I. Processing of the accounts of the housing company (subject to the relying party)
Core principles: all project receipts and disbursements need to be accounted for in the name of the development agent (house-dependent enterprise), in strict compliance with the enterprise accounting standards (eas) and not in isolation from the entity。
(i) accounting for funds
1. Receipt of owner purchase/work
Loans: bank deposits
Loans: collections in advance (pre-sale phase)
Credit: main operating income (to meet income recognition requirements)
2. Transfer of funds to affiliates (before deduction of management fees/taxes)
Borrowing: other receivables — attachments
Loans: bank deposits
Proofs such as procurement contracts for projects, applications for payment, etc. Are required to avoid borrowing funds that are deemed to have no substantive business。
(ii) income recognition
- under eas 14 - income, the owner is contracted in the name of the dependencies to recognize income at the time of “transfer of control” (e. G. Transfer of house), as recorded:
Borrowing: accounts received in advance
Credit: main operating income
Credit: taxable — value added tax (vat)
- it is strictly forbidden to hide income on the basis of “self-receiving by the party on whose behalf it is collected”, otherwise constituting tax evasion。
(iii) cost accounting
Only “heading up” compliance invoices directly related to the project (e. G. Construction services, purchase of materials invoices) are accepted for recording:
Borrowing: development costs (detailed by land, construction, etc.)
Loans: bank deposits/accounts payable
2. Carry-over costs at the end of the period according to the completion of the project:
Borrowed: main operating cost
Loans: development products
The acceptance of false bills or invoices not related to the project (e. G. Personal consumer bills of the relying party) is strictly prohibited。
(iv) account for dependency fees (management fees)
- management fees are charged as “business support services income” recorded as:
Borrowing: other receivables — anchors (or direct deductions from funds payable)
Loans: other operating income
Credit: tax due - value added tax (value-added tax) (6 per cent tax rate)
Ii. Risk of tax-related exposure to housing company core
(i) value added tax risk
1. Volatile billing risk
If the attachment provides false invoicing (e. G., false material tickets) or is fabricated by the attachment for the purpose of crediting the party against whom the attachment is based, it will be in violation of article 205 of the criminal code and liable to a fine or late payment of money, and in serious cases to criminal liability。
2. Risk of delay/missing declaration
Pre-sale payments are subject to an advance value-added tax of 3 per cent, with timely recognition of the sales tax upon payment of the house; delays in filing are considered to be “late filing”, resulting in fines and late payments。
3. Risk of non-compliance with advance crediting
Non-project direct entry taxes (e. G. Personal consumption invoices) are offset by a “entry tax transfer” or otherwise constitute tax evasion。
(ii) enterprise income tax risk
1. Income cost mismatch risk
If only management fee income is accounted for, the project income is not accounted for in a complete manner, or if the cost instrument is invalid (e. G. Error in return, fraudulent business), the tax authority will require an additional 25 per cent of the tax rate for the enterprise income tax and demurrage, based on “approved collection” or “tax adjustment”。
2. Risk of non-compliance with pre-tax deductions
Under the enterprise income tax pre-reduction certificate management scheme, the cost of non-compliant invoices or failure to prove the authenticity of the business (e. G., lack of a procurement contract, proof of payment) is not subject to pre-tax deduction and is subject to an increase in taxable income。
(iii) land value added tax risk
1. Less risk of incorrect project
The deduction (land costs, development costs, etc.) in liquidation is legal and relevant to the project, and the tax authorities remove invalid deductions if the build-up cost (e. G., overestimation of works) or the certificate is not in compliance, resulting in a sharp increase in the tax burden on land value added (60 per cent maximum tax)。
2. Disbursement delay risk
Projects that meet the conditions for liquidation (in the case of three years after completion of their acceptance) are not declared and face fines and late payments。
(iv) associated risks
1. Legal compliance risk
The attachment to the building act, the regulation of qualifications of real estate development enterprises, could lead to the closure of the project, the downgrading of qualifications and the loss of tax registration and the receipt of invoices if they are inspected by the building department。
2. Debt risk
If the dependeor defaults on the wages and materials of the migrant worker, the benefactor bears joint and several responsibility; if the relevant expenditure cannot be certified for compliance, it cannot be deducted before tax。
Core summary
The key to being attached to a housing firm is to “prescribe the whole accounting process by itself” and the tax-related risks are rooted in “relying illegality + irregularities” and need to focus on invoice compliance, revenue-cost matching, time limits for the declaration of taxes, reducing the risk of compensatory tax, fines and criminal liability from the source。
