Overview
All companies registered in mainland China (including WFOE and Free Trade Zone structures) must conduct an annual audit. The report is submitted to the State Taxation Administration (STA) together with the annual tax return, and without it the company cannot complete annual reporting with the State Administration for Market Regulation (SAMR).
Unlike Hong Kong, Chinese audit requires full-scale bookkeeping for the entire financial year — all transactions must be recorded in a local system (Kingdee, Yonyou or Suga) and reconciled with fapiao invoices. The auditor works with this accounting, not bank statements.
When audit is required
- Mandatory annually for all types of Chinese companies — WFOE, Joint Venture, Representative Office, FTZ structures.
- The financial year in PRC coincides with the calendar year: January 1 to December 31.
- Filing deadline for the annual CIT reconciliation (汇算清缴) and enterprise income tax return — May 31 of the following year.
- Late filing results in penalties and risk of business license suspension.
Documents for auditor
- Complete bookkeeping for the financial year (general ledger, transaction journals)
- Bank statements for all Chinese accounts
- All received and issued fapiao (special and ordinary)
- Contracts with local counterparties
- Documents for fixed assets and intellectual property
- Previous year's audit report (for all audits except the first)
Cost
Cost depends on transaction volume and company category. Rates below are for a typical financial year.
| Category | Cost |
|---|---|
| Tier 1 — small volume, up to ~50 fapiao | €750 |
| Tier 2 — medium volume, 50–200 fapiao | €900 |
| Tier 3 — large volume, 200–500 fapiao | €1,200 |
| Tier 4 — major volume, >500 fapiao or complex structure | €2,400 |
Timeline
- Standard audit — 4–6 weeks from the close of the financial year and provision of complete bookkeeping.
- Rush audit (2–3 weeks before the STA deadline) — possible with a 30% surcharge.
- First company audit takes 20–30% longer — requires setup of accounting policies and coordination with tax authorities.
Key considerations
Unlike Hong Kong, in China audit is inseparable from bookkeeping services throughout the year. If bookkeeping is conducted chaotically or with violations (e.g., invoices not closed with fapiao), the auditor will not be able to prepare the report — retrospective reconstruction of accounts will be required, which doubles cost and timeline.
Audit cost does not include:
- Bookkeeping itself — maintained as a separate service
- Filing of annual tax returns (CIT, VAT, individual income tax for employees)
- SAFE reporting for cross-border transfers
- Annual reporting with SAMR (separate registration procedure)
Statutory calendar and separate filings
The current PRC Company Law requires a company to prepare a financial and accounting report at each financial year-end and have it audited by an accounting firm in accordance with law. The tax and market-registry filings are separate checkpoints: under the Enterprise Income Tax Law, the tax year normally runs from January 1 to December 31, monthly or quarterly prepayment returns are due within 15 days after the period, and the annual return and final settlement are due within five months after year-end. The law’s standard enterprise income-tax rate is 25%, subject to statutory reduced rates and incentives. A separate tax-collection rule imposes a daily 0.05% surcharge on tax arrears from the payment due date; that consequence attaches to unpaid tax, not automatically to an unfinished audit.
Separately, the SAMR enterprise-information rules require the previous year’s enterprise report through the National Enterprise Credit Information Publicity System between January 1 and June 30. For foreign-invested companies, the 2026 “multiple reports in one” guidance also includes FDI stock-equity information in that annual-report workflow. Do not treat May 31, June 30 and the audit completion date as one interchangeable deadline; confirm the attachments required by the competent tax office, market-regulation authority, bank and any sector regulator.
Registered capital
Article 47 of the current Company Law requires shareholders of a newly established limited-liability company to pay subscribed capital within five years from incorporation, unless special rules apply. The State Council transition rules require a pre-July 2024 company whose remaining contribution period extends beyond five years from July 1, 2027 to shorten that period and amend its timetable before June 30, 2027. The capital schedule, articles, bank receipts and ledger should therefore reconcile before year-end work begins.
Digital invoices and foreign-exchange evidence
The State Taxation Administration Announcement No. 11 of 2024 rolled out fully digitalized e-invoices nationwide from December 1, 2024. They have the same legal validity as paper invoices, use unified national numbering and flow through digital tax accounts; their intended use must be confirmed for VAT deductions or export-tax rebates. Cross-border receipts and payments remain a separate evidence trail: SAFE requires banks to review the authenticity and compliance of goods-trade documents, so contracts, invoices, customs records and bank movements must describe the same transaction.
Q/A
Is 31 May the statutory deadline for the audit itself?
Not as a universal rule. For a calendar-year enterprise, the national Enterprise Income Tax Law places the annual EIT return and settlement within five months after year-end, while the market-regulation annual report runs from 1 January to 30 June. Whether audited statements are required, and their practical delivery date, depends on the company and filing context.
Can the accounts be audited if some fapiao are missing?
Missing fapiao do not make an audit mechanically impossible, but they can prevent clean tax and VAT substantiation and require the auditor to test contracts, payment records, delivery evidence and accounting treatment. China’s EIT law permits reasonable expenses actually incurred in earning income; the tax result still depends on evidence and applicable invoice rules.
Does a dormant WFOE still have annual obligations?
Yes. A company with no trading activity does not automatically lose its annual tax and disclosure duties. It must still assess nil or other returns, keep accounting records, and file the market-regulation annual report; whether a statutory audit is required should be checked against its company form, local filing practice and any sector-specific rule.
Why does year-end work affect bank and foreign-exchange reviews?
Cross-border flows form a separate evidence trail. SAFE requires banks reviewing goods-trade documents to assess authenticity and compliance, so contracts, invoices, customs records, ledger entries and bank movements should describe the same transaction. Unreconciled balances or vague payment purposes can delay review even if bookkeeping is otherwise complete.
Do fully digitalised e-invoices replace paper fapiao?
They have the same legal validity as paper invoices and have been rolled out nationwide since 1 December 2024, but digital form does not waive substantive checks. The recipient must use the digital tax account to confirm an invoice’s purpose for VAT input deduction or export-tax rebates, and the underlying transaction still needs genuine supporting records.