When doing business and living in China, there are some important matters needed to be done before specific dates, which are crucial to both your company’s operation and your own credit management. Now in this blog, let’s look at some of the key things to keep in mind every year. Have you planned them properly yet? Why not let Hongda help!
The Important Annually Affairs You Must Not Miss
When you live and work in China, there are some important matters and deadlines you need to keep in mind. Missing these deadlines could cause unnecessary trouble for your company or yourself, possibly affecting your social credit and leading to fines or other penalties. In this blog post, Hongda will provide detailed information on the key matters you need to remember! We will list the most important annually matters which need to be planned and handled properly in the timely manner so that you have a clear idea about when you should get ready for what’s coming next!
Key Annual Matters for Companies
1. From 1st January to 31st May: Annual Tax Reconciliation (For All Companies)
Corporate income tax settlement and payment is the act of calculating the taxable income and the amount of income tax payable for the tax year, determining the amount of tax to be refunded or supplemented based on the prepaid tax, and submitting the annual corporate income tax return and related materials to settle the annual corporate income tax. This measure is to ensure that enterprises pay taxes according to the law, timely adjust pre-tax deductions and the application of tax incentives, and ensure the accuracy and compliance of corporate tax filings.
Annual tax settlement and payment is an important financial and legal obligation for enterprises, affecting not only the financial status and tax compliance of the enterprise but also potentially impacting the enterprise's reputation and market image. Through a strict annual tax settlement and payment process, enterprises can timely identify and correct tax issues, avoiding potential tax risks and penalties.
Before conducting the annual tax settlement and payment, your company needs to organize and prepare the financial and accounting documents for the entire year. This includes sorting out the company's income, costs, expenses, profits, and other related accounting vouchers and tax documents from the past year. Subsequently, you should submit the annual tax settlement and payment report through the designated electronic tax bureau system of the State Taxation Administration or go directly to the tax authorities. The submission should include the annual corporate income tax return, financial statements, and other related documents.
Hongda's tax services can assist your company in timely organizing financial records. We will closely monitor and communicate to you changes in tax laws and tax incentive policies, helping you smoothly complete the annual tax settlement and payment, enhancing your level of financial management. Additionally, for eligible companies, Hongda can also provide tax refund services, assisting you in applying for refunds of taxes already paid.
2. From 1st March to 30th June: Company Annual Inspection (For All Companies)
The annual review for companies in China, also known as the Enterprise Annual Report Public Disclosure System, mandates enterprises to submit a report detailing their operational and financial status for the previous year to the administrative department for industry and commerce. Companies must compile their annual report and submit it through the National Enterprise Credit Information Publicity System (the official website of the Administration for Industry and Commerce) within the stipulated timeframe.
Failure to submit the annual report on time may result in the company being listed on the business anomaly list, adversely affecting its credit status. Serious violations could lead to administrative penalties or other legal consequences. This system aims to enhance corporate transparency, promote lawful business operations, and protect the legal rights and interests of investors, creditors, and the public at large. It serves as a crucial mechanism for regulatory authorities to oversee lawful business operations and increase corporate transparency, contributing to the establishment of a market credit system.
Although the annual inspection period does not begin until March each year, it is advisable to start preparing the necessary documents at the end of the preceding year to ensure completeness. The documentation required varies for different types of companies, such as WFOEs, JVs, and ROs. For more details and to select Hongda's annual service packages to expedite the annual process, you can visit our Yearly Maintenance service page . Working with Hongda for your company’s annual maintenance will bring you more benefits than just meeting legal requirements!
3. Before 31st May: Company Tax Verification or Tax Auditing (Not Compulsory for All Companies but Strongly Recommended)
Tax certification refers to the process where professional tax accountants, in accordance with tax laws, regulations, and related provisions, assess and verify the legality and reasonableness of an enterprise's tax-related matters, followed by the issuing of a professional opinion report. Tax certification reports include the settlement and payment of corporate income tax, additional deductions for research and development expenses, pre-tax deductions for enterprise asset losses, special certification for high-tech enterprises, land value-added tax settlement, tax judicial certification, tax situation review services, and other tax-related certification matters.
The necessity of conducting tax verification is that it serves as a critical tool for ensuring transparency and compliance in complex tax matters. For instance, in the case of multinational transactions involving intricate tax structures, tax authorities may demand tax verification reports to validate that the company's tax strategies align with regulatory frameworks. Similarly, in situations where substantial tax refunds are involved, tax agencies may require verification to authenticate the legitimacy of the refund claims and verify that they adhere to relevant tax laws.
Tax verification, much like conducting audits and submitting audit reports, is not mandatory for all companies. Only certain specific companies are required to undertake this annual maintenance task. However, conducting tax verification on a regular basis remains essential as it can bring numerous benefits to your company's operations and financial management. It helps scrutinize your company's financial and tax systems, promptly identifying potential loopholes and swiftly addressing them. Therefore, Hongda advises you to conduct tax verification when necessary, allowing our tax experts to assist you in ensuring tax compliance, optimizing tax management, and minimizing tax risks.
4. Before 30th June: Company Auditing Report (Not Compulsory for All Companies but Strongly Recommended)
The corporate audit report is a document produced by accounting firms based on their audit work and related financial statements. It typically includes an independent third-party opinion on the financial condition and operational results of the company. Submitting financial reports that have been audited by an independent third party to relevant regulatory authorities or shareholders not only helps the company verify the accuracy and completeness of its financial situation but also serves as an important means of assessing the company's compliance with financial and tax regulations.
According to current regulations and laws, the following enterprises are required to submit audit report information when declaring their annual inspections:
- Foreign-invested corporate entities established before December 31, 2011;
- Specific types of business and companies in regulated industries: sole proprietorship limited liability companies and publicly listed companies; companies engaged in finance, securities, and futures; companies involved in insurance, venture capital, capital verification, evaluation, guarantee, real estate brokerage, exit and entry intermediary, overseas labor service intermediary, and corporate registration agency; companies whose registered capital is paid in installments and has not been fully paid; companies that have committed illegal activities such as false declaration of registered capital, fictitious contributions, or withdrawal of contributions within the last three years.
Although it is not compulsory for all companies to conduct auditing and submit audit reports to related government departments, Hongda still highly recommend that you should conduct auditing in an annual basis as it brings more advantages than just meeting the legal regulatory requirements. You can choose Hongda’s yearly maintenance and auditing services to enjoy all those benefits! Our highly experienced CPAs will help you prepare the audit reports, following both the standards of China’s regulations and the requirements of your overseas headquarters.
- Enhancing the reliability and transparency of corporate financial reports, which is important to investors, creditors, and other stakeholders to assess the financial health of a business.
- Facilitating consolidation with the parent company and complying with the financial audit requirements of your parent company.
- Meeting the legal requirement for publicly listed companies or enterprises.
- Meeting the legal requirements by producing an audit report when your company is seeking to distribute dividends.
Key Annual Matters for Individuals
1. From 1st March to 30th June: Individual Income Tax Declaration (For All Individual Taxpayers)
In China, the annual declaration for personal income tax typically takes place from March 1 to June 30 of the following year. During this period, taxpayers need to consolidate and declare their comprehensive income from the previous year. The annual personal income tax declaration is a process where individuals, in accordance with the provisions of the State Taxation Administration, declare their various types of income obtained in the previous tax year to the tax authorities, as well as the taxes that should be paid or refunded. This is a statutory obligation aimed at ensuring the lawful and accurate payment of personal income tax.
The calculation of personal income tax includes income from wages and salaries, individual business income, income from contracting or leasing operations to enterprises and institutions, interest, dividends, rental income, income from property transfers, and incidental income. In calculating personal income tax, many items can be considered as tax-exempt income, tax-reduced income, and deductible items, such as basic pension insurance, basic medical insurance, unemployment insurance, and housing provident fund, etc. In addition, there are many special deduction items, including the educational costs for children, continuing education expenses, house rental, housing loan interest, infant nursing, elderly support, and the costs for major diseases, which can lower the tax payment. If you have already paid these taxes, you can apply for a refund during the annual settlement. Want to know more about individual income tax payments and how you can benefit from the individual income tax updates? Please read our blog: See How Much You Can Save with the Individual Income Tax Updates!
Conclusion
Both corporate and individual taxpayers in China face essential annual obligations that significantly impact their financial and legal standing. For companies, this includes compliance with annual inspections, tax filings, and, where applicable, audit report submissions. These requirements are designed to ensure business transparency, maintain good corporate credit, and adhere to the legal framework set by Chinese regulations, including the submission of corporate income tax and other relevant tax documents. On the individual side, the annual personal income tax declaration is a key obligation, offering opportunities for tax refunds through various deductions and tax relief policies, thus directly affecting personal financial health and creditworthiness.
Both processes underscore the importance of understanding and applying tax laws and regulations accurately, avoiding tax risks, and maintaining compliance to prevent penalties. For corporations, staying abreast of audit and tax filing requirements is crucial for sustaining business operations and fostering growth in China's dynamic market environment. For individuals, timely and accurate tax filing can lead to significant financial benefits and contribute to maintaining a positive personal credit score. Overall, these annual obligations highlight the interconnectedness of legal compliance, financial management, and the broader implications for corporate and personal advancement within China's regulatory landscape. Do not forget to handle them properly!
