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 Tracking 1271 U.S. listed China Stocks and Counting...
 Tracking 3167 U.S. Stocks and Counting...
Created: 01-Jan-2008

Keying in on fundamental differences between the SEC & SAIC

  • Yesterday, 12:48 PMmore... 
    Global Sources Lt (NASDAQ:GSOL) renewed its contract to host its highly successful trade shows at AsiaWorld-Expo (AWE) in Hong Kong in 2017 and 2018 for approximately US$23.1 million.
  • Yesterday, 12:45 PM 
    Tier 1 Pink Kreisler Mfg Co (PINK:KRSL) announced a $3.00 dividend. 
  • Yesterday, 12:44 PM 
    Tier 1 PInk Pd-Rx Pharmaceuti (PINK:PDRX) reported FY2014 (year ending June 30 2014) EPS of $1.13 vs. $0.70 in the prior year period. 
  • Wednesday, December 17, 2014, 12:26 PMmore... 
    Extendicare Inc (PINK:EXETF) announced its intention to purchase for cancelation up to 10% of the public float of its common shares over a maximum 12-month period.
  • Wednesday, December 17, 2014, 12:25 PMmore... 
    Highpower Interna (NASDAQ:HPJ) announced that Huizhou Highpower Technology Ltd., Highpower International's wholly-owned subsidiary, officially qualified for addition to Samsung's supply chain as a supplier of lithium-based battery products.
  • Tuesday, December 16, 2014, 11:00 AMmore... 
    Concord Medical S (NYSE:CCM) announced that the Company has, through its subsidiaries, entered into a definitive agreement to sell 52% equity interest in Chang'an Hospital to the owner of the 48% equity, for a total consideration of RMB 398 million (US$64.8 million or $1.44 per share).
  • Tuesday, December 16, 2014, 10:59 AMmore... 
    Lightinthebox Hol (NYSE:LITB) announced that its Board of Directors has authorized to extend its existing share repurchase program for an additional 12-month period through December 15, 2015.
  • Tuesday, December 16, 2014, 10:56 AM 
    Coding Rcm Technologies (NASDAQ:RCMT) as a GeoBargain. See our full note here
  • Friday, December 12, 2014, 09:00 AM 
    SLOT now trades as "" (OTC BB:SLOTD).
  • Thursday, December 11, 2014, 09:30 AMmore... 
    GeoBargain B- Scada Inc. (PINK:SCDA) reports preliminary 32% annual revenue increase which equates to a record $640,000 Q4 2014 following previous record results of $574,000 in Q3 2014. The company profitability is expected to decline due to increasing its investment into the company including  marketing initiative to help drive growth.  We are not overly concerned in the decrease in profitability at these stages in SCDA’s growth cycle, since achieving top line growth rate in excess of 20% is the key factor in the early stages of SaaS companies (from our experience).  The company has set a target of 25% revenue growth for the Company overall for 2014-2015.
  • Thursday, December 11, 2014, 09:30 AMmore... 
    GeoBargain on the radar Igi Laboratories (NYSE AMEX:IG) announced pricing of convertible notes. The Notes will be convertible at an initial conversion price of approximately $11.29 per share, which represents a conversion premium of approximately 27.0% over yesterday's closing price.  Estimated dilution from conversion translates to about 25%. IG intends to use the proceeds for general corporate purposes, including, without limitation, capital expenditures and potential future acquisitions and strategic transactions.
  • Thursday, December 11, 2014, 09:30 AMmore... 
    Tuniu Corporation (NASDAQ:TOUR) - rumor is Inc. (NASDAQ:JD) might participate in TOUR's planned $100 million equity offering.
  • Thursday, December 11, 2014, 09:00 AM 
    AVRN now trades as Avra (OTC BB:AVRND).
  • Wednesday, December 10, 2014, 10:16 AMmore... 
    Refer to our short investment thesis on Bio-Reference Laboratories, Inc. (NASDAQ:BRLI) on Seeking Alpla: "Bio-Reference Laboratories Tested: Undisclosed Lawsuit Alleges Fraud, Ex-Employees Speak Out". 
  • Wednesday, December 10, 2014, 09:30 AMmore... 
    Momo Inc. (PINK:MOMO) (Upcoming IPO) - a mobile-based social networking platform in China is is offering 16 million American Depositary Shares (ADS) and sees pricing of $12.50 to $14.50 each.  Shares are set to begin trading tomorrow. 
  • Wednesday, December 10, 2014, 09:30 AMmore... 
    China Information (NASDAQ:CNIT) announced that the Company was selected by a leading advertising agency to install 10,000 cloud-based new media elevator terminals in Fujian province.
  • Wednesday, December 10, 2014, 09:30 AMmore... 
    Tuniu Corporation (NASDAQ:TOUR) announced that the Company has signed a strategic agreement with International CTRP, to expand their collaboration on shared travel resources.
  • Wednesday, December 10, 2014, 09:30 AMmore... 
    Nq Mobile Inc. Am (NYSE:NQ) announced changes in the company’s management team and a voluntary two year share lock up by a group of the company’s largest shareholders. Current Co-CEO and Chairman of Board, Mr. Henry Yu Lin, stepped down from his position for “personal reasons unrelated to the company” and three founders, including Mr. Lin, agreed to an additional two year lock up period of their collective shares.  
  • Wednesday, December 10, 2014, 09:30 AMmore... 
    Forevergreen Worl (OTC BB:FVRG) - Revisiting the FVRG story as the company once again issues strong financial guidance. FVRG announced fiscal 2015 revenue guidance of $90 to 100 million, 55 to 70% growth over 2014 and net income guidance of $3.6 to $5 million (EPS of $0.17 to $0.23). In our 5/20/2013 email we mentioned that we were taking a speculative position in FVRG when the stock was trading at $0.22.  In our 10/1/2013 we mentioned that we were locking in some profits as the stock hit new 52 week high of $1.98.  On 11/21/2013 we locked in the rest of our gains as we closed out our position around $1.50.  We have stated on several occasions that we are still uncertain if this is a legitimate company or a possible pump and dump, and will continue to track the story.   We will re-kindle our due diligence efforts. 
  • Tuesday, December 9, 2014, 09:30 AMmore... 
    Soufun Holdings L (NYSE:SFUN) announced that the strategic cooperation agreements the company entered into with CTC and certain other parties on October 7, 2014 have been terminated.
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Zon4Ever 25-Aug-2010 10:07 AM
Post Type: Public Public
Annual Inspection and Income Tax Filing Process in China - Opinion Letter (#3587) 25-Aug-2010 10:07 AM
As part the due diligence process of understanding quality issues in the China Hybrid space, the GeoTeam retained the independent services of an attorney familiar with PRC law.  We asked him to contact different agencies in China, including the SAIC as well as other attorneys before writing the following letter to us.

Re: Annual Inspection and Annual Income Tax Filing Process in China

In China, there is an annual inspection done by the Statement Administration for Industry and Commerce (“SAIC”) for every registered company.  For the companies owned by Chinese individuals and/or entities (Variable Interest Equity ownership structures), except listed companies and/or some special companies, the companies need to file their financial reports to AIC for accomplishing the annual inspection and the audit of the financial statement is not required.  

For the annual income tax filing in the taxation bureau, which is in the beginning of the next financial year, if a company owned by Chinese individuals and/or entities has a big loss (negative net income) in the last financial year and/or claim the rights to make up for losses in the next several financial years, the financial statement with a big loss (negative net income) shall be audited for the purpose of taxation by an independent CPA firm.  If a company only has a small loss (usually the line between big loss and small loss shall be RMB 100,000 and/or RMB 50,000 and the number of the line depends on the different requirements of different taxation bureaus) and does not claim the rights to make up for losses in the next several financial years, the financial statement is not required to be audited.  Accordingly, this company does not pay any income tax.  If a company owned by Chinese individual and/or entities has a positive net income, the company shall pay the income tax based on the standard income tax rate, which is twenty-five percent (25%) of the net income in the last financial year.  Such a financial statement with a positive net income is not required to be audited.

For the foreign invested companies, including Sino-foreign joint venture enterprises and wholly foreign owned enterprises, the annual financial report submitted to the AIC is required to be audited by an independent CPA firmThe same report will also be filed to the taxation bureau and several other government authorizations, such as State Administration for Foreign Exchange, for the issues of foreign exchange administration and others.  If a company has a negative income in the audited financial report, the company does not pay income tax and the company may claim the rights to make up for losses in the next several financial years.  If the companies have positive net incomes, the companies shall pay income tax based on the standard income tax rate, which is 25% of the net income in the last financial year.  

In the real life, for the purpose of avoiding income tax, some companies in China claim that there is a loss (negative net income) in the last financial year.  For the companies owned by Chinese individuals and/or entities, they may claim a small loss (for example, a loss lower than RMB 50,000 and/or RMB 100,000) but not claim to make up for losses in the next several financial years. Therefore, the financial report in the last financial year is not required to be audited by an independent CPA firms.  For the foreign invested enterprises, they may purchase a forged audited financial report which states a loss from a small CPA firm to avoid the possible income tax.

Chinese government controls the possible taxation fraud through the taxation inspection which conducts by the taxation bureau.  For conducting the taxation inspection, the taxation bureau may inspect and review the financial statement and materials of the companies in details from time to time.  However, as the taxation bureau only has limited number of officers and resources.  It is impossible for the taxation bureau to inspect the financial statements and materials of all companies in each financial year.  At the same time, the AIC does not review the financial statements and materials of a company, except in some administrative investigation process.  

If a company with a forged financial report (whether it is audited or not) is chosen for taxation inspection and the fraud is found out by the taxation bureau, this company may be fined and be required to make up the tax which the company shall pay.  The responsible people within the company may also bear the criminal and/or administrative liability. However, to one specific company, as the chance for the taxation inspection is very low, the fine is also comparatively low and criminal liability is not always applied in the real life, some companies dare to take this risk to make a forged financial report for avoiding the income tax.  At the same time, there are also seldom cases that CPA firms which provided forged audit reports are fined and/or bear criminal and/or administrative liability in these situations.
In practice, for the taxation purpose, each company has a specific taxation officer which is the taxation officer to cover the district which the company lies in.  The officer in the company usually an accountant, directly deals with the taxation officer to file the taxation monthly through on line system and/or personally.  At the beginning of the next financial year, the annual income tax filing of the last financial year will also be reported to the same taxation officer.  After each monthly (annually for the income tax) payment of tax (VAT, business tax, personal income tax and company income tax, etc.), the taxation officer will issue a taxation certificate to the accountant to state the amount and types of tax paid on behalf of the taxation bureau.  This taxation information (including the amount of the tax) is not open to any third party except the court, prosecutor and/or police for the reasons of litigation and/or criminal/administrative investigation.  

NOTE: This opinion letter is wholly based on the current effective laws and regulations of P.R. China, and the real annual inspection and income tax filing practice in China.  In different cities and/or provinces of P.R. China, the practice of annual inspection and income tax filing might be slightly different from this opinion letter.  Furthermore, this opinion letter is only for Geoinvesting LLC to understand the process of annual inspection and income tax filing in P.R. China.  This opinion letter shall not be regarded as a formal legal opinion letter based on the laws and regulations of P.R. China.

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