Computational Formula of Corporate Income Tax of China Limited Company

The corporate income tax settlement and payment time, and the method for calculating the income tax

Before talking about ‘The corporate income tax settlement and payment time, and the method for calculating the income tax’, let’s figure out what is income tax settlement and payment?

  • According to the Tax Law, the income tax shall be declared on a monthly basis, prepaid on a quarterly basis, and summarized and settled on a yearly basis. During the final settlement and payment, the tax amount to be supplemented or returned shall be confirmed and settled.

The corporate income tax settlement and payment time

Taxpayers shall, within 5 months after the end of the tax year, carry out settlement and payment and settle the amount that shall be paid or refunded to the enterprises.

The corporate income tax prepayment declaration for December or the fourth quarter shall be accomplished by the taxpayer within 15 days after the end of the tax year. The year’s corporate income tax settlement and payment shall be done after the prepayment declaration.

In case of dissolution, bankruptcy, cancellation and other circumstances that the taxpayer stops production and operation in the middle of the tax year, and that the corporate income tax should be settled, the information shall be reported to the tax authority before liquidation, and the tax shall be settled and paid within 60 days from the day the enterprise actually stopped operation; if the taxpayer has other circumstances to terminate tax liability according to law, within 60 days after the production and operation is stopped, the enterprise shall handle the corporate income tax settlement and payment in the current period with the responsible tax authority.

Before May 31, if the taxpayer finds any error in the annual declaration for corporate income tax, the taxpayer can apply for correction. No overdue fine will be collected for the amount involving supplementary of tax.

After May 31, if the taxpayer finds any error in the annual declaration for corporate income tax, the taxpayer can submit supplementary application for correction. If the correction involves supplementary of tax, an overdue fine amounting to 0.05% of the supplemented amount shall be collected from June 1.

The method for calculating the corporate income tax

The Accounting Standards for Enterprises No.18–Income Tax indicates that, income tax expense consists of 2 parts: one is the income tax expense calculated according to the Tax Law for the current period; the second is the deferred income tax expense calculated according to the accounting standard for temporary differences.

The application guidance of the Accounting Standards for Enterprises No.18–Income Tax specified that, when an enterprise calculates the income tax expense for the current period ( i.e. current income tax payable ) and the deferred income tax expense ( or revenue ), the enterprise shall recognize the sum of both as the amount of income tax expense ( or revenue ) in the income statement, excluding the income tax influence brought by any transaction or event directly recognized as owner’s equity. i.e.

Income tax expense = current income tax payable + deferred income tax expense ( – deferred income tax revenue )

I. Current income tax payable

Current income tax payable refers to the amount of income tax payable in the current period calculated according to the Tax Law. In case of book-tax difference, adjustment shall be made on the basis of accounting profit and considering the permanent and provisional difference according to the Tax Law, to get the amount of taxable income in the current period. Then, applicable tax rate shall be adopted to determine the current income tax payable.

II. Deferred income tax

Deferred income tax asset is used to calculate the income tax of the enterprise that can be deducted in the future. It’s the amount calculated according to the deductible temporary difference on the basis that the book value of the assets is less than the tax base and the book value of liabilities is more than the tax base.

Deferred income tax liability is used to calculate the income tax of the enterprise that shall be paid in the future. It’s the amount calculated according to the taxable temporary difference on the basis that the book value of the assets is more than the tax base and the book value of liabilities is less than the tax base.

Deferred income tax = ( period-end deferred income tax liabilities – period-beginning deferred income tax liabilities ) – ( period-end deferred income tax assets – period-beginning deferred income tax assets )

Income tax expenses not to be included in the income statement:

  • 1. deferred income tax caused by transaction directly counted into owner’s equity in the current period;
  • 2. deferred income tax brought by merger of enterprises.

The goodwill generated in the merger or the amount counted into the current profits and losses shall not affect the income tax expense.

III. Income tax expense in the income statement

Income tax expense in the income statement= current income tax payable + deferred income tax

The aforesaid 2016 corporate income tax settlement and payment time, and the method for calculating the income tax is provided by Fast Legal Reference. We hope it can help you. Furthermore, we also have products relating to ‘income tax settlement and payment’ at transparent and reasonable price, which has gained 100% praise from customers regarding the service quality.

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