As soon as the product sales income is gotten, an element of the quantity is scheduled as “Received in advance” while the recognition of revenue postponed. This allows for postponing the recognition of income to a period that is later the business enterprise has enough cash to cover the income tax. Nevertheless, it really is unlawful to govern and postpone tax liability that is one’s. A increase that is large the total amount sheet product “Received in advance” will probably attract the eye for the income tax authorities.

Item 5: Other Payables

Concealing revenue as a payable.

Another stability sheet product – similar to “Received in advance” – may be the “other payables” category. Repayment received which is why a fapiao ended up being never ever released is generally scheduled within the “other payables” category to wait or reduce VAT and CIT repayment. Whenever ratio between other payables/revenue increases as time passes, this suggests behavior that is fraudulent.

Suspicious cross border transactions

Inter-company transactions – especially people who are cross edge – such as for instance expense recharges, costs allocations (such as “overseas headquarter administration fee”), temporary money amongst the international headquarter together with Chinese subsidiaries or among associated organizations. Continue reading →