Representative Office annual audits

The information below is limited to RO who are expenses-based taxpayers (the major category for ROs).

  • cash ? are your bank statement and bank reconciliation correct ?
  • foreign currency issues – is the transaction rate entered correctly ?
  • fixed assets purchasing ? has it been recorded into expenses ? If not, has it been approved by the tax authority ?
  • fixed asset disposal gain/loss ? is it recorded into expenses ?
  • funds from the parent company – are these consistent with the parent company?s records ?
  • interest income/expenses – have they been identified in the expenses report correctly ?
  • expatriate Individual Income Tax ¨C for high level management, such as the Chief Representative, has the IIT calculation and pertinent rate been correctly assessed ?
  • audit fees – have the audit fees been accrued and separately entered ? Are they listed in the expenses report ?
  • rental expenses – have the rental expenses been accrued and separately entered ? Are they listed in the expenses report ?
  • employer contributions to overseas social security plans – If employees are involved in overseas social security plans, has this payment has been included into the expenses report ?
  • expenses paid on behalf of the head office – the local tax bureau may require such expenses to be recorded into the expenses report.
  • BT and FEIT payments – these tax payments should be excluded from expenses report.
  • stamp duty – is the RO subject to stamp duty ?
  • unofficial Invoices (fapiao) – has the RO received unofficial invoices (non VAT) as part of its expenses ? If so this can be subject to tax penalties.
  • business licenses and related administrative matters – the annual renewal of all of your licenses such as registration certificate, tax licenses and so on (see also separate article in this issue)
  • local employees registered with FESCO and valid work permits for expatriate staff – has all this been completed in accordance with the pertinent regulations ?

Next :
Annual licensing & renewals in China


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

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