While the Chinese government has been very active in
issuing new regulations over the last 12 months, there is still
much uncertainty about how these will be enforced. Here are some
compliance tips you can implement to set yourself up for a smooth
transition and guard yourself against potential
problems.
1. Do thorough background checks
Are you sure all third parties you deal with operate with good
compliance standards? It pays to do exhaustive due diligence on
suppliers, customers, or partners to ensure they will not be
investigated.
This is important for existing and new contacts and when
acquiring a new asset, such as a company or production site. While
your business may be clean and transparent, any third parties you
deal with could be engaging in illegal behaviour, even if they seem
fine.
Hire an external party to help you run comprehensive background
checks on your partners and suppliers.
2. Ensure cross-border tax compliance
As business between China and other countries becomes
increasingly interlinked, we have seen many people faced with
taxation issues and in need for a transparent tax compliance
solution for both jurisdictions. A number of new double taxation
agreements make these situations increasingly complicated.
In addition, the State Administration of Taxation recently
published new measures of General Anti-Tax Avoidance, making the
procedures related to tax investigations more concrete.
Acclime can act on behalf of you, handling your tax matters and
compliance, providing cross-border tax consulting and advisory on
expatriate employment arrangements.
3. Put proper procedures in place
Every company in China should have an Employee Handbook that
clearly outlines the responsibilities of each role within the
company. All about Sourcing in China here.
Good corporate governance must be enforced by all senior
managers and not only by the HR and legal department of a company.
Acclime can help you prepare a solid Employee Handbook, in line
with China’s Labour Law and compliance regulations.
Another essential measure is training your employees to enhance
the awareness of compliance issues, anti-corruption guidelines, and
procedures for potential investigations.
Some international companies may even hire compliance officers
to enforce a unified standard across all subsidiaries.
4. Prevent fraud and corruption
For international companies, it is particularly important to
properly identify how compliance can be enforced under different
regulatory regimes and cultural backgrounds. In light of past
corruption scandals involving MNCs in China, we advise companies
to:
- Adapt their growth expectations to the development of the
Chinese market. - Not engage in discretionary spending.
- Audit third party payments especially to industry
organisations, affiliate networks, and event organisers. - Ensure their sales teams are acting compliant in the
increasingly price sensitive market. - Set comprehensive compliance standards and expectations, and
react appropriately if problems occur. - Communicate their compliance standards clearly with partners
and distributors.
5. Be aware of local differences
For now, compliance investigations still vary from province to
province and there is no general rule on what rights and
responsibilities companies have.
Before there is a unified investigation system in place, we
encourage you to work with a partner who fully understands how to
navigate these regional differences.
