Corporate Income Tax Declaration and Annual Settlement in China

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​published on 5 Dezember 2024 | reading time approx. ​​3 minutes

• Corporate income tax​ ​»

• CIT filing process​​​ »

• ​​​Complexity of annual CIT return »

• ​​​Tax Collection periods and compliance​​​ »

• ​​​Risks of errors in CIT Returns​ »

• ​​​Recommendation »

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​​Corporate income tax​

​CIT filing process

Complexity of annual CIT return

The annual CIT return is a complex task that involves 37 comprehensive forms. Major seven modules include comprehensive information and financial information, tax adjustment forms, loss carried forward forms, tax preference forms, foreign income credit forms, and tax summary and allocation forms (applicable to taxpayers involved in cross-regional operations). Taxpayers need to have sufficient experience and professional know­ledge to correctly select the appropriate forms and complete and correctly fill in the corresponding numbers and information.​

Tax Collection periods and compliance

Currently, Chinese tax law defines a three-year and five-year period for tax collection period: the three-year period applies to cases where the taxpayer has underpaid tax due to the mistakes of the tax authorities; the three-year period also applies to cases where the taxpayer has underpaid tax due to errors in calculation or other mistakes, but the period can be extended to five years if the cumulative amount of tax involved exceeds RMB 100,000. It is important to note that the situations mentioned here are all cases of non-deliberate under declaration, and the nature of tax evasion usually subject to an indefinite collection period.

Risks of Errors in CIT Returns​

If errors in the annual CIT return are not corrected in time, they may lead to tax risks such as the collection of underpaid taxes and late payment interests, lower credit rating and administrative fines. In the case of complex business activities and transactions, especially those involving a large number of related party transactions, high-tech enterprises or taxpayers operating across multiple regions, or where the professional competence of in-house finance and tax personnel is not sufficient, it is generally recommended to seek assistance from external professionals to sort out tax-related matters before the annual CIT clearance, or to assist internal personnel in completing the annual CIT return. In some cases, due to financial handovers and other reasons, companies may find errors in the previous declarations.​

​Recommendation

Given the complexity of the annual CIT return and the potential for error, it is advisable to seek professional assistance. External experts can help to clarify tax issues prior to the annual CIT return and assist internal staff in the correct preparation of the CIT return. This is particularly important for companies with complex business activities, numerous related transactions or insufficient internal expertise.​