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

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