What Is a Tax Year?

The tax year refers to a year determined for the taxpayer's income from production and operation after 12 months. The use of the tax year is determined to clearly define the period of taxpayer's production and operation income, and to calculate the income tax reasonably and correctly. The tax year can be the same as the calendar year or accounting year, or it can be different. China's tax law stipulates that the tax year is the same as the calendar year (ie, January 1 to December 31 of the Gregorian calendar) and the accounting year. The current foreign tax regulations also stipulate that the calendar year is the tax year. Some foreign enterprises have difficulties in adopting the calendar year as the tax year because the accounting year is inconsistent with the calendar year. An application must be submitted by the foreign enterprise and reported to the local tax authority for approval. The 12-month accounting year of the enterprise can be used as the tax year. The calendar year is from October 1 to September 30 of the following year. ^[1]

Tax year

Right!

The tax year refers to a year determined for the taxpayer's income from production and operation after 12 months. The use of the tax year is determined to clearly define the period of taxpayer's production and operation income, and to calculate the income tax reasonably and correctly. The tax year can be the same as the calendar year or accounting year, or it can be different. China's tax law stipulates that the tax year is the same as the calendar year (ie, January 1 to December 31 of the Gregorian calendar) and the accounting year. The current foreign tax regulations also stipulate that the calendar year is the tax year. Some foreign enterprises have difficulties in adopting the calendar year as the tax year because the accounting year is inconsistent with the calendar year. An application must be submitted by the foreign enterprise and reported to the local tax authority for approval. The 12-month accounting year of the enterprise can be used as the tax year. The calendar year is from October 1 to September 30 of the following year. ^[1]

If the taxpayer opens in the middle of a tax year, or because of a reorganization,

The accrual system is the basic principle for the recognition of income and expenses. The new tax law will continue to use the basic principles of the income tax system for the recognition of income and expenses in countries around the world. Where the assembly engineering business and the provision of labor services last for a tax year, the income shall be determined in accordance with the completion progress or the amount of work completed in the tax year. Main considerations:

First, companies are entrusted to process, manufacture large-scale machinery and equipment, ships, etc., and engage in construction, installation, assembly engineering business and provision of labor services. The duration usually falls into different tax years, and may even span several tax years. The amounts involved are generally compared. In order to reflect the taxable income of each tax year in a timely manner, in general, the taxable income cannot be determined when the contract is completed or the settlement amount is obtained; otherwise, it does not meet the accrual requirements, nor does it follow the income and The ratio of expenses is therefore the principle. For the above-mentioned special labor services across the years, the income is generally determined according to the progress of completion or the amount of work completed in the tax year.

The second is to ensure a balanced storage of fiscal revenue. The taxation of special year-round special labor service confirmations by enterprises according to the completion progress or the workload completed is conducive to ensuring that the income of the cross-tax year is recognized in different tax years in a timely manner, and to ensure the balanced receipt of fiscal revenue.

Except for entrusted processing, manufacturing of large machinery and equipment, ships, etc., as well as engaging in construction, installation, assembly engineering business and provision of labor services, other cross-tax year operating activities generally do not adopt income determination based on the completion progress or workload completed in the tax year. The main reasons are:

First, although the duration of these business activities is divided into different tax years, usually the duration is short (less than one year) and the amount is small. It is not practical to determine the taxable income according to the completion progress or the workload completed in the tax year.

Second, it is not easy to reasonably determine the income and related costs of these operating activities at the end of the tax year. It is not easy to determine whether the relevant economic benefits can flow into the enterprise. It is often difficult to determine the taxable income after completion, which is also convenient for tax collection and management.