Corporate Income Tax
There are lots of different treatments between the prevailing accounting system and tax system in China . The objective of the accounting system is to present financial statements on a true and fair basis, while the tax system represents state sovereignty. Many foreign investors are confused and put off by the differences between the two systems.
Chinese tax authorities require all Foreign Invested Enterprises ("FIEs") perform a tax reconciliation by the end of April each year. By tax reconciliation, tax authorities require additional payment for under-paid Corporate Income Tax ("CIT") or refund over-paid CIT during the prior year.
Based on our statutory financial statement audit or tax audit, we can propose relevant tax adjustments, prepare complicated tax filing documents, and do tax filing for you on a timely, accurate and legal basis.
Indvidual Income Tax
Individual Income Tax ("IIT") is one of the most complicated tax structures in China due to unclear and rapid changes of rules. Some tax-efficient items can be taken advantage of if employment contracts are carefully structured. However, there are also a number of pitfalls, such as the 183- or 90-day rule, deductible items, overseas income, nominal salary, etc., of which violations may result in severe penalties or even imprisonment.
Given that IIT accounts for a larger and larger percentage of Chinese fiscal revenue, tax authorities are strengthening the administration of IIT, cracking down on any under-paid activities via continuously promulgated regulations.
IIT is generally withheld by employers on behalf of employees. If an employer fails to withhold IIT for its employees or does not pay IIT after withholding IIT, the employer is subject to a fine ranging from 50% to 300% for the underpaid IIT.
We can provide you the following IIT services to ensure you get into the right place at the right time, and/or take suitable corrective actions to avoid severe penalties or imprisonment:
- Propose suggestive recommendations from the moment you start your business in China
- Calculate IIT on a monthly basis
- Perform tax filing
- Calculate overdue IIT, late interest penalty, and potential fines
- Propose IIT back pay strategy
- Handle IIT return for employer
More and more enterprises are choosing to outsource their payroll function to maintain their competitive edge. Outsourcing your payroll function can enable you to focus on your core business activities, access to external expertise on labor and tax laws and regulations, reduce your risks and cost, and keep your compensation system confidential.
To ensure your payroll function being timely, accurately, and legally completed, our experienced professionals can
a) coordinate with your HR manager or other contact person,
b) collect all relevant information on basic salary, bonus, time records, social welfares, etc., for each of your employees,
c) calculate IIT payable, net salary, welfare payable, etc.
d) coordinate with relevant governmental bodies and pay various social welfares on your behalf,
e) make payment of IIT to tax authority and obtain tax payment certificates
f) make payment to each of your employees
g) update your top management with any latest laws and regulations on social welfares or tax, and
h) provide HR and individual income tax advisory where necessary.
Before you get into a market or an industry, it is critical for you to develop a deep understanding regarding its tax environment. The Chinese government sometimes regulates specific industry or product/service markets by favorable or unfavorable tax policies. As a result, you need to be in a position to be able to take advantage of privileged tax policies, find the best solution through proper tax planning, avoid any complicated tax rule pitfalls, and accurately project returns of your investments.
Our experienced tax professionals can provide you tax advice before, during the course of or following your investment in China . We can work with you as your tax advisor on a retainer or ad hoc basis.
Tax Due Diligence
If you do not feel comfortable for your company's tax accruals and payments, if you are facing a tax audit by local tax authority, or if you want to establish a joint venture with a local partner, you may need to do a health check on you or the local partner to see whether you or the partner has been accruing and paying taxes timely and accurately. Since any underpaid taxes will be subject to a late interest penalty of 0.05% per day and a once-off fine ranging from 50% to 500%, the contingent tax liabilities would be prohibitively high.
You may find it necessary to ask experienced independent professionals to conduct a tax due diligence on all aspects of your tax affairs, not only covering all tax categories, but also accrual and payment status, i.e., to conduct a "health check".
Our tax professionals can interview your company or your partners' employees to understand their business activities, as well as accounting and tax treatments on the activities to unveil any irregularities and propose corrective measures.