China is one of the most attractive countries for doing business, but it is also one of the strictest in terms of accounting regulations. If you're opening a company in China, conducting trade, or offering services on the Chinese market, proper accounting and tax support are essential.
This guide provides practical insights: what standards apply, how accounting works, what taxes to pay, and how to simplify everything to ensure your business operates safely.
Why Accounting in China is Mandatory and Who Needs It
In China, any registered company is required to maintain accounting records, regardless of ownership structure or the scale of operations. This requirement applies to foreign-invested enterprises (WFOE), joint ventures (JV), and even foreign company representative offices.
If you have opened an office, hired employees, or started earning income, the tax authorities expect you to:
- Maintain regular accounting records in line with Chinese standards
- Submit tax reports
- Store all primary documents and fapiaos (electronic invoices)
Important! Even if your company is not actively operating, you must submit zero reports. Failing to meet deadlines in China results in fines and administrative penalties.
2. Chinese Accounting Standards vs. IFRS
China uses its national accounting standards, CAS (Chinese Accounting Standards), which are similar to IFRS but adapted to local legislation.
Main differences:
- Reports are prepared in Chinese, using RMB (Renminbi)
- Accounting follows the principle of matching income and expenses
- Revenue recognition and expense regulations are governed by local standards
- The use of electronic fapiaos is mandatory, as they validate transactions
For foreign companies, this means that accounting within China follows CAS, while reports to the head office are converted from CAS to IFRS. Companies operating internationally often maintain two accounting systems: local (for tax purposes) and corporate (for investors and shareholders).
3. Taxes and Reporting: What, When, and How to Submit
China’s tax system is more complex than it first appears. The main taxes that any company will encounter are:
- Corporate Income Tax (CIT): The standard rate is 25%, with possible reductions for small businesses and certain industries.
- Value Added Tax (VAT): Applied to goods and services, with standard rates of 13% and 6%.
- Individual Income Tax (IIT): Deducted from employees' salaries.
- Social Security Contributions and Housing Fund: Mandatory for all employers.
- Local Levies: Vary by region and type of activity.
Reports are submitted monthly and quarterly, and at the end of the year, the company undergoes an audit and submits a comprehensive package of documents to tax and administrative authorities.
4. Documents, Banks, and Currency Control: What to Pay Attention To
Accounting in China relies on three pillars: fapiaos, bank accounts, and accounting policies.
- Fapiaos: These are electronic invoices without which expenses cannot be verified and input VAT cannot be claimed. Each document must be registered in the tax system.
- Bank Accounts: For opening a corporate account (both RMB and foreign currency), you must provide incorporation documents, a business license, a lease agreement, and details about your financial flows.
- Currency Control (SAFE): All cross-border payments are subject to review. Payments abroad are only permitted with registered contracts and supporting documents.
Tip: Keep the full set—contract, invoice, fapiao, and payment proof. Any discrepancy can delay payments for weeks.
5. How to Choose an Accountant or Outsourcing Company
Foreign companies are often better off outsourcing accounting, especially if they do not have an in-house specialist familiar with Chinese legislation. A good service provider should:
- Work according to CAS and understand the tax authorities' requirements
- Provide bilingual reports (Chinese + English/Russian)
- Have experience with foreign-invested companies (WFOE, JV)
- Assist with banks, fapiaos, and currency control
- Ensure confidentiality and deliver reports on time
A bad sign is if the accountant doesn't give you access to accounting data or claims that "everything is under control without paperwork." In China, without documents, there are no expenses or revenues.
6. Annual Audit and Typical Mistakes of Foreigners
Every foreign-invested company is required to undergo an annual audit and submit financial statements to the AMR and tax inspection.
The audit confirms the accuracy of the accounting, the completeness of tax payments, and the company's right to distribute profits.
What auditors look for:
- Consistency between cash operations and bank statements
- Presence of original fapiaos and contracts
- Correct calculation of corporate income tax
- Consistency between reporting data and accounting records
Typical mistakes:
- Accounting is kept in English without translation—tax authorities will not accept it.
- Missing electronic fapiaos—expenses cannot be verified.
- Delays in reporting—bank accounts are frozen.
- No conversion to IFRS—issues with reporting to investors.
- All functions are handled by one person—high operational risk.
Conclusion: Chinese accounting requires discipline. It is better to set up processes correctly from the start than to deal with audits and penalties later.
How Shile Consulting Helps Foreign Companies in China
Shile Consulting is a consulting company that supports foreign businesses in Asia: China, Hong Kong, Singapore, Malaysia.
We help foreign-invested companies establish transparent financial systems and comply with local regulations.
Our services include:
- Setting up and maintaining accounting according to CAS
- Monthly reporting, VAT, and IIT
- Preparing annual audits and inspections
- Tax planning and consulting
- Opening and managing bank accounts
- Payroll and tax outsourcing for foreign employees
We speak English, Russian, and Chinese, work across different time zones, and provide reports in a clear format.
Our clients are companies from the EU, the US, and the CIS that operate in China and want to ensure financial transparency.
If you're opening a business in China or already operating and want to outsource your accounting to professionals, contact us. We will conduct a free diagnostic and calculate the cost of support for your case.
Final Thoughts
Accounting in China is not just a formality; it's a tool for building trust and business stability. Proper organization of accounting according to Chinese standards, timely declarations, and an annual audit can help you avoid fines, simplify currency operations, and build a reputation as a reliable partner.
Shile Consulting helps companies from different countries operate in China in full compliance with local laws, ensuring transparency and control over every yuan.