In general, China’s accounting principles are pretty close to international financial reporting standards. All foreign companies in the country must strictly follow the rules of the central and local government where they are based in order to be compliant. Basically, the following steps must be followed:
- Annual audit report: composed of a balance sheet, an income statement and a cash flow statement. This must be conducted by external licensed firms and finally signed by a certified public accountant registered in mainland China.
- Corporate Income Tax (CIT) reconciliation report: though CIT is generally paid on a quarterly basis, an annual CIT reconciliation report must be prepared to certify that all taxes have been paid, and to eventually know if supplementary taxes must be paid or reimbursements obtained.
- Annual report to local bureaus of industry and commerce: through the enterprise credit and information publicity system of the jurisdiction where the enterprise is located.
- Annual report to national authorities: through a dedicated reporting system.
In general, all the above documents must be completed within the first four to six months of the following year. It is possible to outsource these procedures to professional accounting firms: costs are based on the volume of transactions (higher costs for higher volumes), with prices starting for as little as CNY 2,000 (ca. 260 EUR) for a couple of dozens of fapiaos every month. Start-ups and SMEs may benefit from outsourcing their accounting services as the costs could be lower than hiring an in-house accountant. On the other hand, larger companies or those with large volumes of transactions should opt for a dedicated in-house team.
For more details on the reporting requirements that companies need to follow in China, see a dedicated guide published by the EU SME Centre in 2016: https://www.eusmecentre.org.cn/guideline/understanding-company-administrative-and-reporting-rules-china.