WITH the simplification of the registration formalities for foreign invested companies, many foreign investors will firstly set up the WOFE before it has the actual business in China. After setting up, to meet the local tax requirement, the new company will make the zero tax filing every month. However, we found some companies who did the zero tax filing for a long period were put on the special administration list by the tax bureau. After negotiating with the local tax officer, we conclude the following point the company should take care of for zero tax filing.
Q1: What company is applicable for the zero tax filing policy?
A1: If the company has no income or expense, it can make zero tax filing for a reasonable and not too long period.
Q2: What is the definition for “reasonable and not too long”?
A2: Generally, the reasonable period for zero tax filing is six months. However, the competent tax officer has his/her own discretion on case by case basis.
Q3: Why the company will be taken the special attention if it made the zero tax filing for the long period?
A3: Because the company has the potential risk being regarded as the “run-away” company or “withholding declaration”. The tax bureau think the main purpose for setting up the company is to gain profit but if the company has no income for a long period, it is no meaning for its existence. Further, it is also reasonable for the company having the expense, i.e. the salary for the employees, the rent and utility fees.
Q4: What special administrations will be taken by the local tax bureau for such companies did the zero tax filing for a long period?
A4: The tax bureau will make the assessment on the company and to check whether it has any illegal action. If the company was found the “run-away” company, it will be put on the non-credit blacklist (even have restriction on this senior management personnel) and listed as RANK-D tax payer. The tax officer can also ask the company to pay tax based on its expenses.
Q5: What is the proper action the company should take when zero tax filing?
A5: The Company should negotiation with the tax bureau on its operation situation and its business plan. Only with the approval for the tax officer, it can continuously make the zero tax filing.
If you have any questions, please send the email to me.
Ms. Jojo Hu
TEL: 0086-21-68868335 ext 324 / FAX: 0086-21-68868021