Final settlement refers to the collection, final settlement and payment of income tax and other taxes applicable to prepayment method after the end of the year. Taxes such as income tax are usually levied according to the taxpayer's annual taxable income. After the end of the year, the tax shall be calculated according to the annual taxable income and the tax rate stipulated in the tax law.
If an enterprise starts or terminates in the middle of a tax year, so that the actual operating period of the tax year is less than 12 months, its actual operating period shall be regarded as a tax year. In order to ensure the timely and balanced storage of taxes, in actual work, taxes are generally paid in advance on a monthly and quarterly basis, and settled at the end of the year, with more refunds and less supplements.
According to the provisions of the current income tax law, all enterprises with sound financial accounting system, clear accounts, complete cost data, income vouchers and expense vouchers, standardized accounting and correct calculation of taxable income, which are determined by the tax authorities to be applicable to audit collection, shall conduct income tax settlement at the end of the year.
Monthly and quarterly prepayments generally calculate the taxable amount according to the taxpayer's tax basis this quarter, which is often difficult to be completely consistent with the tax basis of the annual final accounts. Therefore, after the end of the year, it is necessary to make a summary calculation according to the taxpayer's financial final accounts, pay taxes, and implement more refunds and less subsidies for taxes paid in advance.
Definition of final settlement
According to the Provisional Regulations on Enterprise Income Tax and its implementing rules, the Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprises and its implementing rules and other relevant tax laws, China adopts the method of annual calculation, monthly or quarterly advance payment and year-end final settlement.
The so-called final settlement of income tax means that income tax payers make tax adjustments in accordance with the provisions of tax laws and regulations on the basis of accounting data, adjust accounting income into taxable income, and determine the difference between accounting income and tax paid in advance in the current year to make up or refund taxes.