A Practical Guide on Dormant Company Status in China (I) – How to Apply for Dormant Status?
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Under the influence of the seemingly everlasting pandemic, companies in China that suffer business difficulties may consider seeking suspension of business operations so as to save costs for an interim period, rather than entering a liquidation procedure. In order to support business activities in such sensitive periods of time, the Chinese government has issued regulations and guidelines effective since March 1st, 2022, which enable companies to register their dormant status.
In order to better understand dormant company status in China, we shall provide certain brief guidelines on the application process for dormant company status.
What is dormant status?
Dormant status refers to the circumstances where a company voluntarily decides to suspend its business operations within a limited period of time in consideration of temporary business shortages.
When may a company transfer to dormant status?
If a company suffers business difficulties due to a natural disasters, accidents, public health incidents, social security incidents, etc., it may apply for dormant status for no more than 3 years.
How to apply for dormant status?
Companies shall submit a dormant registration application to the competent local authority. The application is not subject to approval, and the relevant authority shall publish the company’s dormant status through the National Enterprise Credit Information Publicity System.
Will a dormant status company need to be reported to the tax authorities?
According to the competent tax authorities’ announcement related to this matter, effective from July 14th, 2022, being in dormant status is an autonomous act of an enterprise, which only needs to be filed with the registration authority as required and need not be reported to the tax authorities separately.
Is a simplified cancellation possible?
Companies that fulfil one of the following conditions can directly apply for their registration’s cancellation without going to the tax authorities for a tax clearance certificate:
1) Companies which have never handled tax-related matters
2) Companies which have handled tax-related matters, but have not applied or issued invoices and have no pending tax or other outstanding matters.
In conclusion, as a newly implemented policy, the dormant mechanism could be a considerable option for companies experiencing difficulties. A transfer to dormant status is quite feasible and may enjoy consequential benefits for the company’s further endeavors. In our next articles, we shall illustrate the main advantages and compliance matters available for dormant companies. If you are interested in dormant companies, feel free to contact us at info@dpgroup.biz.
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To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
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The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
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The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
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The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
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The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.