On October 30th, the “2018 Accounting Information Quality Inspection Notice” (hereinafter referred to as the “Announcement”) released by the Ministry of Finance recently showed that the Internet industry showed light asset operation, equity and debt investment in the 2017 accounting law enforcement inspection. Intertwined, management structure and separation of legal entities, business operations without borders and other prominent features. Some enterprises have more prominent problems in transferring profits across borders and evading paying taxes.
Among them, Xiaomi Company has some problems in accounting for the amortization of some expenses, and the external gift is not treated as a tax payment, the management of reimbursement invoices is not standardized, and the fee management system is imperfect.
In response, Xiaomi Company responded that the relevant report on the part of Xiaomi is seriously inconsistent with the facts. The inspection of the Ministry of Finance’s announcement is the accounting supervision and inspection of the Ministry of Finance in 2017, which is an inspection of the quality of accounting information in 2016.
The following is the full response of Xiaomi Company:
Yesterday, some media reported that some Internet companies were named by the Ministry of Finance because of cross-border transfer of profits and evasion of tax payment. The relevant reports involving Xiaomi are seriously inconsistent with the facts.
The inspection of the Ministry of Finance’s announcement is the accounting supervision and inspection of the Ministry of Finance in 2017, which is an inspection of the quality of accounting information in 2016. According to the announcement of the Ministry of Finance, Xiaomi has some problems in accounting for the amortization of some expenses, and the fact that the goods donated are not treated as the taxation of the sales behavior, the management of the reimbursement invoices is not standardized, and the fee management system is imperfect. All the above problems have been rectified and approved by the Ministry of Finance.
Part of the cost amortization accounting problem, mainly for the start of the amortization of rent and part of the renovation costs and some of the sharing costs in the group companies have some deviations, the company has carried out the relevant accounting adjustments, there is no tax evasion .
The external gift is not treated as a tax payment issue, and only some of the donated goods are involved. The tax involved is about RMB 600,000. The above problems have been corrected by the company and have been submitted to the tax bureau for payment.
The problem of unreasonable reimbursement of reimbursement invoices and imperfect expense management system involves a fee of RMB 90,000. The Ministry of Finance mainly points out from the system management that the company should clarify the approval authority and details of the reimbursement review in the financial system. The group has completed the relevant system.
Regarding the issues raised in the announcement of the quality inspection of accounting information of the Ministry of Finance, Xiaomi Group attached great importance to it and quickly completed the rectification. Since its establishment, Xiaomi Group has been striving to improve management and actively improve the omissions in development, without major deviations, and has been recognized by auditors during the listing process. Taxation according to law is the value and code of conduct that Xiaomi Group adheres to. There is no misunderstanding of the relevant media to transfer profits across borders and evade paying taxes.