The annual audit deadline for foreign invested enterprises (FIEs) in China is coming up and in order to comply with requirements and deadlines we have worked out a guidance list with three main points:

1. Audit
2. Tax filing
3. Joint examination report

Audit

It is required by Chinese law that annual audits of FIEs statutory accounts must be carried out by a CPA registered in China and extra attention should be paid to the following records:

-          Expenses: All expenses should be followed by supporting papers e.g. contracts

-          Cash: Cash statement and bankroll should balance.

-          Bank statement: Bank statement and bank account should balance.

-          Inventories: A correct count of inventory and its value should be available. It is recommended to establish internal audits and review systems to avoid unbalanced stocks of inventories and to make next year’s annual audit smoother.

-          Reserve funds: For WFOE’s - A min of 10 percent of profits after tax must be allocated to this account. Further conditions apply.

Also, do not forget basic things such as valid work permits for all expats and stamp duty, this will be checked.

Tax filing

The annual tax report must be authorized by a CPA and submitted to both the national and the local tax bureaus by end May.

Your auditor should handle any issues regarding differences in audited and paid taxes.

Joint examination report

Documents for the joint examination report can be obtained at the Administration for Industry and Commerce office (same office as where the original business license was obtained). A signed and stamped report should be submitted to the respective government administration along with other prescribed financial statements by end June.

If you have questions regarding the annual audit please contact:

Kate Qi

Accounting Department Manager

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