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China Tax Deregistration Made Easy

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Category: Business in Asia
China Tax Deregistration Made Easy - SJ Grand

As the Chinese market becomes increasingly competitive, some foreign companies are left with no choice but to shut up shop. The WFOE (Wholly Foreign Owned Enterprise) deregistration process is notoriously complicated. However, in recent years, Chinese authorities have stepped up efforts to facilitate market exit, especially when it comes to deregistering with the different tax bureaus.

Take a look at some of our previous articles: Doing business in China got easier according to World Bank

On May 9, 2019, the State Taxation Administration unveiled the Notice on Making Greater Efforts to Promote the Optimization of the Procedures for Handling Tax Deregistration (Shuizongfa [2019] No.64). The Notice introduces a set of measures aimed at further optimizing the procedure for handling tax deregistration. Its overarching goal is also to improve the overall business environment for China-based firms.

Keep reading as we guide you through key updates regarding the tax deregistration process.

Broader Tax Documents Exemption Conditions

Companies can benefit from a simplified deregistration process and obtain a tax clearance document immediately upon application, after verification of the business license by tax authorities. Conditions to benefit from the streamlined process are highlighted below:

  1. The company has never handled any tax-related matters with the tax bureau
  2. The company has handled tax-related matters, but has never applied to issue invoices. It does not have any outstanding tax and has never been fined
  3. The company has been declared bankrupt by the local People’s Court. It should present the official ruling of the court to tax authorities upon application

Streamlining of the Pre-Deregistration Process

Where a business is determined to be an “abnormal taxpayer” by authorities, it should first rectify its situation and complete relevant tax formalities before submitting a deregistration application. If the following conditions are met, tax authorities may print a zero declaration form (批量零申报确认表) and perform a batch information processing for taxpayers’ filings.

  1. Taxpayers had nil returns for VAT (Value-Added Tax) and CT (Consumption Tax) over the period their status was deemed abnormal
  2. Taxpayers had nil monthly or quarterly returns for CIT (Corporate Income Tax) over the period their status was deemed abnormal. Furthermore, they do not present any loss carried forward from previous periods

In addition, the Notice specifies that taxpayers do not need to terminate the entrusted tax withholding agreement prior to starting the deregistration process. The agreement shall be automatically cancelled once deregistration is complete.

Simplification of Paperwork Requirements

Taxpayers who have already completed real name authentication with tax authorities do not need to submit the following documents:

  • Tax registration certificate, temporary tax registration certificate and fapiao booklet
  • Decision from the market regulation department to revoke the business license
  • Approval of superior authorities or original resolution from the Board of Directors
  • Other documents such as project completion certificate, acceptance certificate etc…

All provisions above are effective since July 1st, 2019.

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