China 2008 annual renewals due: Are you up to speed?

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Government departments need your reports for various business license renewals

By Chris Devonshire-Ellis

It’s that time of year again folks, timed right at the end of the calendar year, and just when westernized business administrators are thinking of skiing holidays, the kids at home and New Years parties – the atheist, yet pragmatic Chinese government insist we get all our business documentation in order to permit us to trade next year. Every year this happens, like clockwork, and every year, foreign businesses in China get caught out. So here, hot off the desk of Dezan Shira & Associates China compliance department (who are all wearing nifty little Dongguan-made Santa Claus hats in the office at this time) is the run down on what you need to be doing, who you need to be talking to and what you need to be filing. Or else it will be a cold and unproductive January after the festivities, and that’s no way to start a New Year.

Annual licensing and renewal requirements for 2008

Please note: This article originally appeared in China Briefing’s2007 Guide to China’s Business Taxes,” written by Dezan Shira & Associates, and is original material subject to copyright. Permission to reproduce this in any format, be in electronic, online, print or other versions must be sought from the publisher at editor@china-briefing.com. All rights are reserved. Links or references to this article however are welcomed.

The China annual audit is not just about financial reporting for the year. There are also legal administration procedures to go through every year end, meaning foreign invested businesses in China also have to submit a range of other documents and licenses to the authorities for checking and renewal – the so-called “annual co-operative examination.” This is a bureaucratic process, but it is a good time to take stock and ensure all your paperwork is up to date.

Luckily, the authorities do try to make it is easy as possible for you – you can either submit your details via the internet, or by going to an office where officials from a total of seven different agencies come together temporarily for this process.

These seven agencies are (almost) the same as the ones to which you have to submit your audited accounts:

Bureau of Foreign Trade and Economic Co-operation (BOFTEC)
Administration of Industry and Commerce (AIC)
Economic Committee
Financial Bureau
State Administration of Tax (SAT)
State Administration of Foreign Exchange (SAFE)
China Customs

The procedure for the annual co-operative examination for foreign businesses in China is as follows:

Preparation for the annual co-operative examination
First of all, every company needs to apply for and obtain the annual co-operative examination documents from the same office of the State Administration for Industry and Commerce from which they have obtained their original business license. They must also download the annual cooperative examination report form from the relevant provincial or municipal SAIC website. Companies must also select one of two options to apply for annual examination – you can apply either through the internet or by taking your documentation directly to the authorities.

Requirements for annual co-operative examination documents
As we have mentioned, there are seven sets of documentation you need to bring together, one for each authority, as follows. Note that all photocopied documents need to be stamped with the company seal.

The Bureau of Foreign Trade and Economic Co-operation (BOFTEC)
Original of annual cooperative examination report
Original and photocopy of approval certificates of foreign invested enterprises
Audit report issued by CPA firm, or photocopy of capital verification report for enterprises set up after July 1, 2005
For enterprises in encouraged industries, photocopy of encouraged project confirmation certificate
For advanced technology enterprises and export enterprises, photocopies of certificates for these two kinds of enterprises

The Administration of Industry and Commerce (AIC)
Photocopy of annual cooperative examination report
Audit report issued by CPA firm, or photocopy of capital verification report, and annual financial report as above
Duplicate of business license

The Economic Committee
Photocopy of the annual cooperative examination report

The Financial Bureau
Photocopy of the annual cooperative examination report
Annual financial statement (full set) of the business
Audit report issued by CPA firm
Duplicate of finance registration

State Administration of Tax (SAT)
Photocopy of the annual cooperative examination report
Duplicate tax registration certificate for state and local tax
Audit report issued by CPA firm and annual financial report.
Photocopy of duplicate business license
Photocopy of capital verification report

State Administration of Foreign Exchange (SAFE)
Foreign currency registration certificate of foreign invested enterprises
Audit report of foreign currency issued by CPA firm

China Customs
Photocopy of the annual cooperative examination report
Audit report issued by CPA firm and annual financial report
Original registration certificate for customs declaration

Should these procedures not be followed, difficulties in resuming trade after New Years can arise, particularly in respect to problems with Customs or accessing your businesses Foreign Exchange to settle invoices.

It is also important to note there can be regional variations in the above procedures and requirements. If you are unsure, please contact us for advice (see below).

It should also be noted that if Chinese administration staff handling this work have no previous experience in handling foreign businesses legal administration, there may be problems concerning incomplete registrations as the procedures for renewing foreign invested business licenses are different from Chinese domestic businesses. Legal administrators back in the home office  should be checking this list above with their Chinese counterparts to ensure compliance is met. As mentioned, operational difficulties or even fines and penalties can be levied if annual renewal documentation for 2008 registrations is not filed completely or on time.

Further Information
If in doubt about what to do, please email Dezan Shira & Associates at legal@dezshira.com.

China Briefing’s “2008 Guide to China’s Business Taxes” is now available, detailing all financial and administration compliance matters of China’s tax regime, the annual audit and annual registration procedures. It is priced at US$25 plus p&p. Orders to sales@china-briefing.com.

On Wednesday: Preparing for your annual audit in China.

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