Establishing a company in China is only the starting point of compliance management for a foreign-invested enterprise. The company must then maintain accounting records, file tax returns, manage cross-border transactions and complete statutory annual reporting on an ongoing basis. Effective compliance is not simply about filing on time. It requires consistency between corporate registration information, contractual arrangements, accounting records, invoices, payment flows and the underlying business activities. Before establishing a business in China, foreign investors should first confirm whether the proposed business activities fall within the foreign investment negative list and whether any sector-specific licensing requirements apply. Key registration matters include the legal form, registered address, business scope, registered capital, shareholders, legal representative and corporate governance arrangements. For a newly established limited liability company, subscribed capital must generally be paid in within five years of incorporation, unless otherwise provided by law or regulation. Registered capital should therefore be set with reference to actual funding needs and the investment plan, so that the subscribed amount is not disconnected from the investor's ability to contribute. Foreign investors and foreign-invested enterprises must perform their reporting obligations under the Measures for Foreign Investment Information Reporting through the designated corporate registration and information reporting systems. Reporting generally covers initial investment information, changes to relevant enterprise information, and annual foreign investment information. Where shareholders, actual controllers or other reportable information change, the enterprise should promptly assess whether a change report is required. After obtaining the business licence, the enterprise should complete the tax, banking and employment arrangements required by its actual operations. These typically include configuring access to the electronic tax system, confirming taxpayer status and invoicing arrangements, opening corporate bank accounts, arranging foreign exchange operations and completing employment-related registrations. The enterprise should also assess, under the Measures for the Administration of Beneficial Ownership Information, whether beneficial ownership information filing is required or whether the conditions for an exemption undertaking are met. Company formation should not be treated as a one-off administrative procedure. Registration information, shareholder capital commitments and actual operating arrangements should all be brought within a single compliance management process. Foreign-invested enterprises operating in China must establish an accounting system in accordance with applicable Chinese accounting laws and regulations and the unified national accounting system. The statutory accounting year runs from 1 January to 31 December. Accounting records must be kept in Chinese; a foreign-invested enterprise may additionally use one foreign language. Accounting is generally based on RMB as the bookkeeping currency. An enterprise whose business receipts and payments are predominantly in a currency other than RMB may select that currency as its bookkeeping currency in accordance with the relevant rules, but the financial reports it prepares must be translated into RMB. Accounting must be based on economic transactions that actually occurred, supported by the underlying documentation obtained and retained by the enterprise. Contracts, invoices, bank statements, payment vouchers, expense receipts and other business records should be properly retained in accordance with the applicable accounting archive requirements. Particular attention should be paid to consistency between the business substance, the accounting treatment, the invoicing and the payment, so that bookkeeping does not become disconnected from the actual transaction. Multinational groups typically prepare financial reports under IFRS or group accounting policies, but a group reporting framework does not replace China's statutory accounting requirements. The enterprise should establish a clear reconciliation mechanism between group reports and the Chinese statutory books, focusing on accounting policy differences, intra-group balances, foreign currency translation, expense recognition and consolidation adjustments. Where an overseas ERP or shared service centre is used, the enterprise should also define who is responsible for the local statutory books, together with system access rights and record retention arrangements. Accurate statutory accounting is the common foundation for tax compliance, financial audit and group reporting. Reconciliation and review should run on a regular cycle rather than being concentrated at the year-end close. Foreign-invested enterprises must determine the applicable VAT treatment based on their actual taxable transactions, taxpayer status and the applicable tax rules. The Value-Added Tax Law of the People's Republic of China and its implementing regulations took effect on 1 January 2026. Enterprises should confirm applicable tax rates, tax incentives, input VAT credit, the timing of tax liability, invoicing and filing requirements under the current rules. The statutory corporate income tax rate for Chinese resident enterprises is generally 25%, and enterprises that meet the prescribed conditions may apply the relevant tax incentives. Corporate income tax is generally prepaid monthly or quarterly and reconciled after the end of the tax year. Because taxable income may differ from accounting profit, enterprises should focus on deductible items, non-deductible items, tax incentives and other tax adjustments. Where an enterprise pays wages and salaries to employees, it must withhold and remit individual income tax and perform the related reporting obligations in accordance with the law. For expatriate employees, the assessment should take into account individual tax residency status, days worked in China, salary allocation arrangements and any applicable tax treaty. Payroll management should also be coordinated with the applicable social insurance, housing fund and employment requirements. From 1 November 2026, where a domestic entity purchases specified taxable services from an individual, it must assess under the applicable conditions whether it has a withholding obligation for VAT and related surcharges. The relevant services include qualifying research and development, software, design, consulting, education, cultural and radio, film and television production services. Before payment, the enterprise should review the nature of the service, the applicable transaction amount threshold, the contractual terms, whether the individual has already paid tax, and the supporting documentation. This VAT withholding obligation is distinct from individual income tax withholding on wages and salaries and should be identified and managed separately. Enterprises should establish a tax compliance review mechanism covering the accuracy of filings, invoice management, accounting vouchers, tax-related information reporting, and timely remediation once issues are identified. The National Unified Tax Administrative Penalty Discretion Benchmark (2026 Edition) took effect on 1 November 2026 and applies a uniform national standard to the relevant tax administrative penalties. Minor violations that meet the prescribed conditions may be exempt from administrative penalty under the law, but this should not be read as an automatic exemption for all first-time violations. Tax compliance should be embedded in day-to-day processes such as procurement, payroll, invoicing and payment approval, rather than being treated solely as a monthly or quarterly filing task performed by the finance department. Foreign-invested enterprises may enter into purchases, management services, licensing, financing and cost-sharing arrangements with an overseas parent or other group affiliates. Such transactions should be assessed against the applicable related-party and transfer pricing rules to determine whether they satisfy the arm's length principle and the relevant reporting requirements. The enterprise should retain documentation that supports the commercial substance of the transaction, the pricing methodology, the contractual terms and the actual performance. Where an enterprise pays dividends, interest, royalties or service fees to an overseas shareholder or related party, withholding tax, tax treaty application, supporting documentation and foreign exchange requirements may all be relevant. Before distributing profits, the enterprise should also review its distributable profits, statutory reserves and the required internal corporate approval procedures. For cross-border payments, the enterprise should establish a complete evidence trail running from the contract, through delivery of the services or goods, the accounting entries, the invoice or other supporting documentation, to the payment itself. Where tax filings, withholding, recordal or bank review are required, these should be completed on a timely basis in accordance with the specific transaction and the applicable rules. A cross-border transaction that has been recorded in the accounts does not automatically satisfy tax and foreign exchange compliance requirements. The enterprise still needs to assess the transaction against its commercial substance and the complete supporting documentation. Foreign-invested enterprises should maintain an annual compliance calendar that coordinates the financial year-end close, statutory audit, tax reconciliation, annual corporate information reporting and any applicable sector-specific items. These obligations arise under different laws and regulations and should not be lumped together as a single “annual inspection”. The enterprise should complete its annual financial close and prepare financial reports in accordance with the applicable Chinese accounting system. Under the Company Law of the People's Republic of China, a company must prepare financial reports at the end of each accounting year and have them audited by an accounting firm in accordance with the law. The statutory financial audit should be managed separately from the annual corporate income tax reconciliation, group reporting and other financial review engagements. The annual corporate income tax reconciliation must generally be completed within five months of the end of the tax year, ordinarily by 31 May of the following year. The reconciliation involves reviewing accounting profit, tax adjustment items, pre-tax deductions, tax incentives and prepaid tax, and ultimately determining the corporate income tax payable or refundable. Enterprises must generally file the previous year's annual corporate report through the National Enterprise Credit Information Publicity System between 1 January and 30 June each year. Foreign-invested enterprises must also report the required foreign investment information through the corresponding annual reporting channel under the foreign investment information reporting system. The two reporting channels are connected, but the regulatory information they cover is not identical. The enterprise should review both for truthfulness, accuracy and consistency. Enterprises with reportable related-party transactions should assess whether the annual related-party transaction forms must be submitted together with the annual corporate income tax return. Depending on the type and scale of the related-party transactions, the enterprise may also be required to prepare contemporaneous documentation and comply with other transfer pricing requirements. Annual compliance should be prepared throughout the year rather than concentrated in the period before the filing deadlines. Accounting, tax, shareholder and investment information should be checked in advance to reduce the risk of last-minute remediation and filing errors. Foreign-invested enterprises engaged in export trade or cross-border e-commerce should review the applicable export VAT refund and customs requirements based on their actual export model. Key areas include export refund registration and filing, customs declarations, purchase and sales documentation, logistics records, export proceeds collection and evidence of genuine transactions. Enterprises using an overseas warehouse model should also establish inventory management, overseas sales records and subsequent write-off mechanisms in accordance with the applicable rules. Sectors such as manufacturing, technology, pharmaceuticals, financial services and certain cross-border operations may be subject to additional tax, licensing and regulatory requirements. Enterprises should assess industry tax incentives, specific filings, customs treatment and other regulatory obligations against their actual business activities and the applicable conditions. Where a tax dispute arises, the enterprise should properly retain the relevant transaction documentation, the basis for its tax treatment, records of communications with the tax authorities and tax administrative documents. Where administrative reconsideration, appeal or litigation is involved, the appropriate remedy should be assessed under the laws and procedural requirements in force at the time. Special tax treatment and tax incentives cannot be assumed to apply simply because of the enterprise's industry or business model. Eligibility, documentation requirements and ongoing compliance conditions should each be verified. Management should review the following seven questions on a regular basis. Where any of them cannot be answered clearly, that area requires further review. For foreign-invested enterprises operating in China, tax and accounting compliance should not be understood as a series of independent filing tasks. Corporate registration, statutory accounting, tax compliance, cross-border transactions and annual reporting are closely connected. A weakness in one area can increase compliance risk in another. Enterprises therefore need to combine accurate financial records, clearly assigned responsibilities, appropriate internal controls and timely review of policy developments into a compliance management mechanism that operates continuously. The objective of compliance management is not only to complete the various filings, but to establish a reliable management foundation for the long-term, stable operation of the business.Key Assessment
01 Business Registration & Initial Compliance
1.1 Company Registration and Investment Structure
1.2 Foreign Investment Information Reporting
1.3 Tax, Banking and Employment Setup
CMAP Note
02 Accounting & Financial Records
2.1 Statutory Accounting Requirements in China
2.2 Accounting Vouchers and Record Retention
2.3 Group Reporting and Local Statutory Books
CMAP Note
03 Ongoing Tax Compliance
3.1 Value-Added Tax
3.2 Corporate Income Tax
3.3 Individual Income Tax and Payroll
3.4 VAT Withholding on Services Purchased from Individuals
3.5 Tax Compliance Review and Remediation
CMAP Note
04 Cross-Border Transactions & Related-Party Compliance
4.1 Related-Party Transactions and Transfer Pricing
4.2 Cross-Border Payments and Profit Repatriation
4.3 Documentation and Internal Controls for Cross-Border Transactions
CMAP Note
05 Annual Compliance & Statutory Reporting
5.1 Year-End Closing and Statutory Audit
5.2 Annual Corporate Income Tax Reconciliation
5.3 Annual Corporate Report and Foreign Investment Information Reporting
5.4 Annual Related-Party Transaction Reporting
Annual Compliance Calendar
Item Usual timing Year-end closing After the end of the accounting year Statutory financial audit As arranged under the applicable rules Corporate income tax reconciliation Ordinarily by 31 May of the following year Annual corporate report 1 January to 30 June of the following year Annual foreign investment information report 1 January to 30 June of the following year Related-party transaction reporting With the annual filing where the conditions are met CMAP Note
06 Special Compliance Considerations
6.1 Export VAT Refund and Trade Substance
6.2 Industry-Specific Tax and Regulatory Obligations
6.3 Tax Disputes and Evidence Management
CMAP Note
●CMAP Compliance Checklist
Seven-Point Periodic Self-Assessment
●CMAP Observation
