The definition of calculation base for calculating surplus reserve is incorrect. The extraction of surplus reserve is based on the full after-tax profit of the current year. If it cannot be distributed to investors according to profits, the rest can be extracted from surplus reserve according to regulations.
In 2006, the new company law only stipulated that the company should withdraw the statutory provident fund according to 10% of after-tax profits.
According to the provisions of Article 167 of the Company Law, the after-tax profits of the company after making up the losses and withdrawing the provident fund shall be distributed by the limited liability company in accordance with the provisions of Article 35 of this Law; A joint stock limited company shall distribute shares according to the proportion of shares held by shareholders.