How to Choose an Accounting Firm in China for Your Company

You have your company's business licence in China and assume the hard part is over. In fact your tax obligations start in the first month, even if you have not issued a single invoice. Choosing the right accounting firm in China is what separates a company with a clean record, one that can open a bank account, renew visas and send profits home, from one that piles up fines and ends up flagged as abnormal by the authorities. This guide explains what accounting firms do, what you actually need from one, how to choose and what you will pay.

What accounting firms in China do

Accounting firms, or bookkeeping agencies as Chinese regulations call them, are licensed by the local finance bureau to provide financial and accounting services to companies without an in-house accountant. That is the normal position for most small and medium-sized foreign companies. Their services include:

• Monthly bookkeeping and management of the company's accounts under Chinese accounting standards
• Preparing and filing monthly and quarterly tax returns: VAT, the surcharges attached to it, and corporate income tax
• Issuing and managing official tax invoices (fapiao) in line with the rules, and recording purchase invoices so input VAT can be deducted
• Running payroll and calculating individual income tax, social insurance and housing fund contributions for employees
• Preparing annual financial statements under Chinese regulations, and coordinating an audit report from a licensed audit firm when needed
• Submitting the annual report to the market regulator that every registered company must file
• Financial and tax advice to avoid legal mistakes, reduce costs and improve profit within the law

Why your company needs an accountant even before it sells

A tax calendar that never stops

China's tax system is complex and runs on fixed dates. Monthly returns are normally filed by the 15th of the following month. Corporate income tax is prepaid every quarter and then settled for the year by 31 May. The company's annual report is filed between 1 January and 30 June. A company that has not started trading must still file a zero return every month, and failing to file is recorded as a violation, just as if you had revenue you did not declare.

What happens if you file late or get it wrong

Errors or late filing expose you to fines starting at a few hundred yuan per late return, but the fine is not the main damage. Your company's tax credit rating drops from A or B to D, and the company may be placed on the list of abnormal operations. At that point invoicing stops, the bank refuses some transactions, and renewing the director's work permit becomes difficult. Fixing this costs far more time and money than a year of accounting fees.

Time saved and records you can rely on

An accounting firm lets you focus on building the business instead of the financial detail, and produces the accurate reports you need to open a bank account, send profits abroad or bid for a contract. If you are still setting up, read how to establish an import and export company in China to see where accounting sits in the full sequence. If you plan to sell online, see how to open an AliExpress store through a Chinese company. If your business is trading, see how to establish a successful trading company in China.

Which services you need at each stage

A new company with no staff and no revenue

You need the minimum: monthly bookkeeping, zero returns, the annual report, and linking the bank account to the tax system so any amounts due can be paid. This basic package is the least expensive, so do not accept an offer that charges you for payroll or invoicing you do not use yet. Also make sure your registered business address is a real or properly licensed virtual one, because the tax bureau may visit it and suspend your file if nobody is there. Our guide to the company registration address in China explains the options.

A company with sales and employees

Here the work multiplies. The company must be classed as a small-scale or general VAT taxpayer (the dividing line is 5 million CNY in annual sales, and the tax rate differs between them). You issue special and ordinary fapiao to customers, run payroll for Chinese and foreign staff with individual income tax withheld monthly, and pay social insurance and housing fund contributions at rates that vary by city. Read the work permit and social security card change for foreigners, because contributions for foreign employees feed directly into your monthly payroll cost.

A company that wants to send profits home or needs an audit

Sending profits to the Gulf requires an annual audit report from a licensed audit firm, payment of corporate income tax (25% as standard, with a reduced rate for small low-profit enterprises whose conditions you should check for your year), and registration of the transfer with the bank. Ask your accounting firm to line up the audit from the start of the year, not in May when audit firms are busiest.

What to hand your accountant every month

The quality of your accounts depends on what you deliver, and when. Most firms want documents by the 5th of the following month so returns can be filed by the 15th. Each month, prepare:

• The company's monthly bank statement, and one for each foreign-currency account if you have them
• Purchase fapiao in your company's name; ordinary receipts are not accepted as expenses
• A list of sales invoices issued, and any cancelled or credited invoices
• The payroll and attendance sheet, and any hires or departures during the month
• New contracts with customers and suppliers, and lease agreements when renewed
• Customs declarations for any imported or exported shipment, as they determine the VAT treatment

Keep an electronic copy of everything you send. You are legally responsible for the books even if the accountant prepares them.

How to choose an accounting firm in China: 5 criteria

• Local experience with foreign companies: look for a firm that currently manages foreign companies in your city and understands what wholly foreign-owned enterprises need, such as the annual audit, profit repatriation and foreign-exchange transactions. Ask for examples of clients similar to you in size and activity.
• Professional qualifications: check that the accountants hold Chinese qualifications such as the Chinese CPA or the national accounting professional qualification, and that the firm itself holds a bookkeeping agency licence from the finance bureau. Make sure these are current and recognised by the Chinese government, not foreign certificates only.
• Language and communication: official reports are in Chinese, so you need a firm that works in several languages and explains what you have signed. Ideally you have one named person who answers on WhatsApp or WeChat within a working day, not a general inbox.
• Transparent fees and scope: record the agreement in a formal contract that sets out what the monthly fee covers and what is charged on top. Some firms quote low at first and then add fees once work starts, for the annual report, per invoice or per employee, so get the list of extra charges in writing before you sign.
• References and reputation: ask about past clients' experience, speak to at least two of them, and read reviews. Ask specifically about late filings and who paid the fine.

Questions to ask before you sign

• Who is the accountant responsible for my file, and how many companies do they handle at once?
• What exactly does the monthly fee include, and what is extra?
• What do you need from me each month, and by when?
• Will you send me a copy of every return and payment receipt?
• Who pays the fine if a filing is late because of you? Ask for this in the contract.
• Do you coordinate the annual audit and profit transfers, or do I need another firm?
• How do we end the contract, and how do I receive the books and electronic files if I move to another firm?

How much do accounting services in China cost?

Fees vary with the services, the volume of work and the city. The figures below are common ranges in Shanghai and Shenzhen for small foreign companies, and they rise with the number of invoices, the number of employees and the language of service:

• Bookkeeping and monthly returns for a small, low-activity company: 500 to 1500 CNY a month, rising to 2000 to 4000 CNY with many invoices or support in English and Arabic
• Payroll and social insurance: 50 to 150 CNY per employee per month
• Annual report to the regulator: 1000 to 3000 CNY
• Annual audit report from an audit firm: 5000 to 15,000 CNY depending on the size of the company and the number of transactions
• General taxpayer registration or changes to tax details: a one-off fee, often a few hundred to a few thousand CNY

Get a quote tailored to your company and compare two or three on what each includes, not on the monthly figure alone. A very low price often means an accountant handling hundreds of companies who will not notice an error in your file until a letter arrives from the tax bureau. An accounting firm is not an extra cost; it protects your company's record and its compliance with local law.

Common mistakes when hiring an accounting firm

• Handing over the company seal, the online banking key and passwords without a signed handover record and a written agreement on how they may be used
• Not checking the returns filed: ask for a monthly copy of each return and payment receipt, and keep them in your own file
• Stopping payment to the accountant when trading stops, so filings stop and the company is moved to abnormal status
• Issuing invoices for services not provided, or buying invoices to reduce tax. In China this is a criminal offence, not an administrative one
• Ignoring the annual report because the company is not trading, which gets the company listed for non-compliance
• Choosing the lowest quote without checking the firm's licence and who signs the returns

What to do this week

1. Gather your company documents: business licence, tax registration details, bank details, and the lease or registered address.
2. Decide which stage your company is at (dormant, trading with staff, or sending profits home) and list the services you actually need.
3. Request two or three written quotes on the same basis, each with its list of extra charges.
4. Check each firm's licence and speak to at least one past client.
5. Sign a contract with a clear clause on responsibility for late filings, and hand over documents against a signed record.

If you would prefer a team that works with you in Arabic, Chinese and English, HiGreenPanda handles accounting and tax filing for foreign companies in Shanghai and Shenzhen, and coordinates related steps such as opening the company bank account.