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  • Annual Audit for Guangzhou Company
  • Author Date Time:2010-03-25 01:00:15

    General Introduction

    All Guangzhou Company (whether Representative Office or Limited Company) in China are required to prepare annual financial statements, including balance sheets and income statements for their annual Chinese audit. Such accounts must be in accordance with the Chinese accounting standards for business enterprises.


    Guangzhou Company, including their legally responsible persons, must take full responsibility for the truthfulness, legitimacy and completeness of these financial statements. The financial statements must be completed each month for each financial calendar year from January 1st to December 31st. These documents must be completed and audited before end of April of the following year. The audited accounts will then have to be consolidated and submitted for tax purposes by the end of April every year. These statements will be used for computing the Guangzhou Company taxable and distributable profit. Accordingly, an annual audit by a firm of certified public accountants registered in the PRC is required under Chinese law.


    Annual Tax Declaration for Guangzhou Company

    Guangzhou Company 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.


    The FEIT is obviously the most important issue to be disclosed in this report. The related taxable elements, and in particular items involved in FEIT such as income, cost and expenses, are specified in detail, while the auditing firm shall make the FEIT reconciliation between financial profit and taxable profit in accordance with PRC FEIT regulations.


    If the audited taxes are different from the taxes paid by the FIE, the FIE shall discuss the variation with the tax bureau. For example, should the audited tax figure be lower than the figure paid, the FIE will need to apply for a tax rebate or tax reduction for the fiscal year in question. Accordingly; should the audited tax figure be higher than the paid FEIT, once the FIE submits the report, it would have to pay the balance due to the tax bureau.


    Annual License Renewals for Limited Companies

    Besides an annual audit, 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.

    Annual Inspection for Limited Companies

    Limited Companies need to apply for and obtain the annual inspection documents from the same office of the State Administration for Industry and Commerce (SAIC) from which they have obtained their original business license. They must also complete the annual inspection report form from the relevant provincial or municipal SAIC website.


    What happens if an enterprise does not attend the annual inspection?

    -----If enterprises does not accept the annual inspection as required, the enterprise registration authorities will order the enterprise to accept the annual inspection within a specified time limit, and to pay a penalty between 10,000 Yuan and 100,000 Yuan if the enterprise is a company (limited /joint-stock/listed company), or a penalty below 30,000 Yuan if the enterprise is a branch company, a non-company entity or branch thereof, an enterprise operating in China from a foreign country/region, or other business unit granted a business license, or a penalty below 1,000 Yuan if the enterprise is a partnership or an individual proprietorship enterprise or branch thereof.

    -----If the enterprise fails to accept the annual inspection within the specified time limit, the enterprise registration authorities will make an announcement. The enterprise’s business license will be revoked if the enterprise still fails to accept the annual inspection within 60 days from the announcement.

    -----Every year, Chinese authorities on enterprise administration conduct annual inspection of enterprises. It is a routine formality, but still a bit complicated. Trust it with us, and you will save a lot of time and energy to engage in your business.


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