Accounting and tax
Healy Consultants’ Compliance Department guides our Client through legal and tax obligations for China business registration.
- China’s corporate tax rate is a flat 25% on all corporate profits. The China incorporation tax rate is reduced to 15% for entities that are established in special economic zones of the Guangdong, Fujian, and Hainan provinces;
- The standard Value Added Tax rate in China is 17%. Some sectors such as certain food industries and utilities enjoy a reduced VAT of 13%. The customs are required to collect VAT at the applicable rate at the time of importation of goods;
- China has signed 97 double taxation treaties with countries around the world. China has signed tax treaties with world leading markets such as Germany, the United States, Russia, and Singapore;
- All enterprises must file a quarterly corporate tax return with the local authorities following China business formation. This has to be submitted within 15 days of the end of the quarter. In addition to this, an annual tax return has to be submitted within 5 months of the end of the tax year;
- Taxable income include: production and business income, income from contracts, leases, services, bonuses, interest income, and income from royalties;
- There is no China withholding tax on dividends to parent companies for China business formation;
- In China, the tax year follows one calendar year, starting in January and ending in December;
- Most companies in China will require an annual statutory audit following China company setup. An annual audit report must be submitted to the relevant authorities;
- The tax authorities in China are the Ministry of Finance and the state administration of taxation. Furthermore, China has also joined international organisations such as the World Trade Organization (WTO) and the Asia pacific economic cooperation (APEC);
- Healy Consultants Compliance Department assists our Clients to efficiently and completely discharge the annual accounting and auditing obligations of their China company through the following: i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budgets, and sensitivity analysis to better manage financial obligations and ease the process of reporting to the China accounting authorities.
- For an active trading company, these accounting and tax fees are an estimate of Healy Consultants fees to efficiently and effectively discharge your annual company accounting, auditing and tax obligations. Following receipt of a set of draft accounting numbers from your company, Healy Consultants will more accurately advise accounting and tax fees. For a dormant company, Healy Consultants fees are only US$950;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
|1.||Update the books in accordance with the Chinese accounting standards||Monthly|
|2.||Prepare monthly financial statements for tax filing purpose||Monthly|
|3.||File monthly business tax return||Monthly|
|4.||File corporate income tax return||Quarterly|
|5.||Submit annual employee tax returns||Annual|
Legal and compliance
- Before China company setup, a lease agreement for a China office is required by foreign investors. Healy Consultants provides shared office space for our Clients at US$950 per month to support China business formation. China company offices must be located in a prime office premises pre-approved by local government and municipal authorities;
- Following China company setup, each China company must appoint i) at least one shareholder and one director ii) a Chinese legal representative and a Chinese board of supervisors;
- According to article 38 of the Chinese company law, A Chinese legal representative must be appointed. A Chinese legal representative can act on behalf of a firm to conclude contracts and submit reports to regulators. A Chinese legal representative has the authority of a director and shares some corporate liability;
- The Chinese Company Law requires limited liability companies to have ‘the board of supervisors’ (made up by shareholders and employees) to serve as a government reporting body. Should there be a breach of the articles of association, the board of supervisors are legally obliged to report directors, supervisors, or senior officers to the relevant authorities;
- The activities of a company setting up a company in China are restricted to those on its business license issued by the provincial government. Consequently, it is critical for a foreign investor about to register a company in China to carefully prepare incorporation documents. Healy Consultants handles all pre-incorporation documentation for Clients to ensure the scope of business license matches the planned activities of the company;
- Following China business registration, monthly and quarterly financial statements must be submitted to the local authorities;
- In 2014, the US and Chinese Governments signed a treaty whereby all Chinese financial institutions will legally disclose the holdings of all their American Clients to the authorities from 2015. Consequently, our American Clients must file the details of all their Chinese holdings with the IRS, as failure to do so will result in penalties of up to i) 10 years of imprisonment and ii) US$500,000 fine;
- Employers and employees have to contribute to a pension fund. Employees will have to contribute a certain percentage of their salary to meet the local authorities requirements;
- Chinese law provides three basic types of employment contracts: fixed-term contract, non-fixed term contracts, and contracts expiring upon completion of certain tasks;
- Termination within the employment term must be supported by a justified reason, the Chinese law only stipulates certain justifications that allow for cause of termination;
- The de-registration process can take a minimum of 6 months. Healy Consultants provides this service to our Client for US$1,450. During this 6 months period our Client maintain a resident company secretary and a legal registered office;
- In accordance with Chinese Company Law, the minimum registered capital is between US$15,000 and US$140,000 depending on the industry and the province of registration. Our Client can pay up this capital in the following ways i) deposit 100% of this capital within 6 months of the date of incorporation or ii) deposit 20% of the registered capital within 3 months of incorporation date and the remaining 80% within 2 years after the date of incorporation. The paid up capital must be audited by a certified public accounting firm in China to verify that this capital is contributed in accordance to China Company Law.
Frequently asked questions
Do I need a licence to do business in China?Yes. All foreign-owned businesses registered in China must obtain a licence for their chosen business activity or activities. These companies may not enter new business lines without increasing the scope of their licence.