Meaning
Administrative regulations specify the duration and conditions under which tax related documents and financial records must be preserved for inspection. These prc tax retention rules apply to all taxpayers and withholding agents operating within the jurisdiction of the State Taxation Administration.
Retention Period
Standard accounting records such as ledgers, vouchers, tax invoices and financial statements are generally required to be kept for at least ten years. The prc tax retention rules demand that even after a business has closed, these documents must be stored in a secure and accessible manner. Certain special documents like those related to fixed asset depreciation or long term contracts may require longer periods.
Failure to produce these records during an audit can lead to the denial of tax deductions or the imposition of penalties.
Digital Management
Electronic records are subject to the same strict requirements as physical paper documents. Under the prc tax retention rules, a company must ensure that its electronic accounting system can generate readable and verifiable outputs for the duration of the retention period. Migration to a new software platform does not excuse a taxpayer from maintaining access to historical data.
Backup systems must be robust enough to prevent the accidental loss of data due to hardware failure.
Supervision Authority
Tax bureaus have the right to inspect the storage facilities and the management systems used for record keeping. If the prc tax retention rules are violated, the authority can order a correction within a specified time limit. Continuous non compliance might result in the lowering of the enterprise’s tax credit rating.
This rating affects the frequency of future audits and the eligibility for certain tax incentives.
