China is a constantly evolving market. The laws and regulations on trade and business are ever-changing; what is true today, may not be true a week later.
The success of your Chinese operations depends on whether your company is able to keep track of these changes and stay updated. This is especially true when it comes to filing taxes and maintaining accounts.
Your business may be at risk from rising costs, decreasing margins, sudden regulatory changes, or other unforeseen market factors. This is why it is often recommended to outsource with a professional firm that has the required experience in tax and accounting services in China.
Once your company’s registered office or WFOE or representative office is set up in China, regularly maintaining proper records and corporate accounts in accordance with the Chinese accounting laws and principles is essential. Reporting of taxes and accounts to the related authorities needs to be done periodically. In some cases, like Foreign Invested Enterprise (FIE), this step is a prerequisite for the repatriation of profits.
However, this is not new to a business or any other country. After all, accounting is a critical factor in the success of a corporation. However, adapting to the rules and standards of tax and accounting in China can prove to be difficult.
The Chinese accounting system has adopted the Chinese Generally Accepted Accounting Principles (GAAP) framework or the Chinese Accounting Standards (CAS). These sets of laws and regulations have been constantly evolving and now are similar to the globally recognized International Financial Reporting Standards (IFRS) and also US GAAP.
However, there are yet some differences that can be challenging to deal with.
As an example, CAS uses a different valuation method to calculate fixed assets. While IFRS permits valuation either by historical cost or by the revaluation of assets, CAS sticks only to the historical cost principle.
Similarly, there are several discrepancies between the Chinese and International Standards due to the slow updating procedure in the country.
Why consider Outsourcing?
Outsourcing your company’s tax and accounting services in China can support your decision-making process and help guide you through the transition into the Chinese market.
During outsourcing, the complexities of the Chinese standard for accounting and taxes are delegated to a trusted and reliable company that offers corporate services.
These professionals are experts in their field, closely following all upgrades and changes in the laws and rules. They also have a deep understanding of the subject.
The benefits of outsourcing to a tax and accounting service company include-
- Reducing the internal company time loss by administration and reporting. The firm’s resources can be directed to the actual business.
- Your accounts always stay up-to-date and you remain well-informed on current updates and possible changes in the future.
- Avoiding penalties from the Chinese authorities for regular and accurate submissions.
- Some corporate service companies, while dealing with your accounts, may also provide extended services include advice