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Tax-related Issues on Invoice of Different years in China

Tax-related Issues on Invoice of Different years in China

  1. Basic principle

    According to Regulations on the Implementation of the Enterprise Income Tax Law, the taxable income of enterprises shall be computed on an accrual basis. The income and expenses of certain period shall be recorded according to the period of rights and obligation, regardless whether the money is received or paid; The income and expenses not attributable to a certain period shall not be regarded as income and expenses of the period, even if the amount has been received or paid.

  2. Vouchers for deduction before tax computation

    According to Administration on Vouchers for Deduction before CIT Computation, the management of vouchers shall follow the principles of authenticity, legality and relevance. Authenticity means that the vouchers reflect real business operations and the amount of expenses happend. The expenses of enterprise shall obtain corresponding vouchers as the proof to be deducted before the computation of CIT.

    Enterprises shall obtain relevant vouchers for deduction before CIT computation according to Corporate Income Tax Law, which means before the final settlement of CIT.

  3. Measures of remediation

    According to Announcement on Several Taxation Issues Concerning Taxable Income Amounts of CIT, if there are actual expenses of previous years that shall be deducted before computation of CIT but not deducted or deducted partially, enterprises are allowed to reimburse to the year of occurrence of the project for deduction, but the period of reimbursement shall not exceed 5 years.

    Enterprises that overpay CIT due to the above-mentioned reasons may deduct the amount of CIT payable in the year of retroactive recognition. The excessive part is allowed to be deducted in the following years or for application of tax refund.

  4. Special situation

    According to Implemention of Corporate Income Tax Law on Certain Taxation Issues, if the fixed assets  are put into use without obtaining invoices because the outstanding project funds,  enterprises shall make depreciation according to the contract amount temporarily, then make adjustments after obtaining the invoices.  However, the adjustments should be made within 12 months after the fixed assets are put into use.

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