State Administration of Tax issued Annual Corporate Income Tax Return Package of People’s Republic of China (Type A, 2014). The new return package will come into force on Jan 1st, 2015 and first to be adopted by resident CIT taxpayers in the 2014 annual CIT filing.

 The main changes are summarised here:

-With the new CIT law, the current return package can no longer meet tax authorities’ needs in tax -administration and restricts the improvement of their service level. Therefore, the new annual CIT return package has emerged as the time’s demand.

-In the new return package, form structure is streamlined and organised around the Principal Form. Each supplementary form, while independently reflecting specific tax policy or tax preference, also correlates with the principal one. After filling in the supplementary forms either electronically or manually, most data will generate automatically in the Principal Form.

-Besides, the new return package contains large quantities of information like accounting data, differences between tax law and accounting principle, tax preferences, overseas income etc., making it easier for tax authorities to understand how taxpayers are fulfilling their tax obligation and do an analysis of risk of tax evasion.

-The new return packages structure comprises one Form of Basic Information, one Principal Form and 39 supplementary forms, totalling 41 forms. Despite an increase of 25 forms compared with the current 16-forms return package, based on their business situation, taxpayers may choose only to fill forms that are related to their business and neglect those irrelevant ones.

-The new return package includes the form of basic information and in this form, an enterprise shall enter its name, registered office, industry, registered capital, number of employees, shareholding structure, accounting policy, computation methods for cost of stock, overseas investment etc..

-This information can not only serve as a substitute for an enterprise’s registration information (For example, in light of an enterprise’s assets and assets change information and number of employees, it can be judged whether the taxpayer qualifies as a small-profit enterprise. And for a small-profit enterprise, there is no need of it to submit any other data after enjoying preferential tax treatment), but are also necessary for tax authorities in tax administration.

-Principal form: The structure of this form varies little from that of the one in the current return package and reflects the taxation process of CIT. That is, on the basis of accounting profit, make tax adjustment pursuant to tax law, compute the amount of taxable income, deduct a number of tax preferences, make good tax paid abroad and at last, calculate the amount of tax payable (refundable).

-Supplementary form: The new return package contains six forms of income and expense breakdown, 15 forms of tax adjustment, one form of loss for compensation, 11 forms of tax preferences, four forms of tax paid abroad for making good and two forms of tax payment on consolidated basis, totalling 39 forms.

-Form of income and expense breakdown: The six forms reflect the costs and expenses incurred by an enterprise pursuant to accounting policy and constitute a major source of data for an enterprise in tax adjustment.

-Form of tax adjustment: The 15 forms divide all items need tax adjustment in light of differences between tax law and accounting principle into three major categories of income, cost and assets and reflect the computation process of data. They replace the one Form of Tax Adjustment in the current return package and the information contained in them will make it more advantageous for tax authorities to do statistics calculation and analysis. Compared with the current form, these new forms list the particulars of each adjustment item in more minute ways. For example, items like “accrued expense” and “estimated debt” can be filled only in the column of “Others” in the current return package and an enterprise has to provide an independent explanation for the situation. However, in the new return package, these items can be filled in the newly-added column of “Deductible items go beyond periods”, making the situation more explicit. Besides, an enterprise is required to provide more detailed information when filling in the newly-added Form of tax adjustment breakdown with respect to financial allocation with a special purpose and Form of pre-tax deduction and tax adjustment breakdown of assets loss. Via these forms, tax authorities shall be able to judge whether the incomes, expenses, costs etc. declared by an enterprise comply with the regulations of tax law.

-Form of loss for compensation: This form calculate the period of years for the loss to be carried forward for making good and the offset limit. Compared with current return package, there is no substantial change except the addition of the column of ‘Deductible loss transferred in/out through combination or division”.

-Form of tax preference: The current 39 items enjoying tax preference of CIT are categorized on the ground of tax base, taxable income, tax break etc. and are contained in 11 forms. The 11 forms replace the current one Form of items enjoying tax preference and reflect tax preference enjoyment situation and computation process in the more distinct way.

– Form of tax paid abroad for compensation: The form reflects tax paid abroad by an enterprise for overseas income, how to make it good and specific method for computing the compensation amount.

– Form of consolidated payment of tax: The form reflects how an enterprise practising tax payment on a consolidated basis distribute tax burden among its branch organisations.