What is a reserve fund? Purpose of the reserve fund

Now, with the improvement of everyone's quality of life, many friends have started the road of investment, and funds are a popular choice for many investors. I believe that friends may know something about the reserve fund when buying funds. Of course, many friends will ask what is the reserve fund. What is the reserve fund for? Come on, let me answer for you.

What is a reserve fund? In fact, the reserve fund is a fund mainly used for safety reserve. Its essence is the reserve fund property which is extracted from the net profit of fund products according to the provisions of laws and regulations and approved by relevant departments to make up for product losses and increase capital. The existence of reserve funds can better ensure the safety of investors' funds.

Knowing what the reserve fund is, let's take a look at how the reserve fund specifically guarantees the safety of investors' funds. Reserve is the standard to determine the laws and regulations implemented. According to the Detailed Rules for the Implementation of People's Republic of China (PRC) and the Law of People's Republic of China (PRC) on Enterprises with Foreign Investment, foreign-invested enterprises established in China shall, after paying enterprise income tax in accordance with the provisions of the China tax law, draw some reserve funds and employee incentive and welfare funds from these profits. Moreover, the proportion of reserve fund withdrawal is also explained accordingly, and it cannot be lower than 10% of after-tax profit. Only when the accumulated withdrawal amount of the provident fund reaches 50% of the registered capital of the foreign-invested enterprise can the provident fund not be withdrawn.

For Sino-foreign joint ventures that are not foreign-funded enterprises, there are also certain provisions on reserve funds. According to the Enterprise Income Tax Law of People's Republic of China (PRC), the proportion of reserve funds shall be decided by the board of directors of the company. Reserve funds can be used not only to make up the losses of enterprises in the usual sense, but also to expand the production and increase the capital investment of enterprises. In short, the reserve fund is a legal provision formulated by the state, which is mainly used to help enterprises develop better and promote their rational operation. It is very helpful for enterprises and employees. At the same time, the existence of reserve funds can be described as taking precautions.