Plus Relocation

What should your company know about doing business in China?

A strict financial system can make doing business in China a challenge for multinational companies. Plus COO Joe Benevides offers tips for successful expansion into the country in this Relo Tip Tuesday.

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Complete transcript: “Hi, I’m Joe Benevides, chief operating officer here at Plus, and welcome to another addition of Relo Tip Tuesday. Today, I’d like to talk a little bit about setting up and doing business in China.

As more and more business is transacted within China, companies are asking their employees to go to China on extended business trips, or move there on a short- or long-term assignments. As a result, what do you need to know about doing business in and being tax compliant in China?

First, it’s very important to understand that the Chinese financial system is much more restrictive than most other countries around the world. Unlike many of its trading partners, the Chinese government maintains strict control over its currency, the ability to send money outside of China and the documentation required in order to be able to deduct expenses for tax purposes.

In this highly regulated environment, it’s very important to understand the need to have a physical presence in China. Usually, this is in the form of a “WFOE.” W-F-O-E. Which stands for wholly foreign owned entity. There are other forms of legal entities in China, but today we’ll talk about the WFOE. The WFOE is equivalent to a U.S. corporation, but in China you must apply for a business license with the proper Chinese authorities before you can open your doors. The business license dictates the type of business you can transact in China. For Plus, having a WFOE allows us to invoice and pay expenses in China to your local entities there in local currency.

China’s Golden Tax System is also something very important to understand. Under this system, the government tracks and monitors all taxes paid related to transactions in China. All companies that produce goods and services are required to create a special invoice called a “fapiao.” The fapiao is your official tax receipt for expenses incurred in China, and it must be an original receipt. Copies are just not acceptable. Without it, the tax authorities may disallow those expenses on your company’s tax return or fine you for not following their tax laws. Or maybe even worse, require you to include those relocation expenses in an assignee’s income for the year.

Ultimately, your best course of action when expanding your business into China is to work with people who live and operate there. There are great opportunities in doing business in China. Working with a relocation management company that has a presence and work experience there will help you navigate the challenges and position you for success. Thanks for watching!”