Qualifying Bad Debt in your China Accounts

by Dezan Shira & Associates, Investment Intelligence Unit, Greater China

Receivables (listed as assets) can be written off your books and displayed as bad debt (this reducing profit) under certain conditions as directed by the tax bureau.

Uncollectable Debt
An uncollectable debt is any debt that remains delinquent for two years or more. It may be necessary to show that reasonable steps had been taken to recover the amount, which can include the debtor’s financial statements, which can show the company is in financial difficulty, or Court judgements requesting settlement that have been unresolved, plus any other related documents that can be submitted to tax bureau.

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This article included in China Briefing Magazine

September 2005: Cultural Differences When Managing Chinese Financial Reporting

Other articles in this issue: Cultural Differences In Understanding Chinese Financial Reporting & Common Accounting Practices in the PRC by Dezan Shira & Associates, Investment Intelligence Unit, Greater China New Treatment on Individual Income Tax for Employee Stock Options by Sabrina Zhang, North China Regional Partner, Dezan Shira & Associates Correctly Assessing The Ratios of Total Investment (TI) and Registered Capital (RC) in Your China Business by Alberto Vettoretti, South China Regional Partner, Dezan Shira & Associates