How to Do Business in China: Running the Business

09 Tax and Accounting for Foreign-Invested Companies in China

Tax planning should be part of the market-entry plan, not a step left until the first invoice or overseas payment. A China company’s tax obligations depend on what it sells, where it operates, how it is funded and whether it has related-party transactions with overseas group companies.

Identify the main taxes and filing duties

Depending on its activities, a company may need to manage enterprise income tax, value-added tax (VAT), surcharges, individual income tax withholding, stamp duty, customs duties and other taxes. The VAT Law took effect on January 1, 2026, together with implementing rules. Rates, exemptions, input credits, invoice requirements and filing periods depend on the transaction and taxpayer status.

The company should establish compliant bookkeeping, tax filing, invoice issuance and document-retention procedures from the outset. Invoices and accounting entries should reflect genuine transactions and be consistent with contracts, delivery records and payments. Tax registration and filing details should be checked with the competent tax authority and local advisers.

Review cross-border payments before signing

Payments to an overseas parent or affiliate for dividends, interest, royalties, services or goods can raise withholding tax, treaty, VAT, transfer-pricing and foreign-exchange questions. A contract alone does not prove that a service was provided or that a related-party price is arm’s length. Keep evidence of the commercial purpose, actual performance, pricing basis and approval process for each material payment.

Treaty benefits may be available where the relevant conditions and documentation are met. They should be reviewed before making a payment, rather than assumed from the recipient’s place of incorporation.

Keep corporate and tax planning aligned

The chosen legal structure, people and functions in China should match the company’s accounting and tax treatment. A representative office, branch, subsidiary, distribution arrangement or service model can have different consequences. If the group changes its operating model, intercompany contracts and tax treatment should be updated together.

How we can help: We coordinate with tax professionals on the legal aspects of entity structure, intercompany agreements, dividend and royalty arrangements, tax documentation and dispute response.

10 Hiring Employees in China: Contracts, Social Insurance and Foreign Staff

Hiring in China involves more than signing an offer letter. Employers should use locally compliant employment documents, establish payroll and social-insurance processes, protect confidential information and confirm that foreign employees have the required work and residence permissions.

Use a written employment contract

An employer should enter into a written labour contract with an employee within the statutory period after employment begins. The contract should identify the employer and employee and address the role, work location, working hours, remuneration, social insurance, occupational protection, contract term and other required matters. Offer letters and company policies should be consistent with the signed contract and local practice.

Employers should also prepare written rules for matters such as attendance, leave, performance, expenses, discipline, information security and use of company systems. Under Chinese labour law, employee-facing rules can have legal consequences; consultation, notice and proof that employees received the rules may matter in a later dispute.

Budget for payroll and social insurance

Employers should account for individual income-tax withholding, social-insurance contributions and housing-fund obligations where applicable. Rates, contribution bases and implementation details can vary by locality and change over time. The company should obtain location-specific payroll advice before hiring and keep clear records of wages, attendance, leave, social-insurance payments and employee communications.

Employing foreign nationals

Foreign nationals generally need the required work authorisation and residence status before taking up employment in China. The employer normally has a role in the application and must ensure that the job, qualifications, employer information and immigration documents remain consistent. A business visa or an overseas employment contract alone should not be treated as permission to work in China.

Protect business information and work product

Employment documents can address confidentiality, invention disclosure, ownership of work product, data security and post-employment obligations within the limits of Chinese law. Non-compete restrictions are subject to statutory conditions and compensation requirements and should be used selectively. The employer should also define access controls and offboarding procedures so that contractual protections have practical effect.

How we can help: We help foreign-invested companies prepare and review employment contracts, staff handbooks, confidentiality and IP clauses, foreign-employee onboarding documents and employment-dispute strategies.

11 China Data Protection and Cross-Border Data Transfers

A foreign-invested company may share employee, customer, supplier or operational data with its overseas headquarters, cloud vendors and group companies. Before doing so, it should identify what data it handles, where it is stored, who can access it and whether any China-to-overseas transfer mechanism is required.

Map the data and the business purpose

Start with an inventory of the personal information and business data the company collects, uses, stores and shares. Identify the purposes, systems, service providers, retention periods and overseas recipients. Data concerning employees, online users, health, finance, location, children or sensitive business operations may need closer review. A group-wide privacy policy may not by itself explain or authorize each China data flow.

Apply China’s data-protection rules

China’s Personal Information Protection Law, Data Security Law and Cybersecurity Law impose obligations concerning lawful processing, notice, security and individual rights. Depending on the company’s role and activities, it may need privacy notices, consent or another legal basis, data-processing agreements, internal controls, impact assessments and incident-response procedures. Certain sectors and data categories may have additional requirements.

Check whether an outbound-transfer mechanism applies

Cross-border transfers can require a CAC security assessment, a personal-information export standard contract, or personal-information protection certification, depending on the operator, the type and volume of information and the applicable rules. The 2024 CAC provisions also create exemptions and adjust thresholds for specified situations, including certain ordinary business and human-resources transfers. An exemption from one transfer mechanism does not remove the other data-protection duties.

Before enabling overseas system access, group reporting or cloud hosting, the company should document the data categories, recipient, purpose, volume and applicable route. Free-trade-zone arrangements and Greater Bay Area measures may also be relevant to eligible entities, but their scope is limited and should be checked against the facts.

12 Protecting Brands, Technology and Trade Secrets in China

Foreign businesses should protect their intellectual property before launching products, appointing distributors or disclosing technical information to a Chinese manufacturer. A foreign registration or a contract signed overseas may not provide the protection the business expects in China.

Register key brands early

China’s trademark system is principally based on registration. A foreign company without a domicile or business establishment in China generally must appoint a legally established trademark agency to apply through the domestic route. Businesses should consider the Chinese-language brand, relevant goods and services, likely product extensions and important logo or name variations. Filing before public launch or negotiations can reduce the risk of disputes over an earlier local filing.

Clarify ownership of technology and work product

Contracts with employees, consultants, distributors, suppliers and manufacturers should identify who owns existing IP, who owns newly developed work, what licences are granted and whether subcontractors may use the materials. Product tooling, drawings, software, packaging, domain names and technical documents should be addressed expressly. IP assignments and licences should be recorded in a form that can be implemented and, where appropriate, registered.

Treat trade secrets as an operating system

Confidentiality clauses matter, but practical protection also depends on identifying confidential information, limiting access, marking and tracking documents, controlling copies, training staff and closing access when a relationship ends. For manufacturer and supplier relationships, a China-focused NNN agreement may address non-disclosure, non-use and non-circumvention risks more directly than a generic NDA. The agreement should fit the actual business model and be signed before sensitive information is shared.

Plan for enforcement

Keep dated evidence of creation, ownership, disclosure and unauthorized use. Preserve samples, communications, website pages, purchase records and access logs. The appropriate response may involve administrative complaints, customs measures, civil litigation, arbitration or negotiation, depending on the right and the conduct involved.

How we can help: We assist with China trademark strategy, IP ownership clauses, manufacturing and distribution agreements, NNN/NDA documents, trade-secret controls and enforcement.

13 Importing, Exporting and Product Compliance in China

Trading with China can involve customs formalities, product-specific approvals, labelling rules, inspection and quarantine, export controls and tax documentation. The required steps depend on the product, the parties’ roles and the intended route to market.

Confirm the operating model

Decide whether the China entity will import goods in its own name, act as a distributor, use a customs broker, sell through a platform or supply a Chinese customer from overseas. Since December 30, 2022, China has removed the general foreign-trade-operator filing requirement. That change does not eliminate customs registration, product licences or other regulatory requirements that apply to a particular transaction.

Classify products and check permits

Before shipment, confirm the customs classification, declared value, origin, tariff treatment and any import or export restrictions. Some goods require licences, quotas, inspection, certification or registration with a sector regulator. Products such as food, cosmetics, medical devices, telecom equipment, chemicals, children’s products and electrical goods can raise specialised compliance questions. Product labels, Chinese-language instructions, safety standards and after-sales obligations should be reviewed before sale.

Allocate responsibility in the contract

The sale, distribution and logistics contracts should specify who acts as importer or exporter of record, who obtains permits, who pays duties and taxes, who bears inspection and storage costs, how non-conforming goods are handled and what evidence is required for payment. Incoterms can help allocate delivery risks, but do not replace a clear allocation of regulatory responsibilities.

Keep consistent transaction records

Invoices, customs declarations, purchase orders, payment records and product descriptions should accurately reflect the actual transaction. The company should also check applicable export-control, sanctions and end-use restrictions for the goods, technology, destination and counterparties.

How we can help: We advise on China-facing supply and distribution arrangements, product-market entry, customs and licensing risk allocation, trade claims and disputes over quality, delivery or payment.