【TAX】VAT Accountability, Avoidance or Evasion?
A Case Study of VAT Accountability Caused Issue
税务案例分析，因为增值税避税导致的困扰
Recently, Reindeer Station encountered an emergency inquiry from a foreign directed investment (FDI) company concerning accounting issues. Due to different accounting standard , and misunderstanding of book keeping rules, the company’s annual financial report caused major problems in its mother company. This issue is typical among companies in China whose main revenue is overseas payment. We hope it would help you understand how our accounting service is a good choice.
近日，灵达商务遇到一起外资公司因接收母公司支付的服务费用后，未按国际通用的财务准则做账，导致母公司造成财务方面的困扰。由于不同的财务准则，国内公司与国外母公司的账目引起了母公司审计人员的关注，导致国外母公司的年度财务报表不能过审。他们经历的状况在同类型公司中比较典型，即公司的主要收入为国外公司的打款。希望这个案例能让你理解为何灵达商务的会计服务是物超所值的。
This FDI company was set up in China, let’s call it company A. Its main purpose is to provide quality check and product inspection for its mother company, company B in Europe. Its sole revenue is from company B who paid as service fee. In 2020 account year, company B transferred in total RMB 1.6 million to company A.
该外资公司在中国境内注册为，我们称他为A公司。设立A公司的主要目的让其为母公司B提供在中国的质检、验货等服务。B公司是注册在欧洲的公司。2020年B公司共支付服务费160万元给A公司。
According to Chinese legislation on tax, small scale Value Add Tax (VAT) tax payer should pay VAT quarterly. Each quarter, its overseas revenue of under RMB300,000 , is tax free. For quarterly oversea revenue over RMB300,000 , the total amount shall be taxed, the VAT tax rate on that term is 3%. To perform tax avoidance, legally allowed, the accountant of company A adopted the usual method to account RMB 300,000 each quarter into the income statement and enjoy the tax free policy, while leave the remaining RMB 400,000 (1,600,000 - 300,000*4) unaccounted. In the balance sheet, the extra amount was listed as pre-paid debt. With the tax bureau in China, it is allowed, as the time to account income takes one month delay is typical. No legal dispute in China so far.
根据中国的税法规定，按季度纳税的增值税小规模纳税人，季度境外收入不超过30万元的（该收入无需开具增值税发票），可以按规定享受增值税免税政策；如果每季度的境外收入超过30万元，则需要全额缴税，税率为3%。因此，该公司的财务为了合理避税，按每季度30万元报税，2020年全年报税收入为120万元，导致剩下的40万元(160万元-30万元*3)一直没有入账，公司实际收款金额与报税收入金额不符。在资产负债表中，余下的40万元置于负债中的预收款项，这在中国叫做挂账，是允许的，因为财务入账需要时间，延迟一个月非常典型。在国内并没有出现任何法务问题。
However when company B received its financial report and ready to have its own account audit in Europe, there are problems. As the sales revenue should be total RMB 1.6 million , rather than total RMB1.2 million . Company A did have cost and made the expenditure already, its income statement showed negative profit. This is not the actual cash flow of Company A as cash flow can’t be negative, this is not the actual income statement as the income had been received RMB 1.6 million in total.
但是，当母公司B收到A公司的财务报表并准备接受欧洲的审计时，出现了问题。因为A公司的收入实际为160万元，而不是提供的损益表中的120万元。A公司损益表中的支出都是的实际已经发生的，总计约为160万元，导致其账目上为亏损。 这并不是公司A实际的现金流，因为现金流不能为负数，而这也不是实际的损益表，因为销售收入，即外汇收入为160万元总计。
State Administration for Market Regulation (SAMR) of China require all enterprises registered in mainland China should file annual check of last year before 30th June. Financial statement should be attached as mandatory. Therefore, in official record, Company A’s annual income is also RMB 1.2million . When Company B is auditing its annual report, the inconsistency of RMB 400,000 income led to serious issue as the audit official threat to freeze their company bank account if they cannot explain the negativity in the income statement while the bank statement showed clear the there was 1.6 million RMB transfer in total last year. This was the risk that Company A’s accountant did not expected. It is customs in China the accountant adopt the “save money”first rule. As even by regulation, all income should be accounted in time, it is common to delay input of financial statement to avoid tax legitimately. The thin line between tax avoidance and evasion can be blurry, especially when under different accounting standards.
此外，中国市场监督管理局要求所有在中国境内的公司每年1月1日至6月30日前完成上一年度的公司年检（年检时需要提供财务报表），因此，该公司在市场监督管理局年检官网上的年检公示也是全年收入120万元。刚巧，境外母公司也需要在他们本国进行年检且需要宁波公司提供自己的年检报告来辅助。双方核对后发现，宁波公司实际收到境外母公司汇款160万元，却只向境内工商和税务机关申报收入120万元，与境外母公司已入账的160万元支出金额不匹配，导致境外母公司无法顺利完成年检，宁波公司的财务人员在记账时，没有预估到这样的风险。中国的会计习惯于用“省钱”作为原则，仅仅申报免税的收入，而将不免税的部分挂账是常见手段。即便税收政策规定，入账应该及时，但是挂账依然成为常见且合规的现象。逃税和避税之间的界限可能模糊，尤其再同意账目需要符合不同的会计准则的条件下。
Of course different clients would have different agenda on accounting rules. Many of our clients prefer to adhere strictly to the accounting principles by writing their income and cost in time. It is well respected yet foregone certain benefit of the tax exemption. As actual cash inflow of the foreign income, the total VAT on the income could be as high as RMB 48,000 (1,600,000*3%). In this scenario, Reindeer Station offer solutions as below:
针对以上特殊案例，我司给出的专业财务指导如下：
前3个季度，每季度按30万元申报，最后一季度申报70万元，则需缴纳的增值税额：300000*3*0%+700000×3%=21000元。这样的报税方式以及做账方式符合双方财务报表的规则，并能节省下27000元的增值税费。
It should be highlighted that even in China, it is common to delay certain income in financial statement, that dose not mean it is without risk, especially when it is FDI company. Tax evasion in China is a serious crime, once determined by the tax bureau, there will be minor consequences as penalty and sever legal result as jail time. Therefore, Reindeer Station strongly suggest to comply strictly with the accounting rule while seeking professional advice of tax avoidance.
值得注意的是，虽然在中国，延迟入账是常见的避税手段，但是这并非没有风险，尤其对于外资公司来说。逃税在中国是非常严肃的犯罪，一旦被税务机构界定为逃税行为，轻则罚款，重则坐牢。因此，灵达商务强烈建议各公司机构严格遵守财务规范，并在避税手段上咨询专业人士。
Chinese: Nadia
English: Anna
Editing: Anna
A Case Study of VAT Accountability Caused Issue
税务案例分析，因为增值税避税导致的困扰
Recently, Reindeer Station encountered an emergency inquiry from a foreign directed investment (FDI) company concerning accounting issues. Due to different accounting standard , and misunderstanding of book keeping rules, the company’s annual financial report caused major problems in its mother company. This issue is typical among companies in China whose main revenue is overseas payment. We hope it would help you understand how our accounting service is a good choice.
近日，灵达商务遇到一起外资公司因接收母公司支付的服务费用后，未按国际通用的财务准则做账，导致母公司造成财务方面的困扰。由于不同的财务准则，国内公司与国外母公司的账目引起了母公司审计人员的关注，导致国外母公司的年度财务报表不能过审。他们经历的状况在同类型公司中比较典型，即公司的主要收入为国外公司的打款。希望这个案例能让你理解为何灵达商务的会计服务是物超所值的。
This FDI company was set up in China, let’s call it company A. Its main purpose is to provide quality check and product inspection for its mother company, company B in Europe. Its sole revenue is from company B who paid as service fee. In 2020 account year, company B transferred in total RMB 1.6 million to company A.
该外资公司在中国境内注册为，我们称他为A公司。设立A公司的主要目的让其为母公司B提供在中国的质检、验货等服务。B公司是注册在欧洲的公司。2020年B公司共支付服务费160万元给A公司。
According to Chinese legislation on tax, small scale Value Add Tax (VAT) tax payer should pay VAT quarterly. Each quarter, its overseas revenue of under RMB300,000 , is tax free. For quarterly oversea revenue over RMB300,000 , the total amount shall be taxed, the VAT tax rate on that term is 3%. To perform tax avoidance, legally allowed, the accountant of company A adopted the usual method to account RMB 300,000 each quarter into the income statement and enjoy the tax free policy, while leave the remaining RMB 400,000 (1,600,000 - 300,000*4) unaccounted. In the balance sheet, the extra amount was listed as pre-paid debt. With the tax bureau in China, it is allowed, as the time to account income takes one month delay is typical. No legal dispute in China so far.
根据中国的税法规定，按季度纳税的增值税小规模纳税人，季度境外收入不超过30万元的（该收入无需开具增值税发票），可以按规定享受增值税免税政策；如果每季度的境外收入超过30万元，则需要全额缴税，税率为3%。因此，该公司的财务为了合理避税，按每季度30万元报税，2020年全年报税收入为120万元，导致剩下的40万元(160万元-30万元*3)一直没有入账，公司实际收款金额与报税收入金额不符。在资产负债表中，余下的40万元置于负债中的预收款项，这在中国叫做挂账，是允许的，因为财务入账需要时间，延迟一个月非常典型。在国内并没有出现任何法务问题。
However when company B received its financial report and ready to have its own account audit in Europe, there are problems. As the sales revenue should be total RMB 1.6 million , rather than total RMB1.2 million . Company A did have cost and made the expenditure already, its income statement showed negative profit. This is not the actual cash flow of Company A as cash flow can’t be negative, this is not the actual income statement as the income had been received RMB 1.6 million in total.
但是，当母公司B收到A公司的财务报表并准备接受欧洲的审计时，出现了问题。因为A公司的收入实际为160万元，而不是提供的损益表中的120万元。A公司损益表中的支出都是的实际已经发生的，总计约为160万元，导致其账目上为亏损。 这并不是公司A实际的现金流，因为现金流不能为负数，而这也不是实际的损益表，因为销售收入，即外汇收入为160万元总计。
State Administration for Market Regulation (SAMR) of China require all enterprises registered in mainland China should file annual check of last year before 30th June. Financial statement should be attached as mandatory. Therefore, in official record, Company A’s annual income is also RMB 1.2million . When Company B is auditing its annual report, the inconsistency of RMB 400,000 income led to serious issue as the audit official threat to freeze their company bank account if they cannot explain the negativity in the income statement while the bank statement showed clear the there was 1.6 million RMB transfer in total last year. This was the risk that Company A’s accountant did not expected. It is customs in China the accountant adopt the “save money”first rule. As even by regulation, all income should be accounted in time, it is common to delay input of financial statement to avoid tax legitimately. The thin line between tax avoidance and evasion can be blurry, especially when under different accounting standards.
此外，中国市场监督管理局要求所有在中国境内的公司每年1月1日至6月30日前完成上一年度的公司年检（年检时需要提供财务报表），因此，该公司在市场监督管理局年检官网上的年检公示也是全年收入120万元。刚巧，境外母公司也需要在他们本国进行年检且需要宁波公司提供自己的年检报告来辅助。双方核对后发现，宁波公司实际收到境外母公司汇款160万元，却只向境内工商和税务机关申报收入120万元，与境外母公司已入账的160万元支出金额不匹配，导致境外母公司无法顺利完成年检，宁波公司的财务人员在记账时，没有预估到这样的风险。中国的会计习惯于用“省钱”作为原则，仅仅申报免税的收入，而将不免税的部分挂账是常见手段。即便税收政策规定，入账应该及时，但是挂账依然成为常见且合规的现象。逃税和避税之间的界限可能模糊，尤其再同意账目需要符合不同的会计准则的条件下。
Of course different clients would have different agenda on accounting rules. Many of our clients prefer to adhere strictly to the accounting principles by writing their income and cost in time. It is well respected yet foregone certain benefit of the tax exemption. As actual cash inflow of the foreign income, the total VAT on the income could be as high as RMB 48,000 (1,600,000*3%). In this scenario, Reindeer Station offer solutions as below:
To account RMB 300,000 as income for the first three quarters to enjoy the tax free quota, then in the last quarter , account the remaining RMB 700,000 (1,600,000-400,000*3) as the last quarter income revenue.
This last quarter income would see a VAT payment of RMB21,000 (700,000*3%).
This solution would comply both parties’ accounting rules while save on VAT of about RMB 27,000 (48,000-21,000).
不同的客户对于财务准则的目标不同，有许多我们的代记账客户选择严格遵守实时发生制的财务原则，及时入账每一笔收入和开支。当然这点是非常值得尊重的，灵达商务也赞赏这种行为。但是，这样会导致一些纳税方面的损失，比如，在此案例中，最高缴税的金额可达到人民币48000元（120万元*3%）This last quarter income would see a VAT payment of RMB21,000 (700,000*3%).
This solution would comply both parties’ accounting rules while save on VAT of about RMB 27,000 (48,000-21,000).
针对以上特殊案例，我司给出的专业财务指导如下：
前3个季度，每季度按30万元申报，最后一季度申报70万元，则需缴纳的增值税额：300000*3*0%+700000×3%=21000元。这样的报税方式以及做账方式符合双方财务报表的规则，并能节省下27000元的增值税费。
It should be highlighted that even in China, it is common to delay certain income in financial statement, that dose not mean it is without risk, especially when it is FDI company. Tax evasion in China is a serious crime, once determined by the tax bureau, there will be minor consequences as penalty and sever legal result as jail time. Therefore, Reindeer Station strongly suggest to comply strictly with the accounting rule while seeking professional advice of tax avoidance.
值得注意的是，虽然在中国，延迟入账是常见的避税手段，但是这并非没有风险，尤其对于外资公司来说。逃税在中国是非常严肃的犯罪，一旦被税务机构界定为逃税行为，轻则罚款，重则坐牢。因此，灵达商务强烈建议各公司机构严格遵守财务规范，并在避税手段上咨询专业人士。
Chinese: Nadia
English: Anna
Editing: Anna
