Every registered company in China needs a way to navigate through the complex and often changing tax & accounting system. One of the most popular options to do this effectively is to use a professional bookkeeping provider in China. Accounting in China has to be compliant with the “China GAAP (General Accepted Accounting Principle), also known as “Accounting Standards for Business Enterprises” (ASBEs) which is a certificate available to Chinese accountants and local accounting firms.
Options for tax & accounting in China
When it comes to tax & accounting in China, all companies have 2 options: Handle accounting in-house and hire one or more certified Chinese accountants OR use a third party tax & accounting provider in China. The average salary for a certified accountant, even a junior accountant in Shanghai was 155,000CNY per year or around 13,000CNY/month.
Depending on the size of your organization and the amount of transactions, using a third party tax & accounting firm may be the more cost efficient option. However, there are many good reasons why price shouldn’t be the only factor in your tax & accounting management. As we’ve seen over the years, prices too good to be true are often exactly what they sound like: “too good to be true”. In other words, there is always a catch.
First major point up…
Is your bookkeeping provider in China liable for your tax & accounting?
Hmm, if this sounds like a major concern, it’s because it is. The short answer to this question is NO. If your tax and accounting is neglected and the government takes notice, the people they will go to for answers will be your legal representative as well as your financial manager. The excuse “we hired a bad bookkeeping firm” is not a get-out-of-trouble (or jail) card.
Non-Compliance and mistakes can lead to large fines, severe penalties, and, possibly, deportation of foreign employees. If your accountant makes a mistake, who’s liable for it? Sadly, even if you’ve trusted an accountant agency to take care of your tax, the liability for any mistakes would fall to you nonetheless.
The value of a good accountant lies far beyond simply being able to make correct calculations. A good one can really steer your business in the right direction, and smoothly guide you through the regulatory system stress-free. A bad one could mess up your books or even get your company blacklisted. Mistakes in this area are costly and easily overlooked.
Is your bookkeeping provider too cheap?
The requirements for CPA (Certified Public Accountant) in China are:
- Earning a college degree,
- Passing a uniform examination,
- Two years experience of auditing in China,
- Becoming a member of the CICPA,
- Complete 120 hours of CPE every three years.
Looking for cost-efficient services and watching your budget is good, as long as cutting costs doesn’t affect the quality of services your accountant offers. Where does the cost saving come from? Licensed accounting agencies who follow the requirements for CPA price their services accordingly. However, some accounting agencies would rather hire inexperienced fresh graduates or barely qualified staff to lower their prices and boost their sales. In this case, cutting corners could be potentially risky for your business. Unprofessional service is most likely not a suitable way of cost control in the long run.
The agency should have staff that is equipped to meet the client’s needs and is up to date with the current China Finance and Tax laws, for it is changing quite often. A clueless, inexperienced, or underqualified accountant could miss opportunities to lower a company’s tax burden, like tax rebates, and it can result in paying too much tax.
Accountancy firms hold a huge amount of private data. National insurance numbers, tax documents, and direct-deposit information are just some of the examples of the sensitive data – data that can stretch back years for some clients. If you want to avoid the financial and reputational risks, it would be better to pick a firm that has the IT manpower to secure the protection of your information effectively and consistently. The key factor to look out for here is does the tax & accounting provider have an IT department or IT staff? Or do they outsource their IT? Make sure your bookkeeping provider has the human power to provide standard database security and backup protocols.
How long has your bookkeeping provider been doing business?
The last thing to look out for is 1. How long has the company been established and 2. What is their company’s turnover rate (on LinkedIn). Avoid dealing with a company that hasn’t established their internal operations and has a high turnover rate (which often is the case with agencies without proven track record on the market). The problem with a new company or a company with a high turnover rate is that the BD personnel, accountant or the account manager in charge of your account can change often. According to smallbusiness.chron.com Companies with rapidly changing staff have a higher tendency to not follow through with guarantees and service quality.
it’s possible that there would be too many different employees engaged on your matter. It’s likely that the ways in which they handle it are different, because of the knowledge gaps, questionable management, poor training or missing internal guidelines.
Farewell for now
With all these points in mind, you’re now ready to choose a qualified tax and accounting solutions provider that will follow you through your journey for a long time to come.