Annual Fiscal Requirements for Foreign Companies in China

Annual Fiscal Requirements for Foreign Companies in China

Surviving in the local Chinese market can be a difficult task due to a host of local laws, regulations, policies, and requirements that foreign entities have to comply with. Proper understanding of all the red tape is necessary to flourish in this highly lucrative market.

In this article, we look at the fiscal requirements that foreign companies must meet in order to continue operating in the Chinese market.

There are four main fiscal requirements that foreign companies in China—like WFOEs—must meet annually:

  1. Annual Audit
  2. Annual Tax Reconciliation
  3. Inspection and Reporting
  4. Foreign Exchange Reconciliation

Let’s have a look at them one by one.

Annual Audit

An annual audit is the audit of a company’s previous year accounts. Audits of foreign companies are carried out by a certified Chinese accounting firm. The reports that need to be produced and audited include the income statement, balance sheet, and cash flow statements.

The local accounting standards that are set out by the government are to be used in making the financial statements. Here is a guide to Chinese accounting standards.

Annual Tax Reconciliation

Government spending in China is very high, and therefore, the government must ensure high levels of income through taxes and public returns.

Companies need to pay taxes regularly, and an annual tax audit is conducted every fiscal year to make sure that tax laws are being followed. Here is a guide to corporate taxation in China.

Inspection and Reporting

An annual report must be disclosed to the relevant authorities; this includes basic information about the company, a summary of the financial situation of the company, investments made by the company, and other ownership details. Some information is made public, while the rest can be kept secret.

Foreign Exchange Reconciliation

The government keeps a close eye of foreign transactions. In order to monitor the exchange of foreign currency closely, the government requires all foreign companies to provide a statement of foreign exchange inflows and outflows every year. The statement then needs to be audited by a government-approved audit firm which provides an audit report to them.

Professional Business Services

If you’re a foreign investor thinking of investing in China, don’t let all these regulations stop you. Business China provides all kinds of company registration and company management services for foreign investors in the country. So get your WFOE registered now and start earning! Visit the Business China website for more details.

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