Chinese-foreign contractual joint ventures should set up a detailed account of "profit return investment" in this account when returning investors' investment during the cooperation period.
Surplus reserves are all kinds of accumulated funds. Surplus reserve includes statutory surplus reserve, arbitrary surplus reserve and statutory public welfare fund. It is the accumulation of profits extracted from after-tax profits and left in the enterprise for specific purposes.
Extended data:
Surplus reserve is divided into public welfare fund and general surplus reserve according to different purposes. The public welfare fund is specially used for the expenditure of welfare facilities for employees of enterprises, such as the purchase and construction of dormitories, nurseries and barbershops. Article 177 of the old "Company Law" stipulates that the corporate enterprise shall withdraw the statutory public welfare fund according to the ratio of 5% to 10% of the after-tax profit.
In 2006, the new company law only stipulated that the company should withdraw the statutory provident fund according to 10% of after-tax profits. All provisions on "statutory public welfare fund" have been abolished. The legal surplus reserve is drawn from the net profit (minus the losses of previous years) by the company-based enterprise according to the specified proportion of 10%. The enterprise income tax stipulates that losses in previous years (within five years) can be made up by pre-tax profits, and from the sixth year onwards, they can only be made up by after-tax profits.
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