While the Chinese government has been very active in issuing new regulations over the last 12 months, there is still much uncertainty as to how these will be enforced in practice. Here are some compliance tips you can implement to set yourself up for a smooth transition and guard yourself from potential problems.Â
1. Do thorough background checks
Are you sure all third parties you deal with are operating with good compliance standards? It pays to do exhaustive due diligence on any suppliers, customers, or partners, to ensure that they will not be investigated. This is not only important for existing and new contacts, but also when you are acquiring a new asset, such as a company or production site. While your business may be clean and transparent, any third parties you are dealing with could be engaging in illegal behaviour, even if they seem fine on the surface. Hire an external party that can 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. Fiducia 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. Good corporate governance must be enforced by all senior managers and not only by the HR and legal department of a company. Fiducia can help you prepare a solid Employee Handbook, in line with Chinaâ€™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. Â Our Executive Search Team can assist you in finding the right employees with comprehensive knowledge of compliance procedures.
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 Â 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. Â 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.