Lawyer, Family Office
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)
Sources
- State Taxation Administration: Enterprise Income Tax Law
- State Taxation Administration: Enterprise Income Tax implementing rules
- SAMR: State Administration for Market Regulation
Related pages
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