Meaning
An administrative announcement issued by the State Taxation Administration of China that governs the procedural and filing requirements for corporate income tax during enterprise liquidation. Under STA Announcement 2018 No 10, the tax authorities established a standardized framework for the declaration of liquidation income and the disposal of remaining corporate assets. The regulation applies to all domestic and foreign-invested companies undergoing dissolution within the Chinese jurisdiction.
Regulatory Update
The announcement was introduced to simplify and streamline the administrative burden of tax registration cancellation for businesses. By modifying previous filing requirements, STA Announcement 2018 No 10 introduced a more direct path for companies with clean tax records. It allowed eligible enterprises to skip the lengthy audit process if they had no outstanding tax liabilities or active disputes.
This change accelerated the exit process for compliant foreign and domestic investors.
Reporting Obligations
Dissolving companies must file their final tax returns along with a liquidation report to the local tax bureau. This report must detail the valuation of remaining inventory, the recovery of accounts receivable, and the final distribution of equity to shareholders. The announcement requires that these documents be submitted electronically through the national tax portal to ensure transparency and traceability.
Any discrepancies in these figures will result in the immediate suspension of the simplified exit procedure.
Audit Practice
Tax bureaus retain the right to audit any liquidating company’s historical filings before issuing final tax clearance. Under STA Announcement 2018 No 10, the simplified clearance route does not protect enterprises from retroactive tax assessments if fraudulent filings are discovered. If an audit reveals unpaid tax, the company’s directors can be held personally liable and face administrative sanctions.
This enforcement pressure ensures that companies provide accurate reports during their final exit phase. Tax authorities frequently coordinate with exit-entry bureaus to block the departure of foreign executives if their company’s liquidation tax disputes remain unresolved.
