Annual Compliance for China Companies

China’s annual enterprise compliance procedures include annual tax declaration, annual evaluation reporting and annual audit. These procedures should be carried out between the end of the fiscal year (December 31) and the end of June. Given the constantly changing regulatory requirements set by Chinese authorities, companies should be vigilant about fulfilling their annual compliance obligations, failure to comply with these procedures can lead to penalties.

Annual Corporate Income Tax (CIT) declaration

In China, the tax year follows the calendar year. The State Taxation Administration requires corporate taxpayers to submit their annual CAT returns accompanied by the reconciliation sheet between January 1 and May 31 of the following year. The annual filing ensures that all incurred taxes in the previous year are paid and if any reimbursements need to be made.

The standard CIT rate for businesses registered in China is 25 percent. The tax rate could be adjusted depending on annual taxable profit, location, or the industry it operates in and lowered if it leverages the incentives provided by the local government.

In addition to the annual CIT filing on the employer side, the employee is responsible for declaring annual individual income tax (IIT) returns. This procedure ensures that the individual has settled their income tax obligations and must be finalized between March 1st and June 30th. The annual IIT filing can be done online via a Personal Income Tax app – 个人所得税.

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Annual evaluation reporting

Under Chinese law, all companies must submit annual compliance documents to the respective authorities: the Ministry of Commerce, the State Administration for Market Regulation of Industry and Commerce (SAMR), the State of Foreign Exchange, and the Finance Authority, as well as the Customs Authority if the company is engaged in trade.

Normally, annual evaluation includes basic information on the company, financial data, investment details, and ultimate beneficial owner information. Additional information might be required depending on the business scope and location of registration.

The deadline for the annual evaluation report is the end of June; if a company fails to submit the report according to the deadline, it will be listed on the SAMR abnormal list. After a three-year consecutive violation of the terms, a company may face the cancellation of its business license.

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Annual audit

While the annual audit is not mandatory, it is highly recommended for all limited liability companies operating in China to hire a certified public accountant (CPA) to conduct an annual audit of the previous year’s financial reports. Also, in some cases the local tax bureau may require it.

The objective of the annual audit is to demonstrate that the company’s financial statements comply with Chinese Generally Accepted Accounting Principles standards and accurately reflect the company’s actual financial position.

The standard documentation for the report consists of the audit report, the financial statement, notes of financial statements, and a taxable income reconciliation sheet. The requirements differ depending on the region.

It this advised to complete the annual audit ahead of the annual CIT refund filing.

Whilst annual audit is not a legal requirement that companies must follow, it is an opportunity to conduct a financial health check and review your operations to identify accounting, tax and compliance issues.

Need professional support?

S.J. Grand boasts more than two decades of experience in providing exceptional tax and accounting services within the China region. Our expertise can aid your company in meeting the annual compliance requirements, ensuring that all necessary paperwork is completed accurately in a timely manner.

By leveraging our extensive knowledge, your business will maintain compliance and ensure financial stability, allowing you to focus on achieving your business goals.

S.J. Grand is a full-service accounting firm focused on serving foreign-invested enterprises in Greater China since 2003. We help our clients improve performance, value creation and long-term growth. 

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