarter. However, due to discrepancies between the accounting standards and tax laws in Xiamen, the actual CIT taxable income is usually different from the total profits shown in the accounting books. Meanwhile, CIT calculation should be in compliance with tax law, not the accounting standards. As such, the State Administration of Taxation (SAT) requires companies to submit an Annual CIT Reconciliation Report within five months from the previous year’s year-end to determine if all tax liabilities have been met, and whether the company needs to pay supplementary tax, or apply for a tax reimbursement. Generally, the Annual CIT Reconciliation Report must include adjustment sheets to bridge the discrepancies between tax laws and accounting standards.
Step 3 of Xiamen Bookkeeping & Auditing: Annual Inspection
FIEs in Xiamen are required to undergo an annual cooperative inspection jointly conducted by several governmental departments of the State Council. These inspections are designed to ensure that FIEs conducting businesses in Xiamen are fulfilling the legal commitments they make to each of the departments. Each year from March to the end of June, the annual inspection is jointly hosted by the following governmental departments:
Ministry of Commerce (MOFCOM)
Ministry of Finance (MoF)
Administration of Industry and Commerce (AIC)
State Administration of Taxation (SAT)
State Administration of Foreign Exchange (SAFE)
Statistical Bureau
Step 4 of Xiamen Bookkeeping & Auditing: Profit Repatriation
Companies distributing profits should complete the reconciliation procedure in advance to leave sufficient time for shareholder companies to prepare for CIT compliance before the May 31 deadline. The submission of additional documents may also be required. In Shanghai, for example, a company should apply for a Letter of Notice for Profit Distribution of Domestic Enterprise issued by the local tax bureau after finalizing its CIT reconciliation. The company receiving the profits will need to attach this letter to its own CIT reconciliation report.
Verification of the documents and tax assessment will be conducted within 15 days after the STB receives these documents. Beijing STB explains that Announcement 40 does not change the tax withholding obligation, but merely simplifies the outbound payment procedure. Companies or individuals who are found to not have fulfilled their tax obligations or filing and registration requirements could face fines ranging from 50 percent to 500 percent of the unpaid tax.
Contact Us
For further queries, you are welcome to visit ATAHK website www.3737580.net or email to atahkhk@21cn.com/ ata-cfmp@hotmail.com or contact any of the following branches, thank you.
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