Common tax related risks of construction and installation enterprises

tax related risk points of income 1.

The purchased raw materials are directly disbursed in “engineering construction” and other subjects without accounting through “raw materials”, resulting in the gross profit margin of the enterprise being lower than the normal level of the industry, and even the inversion of income and cost.

According to the national economic industry classification (GB / t4754-2017) published by the National Bureau of statistics, the construction industry can be divided into four categories: Housing construction, civil engineering construction, construction and installation, building decoration and other construction industries.



The income obtained from construction in other places is not reported as required 11.

Expenses are disbursed through false business.



The income from accepting party A’s debt paying assets is not recognized as required.

Invoices that should be obtained but not obtained or non-conforming invoices shall be used as pre tax deduction vouchers.


Unrecognized income from the collection of non price expenses related to the project, such as temporary facilities fee, construction organization relocation fee, labor insurance fee, safety construction fee and other income collected from Party A are not included in the income.



Other risks of failing to calculate the cost as required 12.


the project owner) can organize forces by itself.

The project department directly managed by the head office of foreign construction and installation enterprises fails to handle the application for inspection and registration of cross regional tax related matters as required, and there is no enterprise income tax declaration information within 6 months after commencement, which may lead to the risk of failing to declare enterprise income tax to the project location as required.


Some construction enterprises have made advance declaration of value-added tax, but the corresponding enterprise income tax income has not been declared in advance as required.

Since the construction enterprise often advances funds for construction, it is common for the construction enterprise to accept the employer to repay the debt with non monetary assets after the employer defaults on the project payment.

Loop Box


Illegally obtaining invoices for main building materials.

Failure to obtain pre tax deduction certificate in accordance with regulations.

2、 Cost tax related risk points focus on the matching of cost carry forward, the rationality of cost composition and the authenticity of cost occurrence.

It is common for construction enterprises to falsely list material costs.


The cost is temporarily recorded according to the contract or budget estimation.


First, obtain false invoices from cement production enterprises, steel and other construction main materials wholesale enterprises with more surplus tickets; Second, issue material invoices through the tax service office; Third, falsely use other people’s ID cards to handle tax registration and falsely issue material invoices by using inclusive tax policies.

The rent obtained by renting steel formwork, wood formwork, scaffold and mechanical equipment is not included in the income.

Risks of not making tax adjustment before the estimated entry cost.

The depreciation of fixed assets for temporary facilities of the enterprise is accrued according to the construction period, resulting in the depreciation expense exceeding the standard and included in the cost.


The cost is not carried forward as required.

Falsely list labor cost risk 9.

It is concluded that construction and installation enterprises have certain particularity in accounting, which is very different from production-oriented enterprises, especially from ordinary production-oriented enterprises in cost accounting and revenue recognition.

Enterprises build employment relations through false labor contracts, increase the number of employees, increase the payment amount of employees’ salaries, and reduce the taxable income of enterprise income tax.

Obtain false labor invoices.

3、 Tax related risk points of expenses 1.

Failing to declare the income statement other than the main project funds as required, the income generated by contract change, claim, reward and other means shall be operated outside the account or included in the current account.


The income from the disposal of residual materials and corner wastes is not included in the income.

It is difficult for construction enterprises to obtain invoices normally when purchasing sand and stone and other raw materials.

Risk of falsely listing material costs 6.



In order to delay the payment of current enterprise income tax, the enterprise confuses the cost attribution period and carries forward the project cost in advance.

Due to the lack of relevant certificates or evidential materials for the recognition of the fair value of some debt paying assets, there may be the risk of low recognition of fair value or non recognition of income.

For example, using false business to increase transportation expenses, loading and unloading expenses, conference expenses, office expenses, travel expenses, or vehicles and construction machinery not leased under the name of the company, and disburse fuel expenses, repair expenses, bridge and road crossing expenses, etc.

Before the final settlement, the enterprise has not obtained the invoices, and has not made tax adjustment according to the regulations.

Due to the long construction period of construction products and slow project settlement speed, some construction and installation enterprises, for various reasons, fail to carry forward the income and cost of their projects in time according to the completion schedule method (completion percentage method) specified in the enterprise income tax policy, resulting in false declaration.

The enterprise falsely increases the labor cost by obtaining more labor invoices or disburses other expenses irrelevant to production and operation activities as labor items, resulting in the enterprise underpaying the enterprise income tax.

According to the pre tax deduction of accrued expenses, there are only accrued but not paid or more accrued but less paid.

The construction industry is an important material production department of the national economy.

Source: China tax Q & A; The copyright belongs to the author and is only for learning and communication.

Revenue is not recognized according to the completion schedule.

Content i.

The head office of some construction enterprises offset the tax prepaid in other places when reporting the advance payment and final settlement, but the corresponding project progress payment is not included in the total income for reporting.

Falsely list employee wages and salaries.



Failure to declare various incomes other than the project price as required.



The bidding fee charged in the bidding stage of the project is not included in the income.

Construction and installation enterprises in other tax related risk points failed to declare enterprise income tax in time when they went to other places for construction.

The construction and installation works are mainly undertaken by the construction and installation enterprises, or the construction unit (i.e.


It will be linked to the current account for a long time and no tax adjustment will be made.

With the improvement of the technical content of the construction industry, it has become normal for large-scale construction enterprises to obtain income by providing patent rights and land use rights of non patented technologies, which are not included in the income.

The enterprise has paid the project funds, raw material procurement funds and labor funds, but failed to obtain the invoices in time.

Because of this, the tax related risks of construction enterprises also have certain particularity and need special attention.

Use other material invoices to replace the cost of raw materials such as sand and gravel.

It is mainly engaged in the production activities of construction and installation projects, building houses and structures for various departments of the national economy, and installing machinery and equipment.

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Enterprises usually deduct the cost of raw materials that cannot obtain invoices before tax through other invoices.



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