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.