This service is a core module of China Compliance Risk Review™, designed to support the overall compliance infrastructure for China operations.

Assessing Whether Your China Compliance Position Is Defensible When Questioned

Overview

China Compliance Risk Review™ is a systematic compliance risk assessment service designed specifically for foreign-invested enterprises (FIEs) operating in China.

It is not a bookkeeping, filing, or remediation service. Instead, it delivers an independent, explainability-focused assessment of a company’s current China compliance position, viewed through the lenses of regulators, auditors, and headquarters.

Our core objective is not to “find mistakes”—but to help management answer one critical question:

If your China operations are questioned today, is your compliance position defensible and explainable?

1. Why China Compliance Risk Review™ Matters

In China, many compliance risks do not stem from illegal actions, but from accumulated inconsistencies that often go unnoticed until they escalate. Key examples include:

• Drift between accounting treatment and tax filing positions

• VAT, outbound payments, and refunds handled in isolation (without cross-departmental alignment)

• Historical practices lacking clear explanation logic or documentation

• Headquarters’ inability to accurately assess China-specific risk exposure

By the time these inconsistencies surface, companies are often already facing regulatory inspections, tax audits, or costly remediation. China Compliance Risk Review™ is designed to provide a calm, professional, and explainable assessment before that critical point is reached.

2. Scope of the Review

The review is structured into 6 core modules, each focusing on high-impact compliance areas for FIEs in China. Each module includes targeted assessments and clear deliverables.

Module 1 | Accounting–Tax Alignment Risk

• Long-term consistency between accounting treatment and tax filing positions

• Historical changes in compliance positions and their explainability

• Potential exposure to tax audits and regulatory inspections

Deliverable: Accounting–tax alignment risk rating (Low / Medium / High) with supporting analysis

Module 2 | VAT Compliance Risk

• Alignment of VAT rates and calculation methods with actual business substance

• Consistency between invoices, accounting records, and VAT filings

• Risks related to VAT deduction eligibility and abnormal tax burden

Deliverable: VAT risk matrix with key observations and priority ratings

Module 3 | Non-Trade Outbound Payment Risk

• Clarity and defensibility of the nature of non-trade outbound payments

• Risks related to regulatory approval and bank acceptance of payments

• Structural weaknesses in payment policies and execution practices

Deliverable: Payment risk grading and practical explanation guidance for regulators/banks

Module 4 | Export VAT Refund Consistency Risk (if applicable)

• Consistency among invoices, customs declarations, and foreign exchange collection records

• Stability and repeatability of operational rules for export refund processes

• Systemic risk indicators that may trigger refund reviews

Deliverable: Refund consistency risk assessment (no guarantee of refund success)

Module 5 | Basic Tax Incentive Applicability Risk

• Inadvertent loss of eligible tax incentives due to non-compliance with requirements

• Risks of unsupported tax incentive applications (lack of documentation)

• Potential retroactive tax liabilities from improper incentive claims

Deliverable: Incentive applicability risk observations and recommendation notes

Module 6 | HQ Explainability & Governance Risk

• Transparency of China compliance logic and processes to headquarters

• Clarity of governance structures and compliance reporting mechanisms

• Impact of compliance gaps on headquarters decision-making and global audit processes

Deliverable: HQ explainability risk summary with improvement suggestions

3. What This Review Does Not Include

l  Routine accounting or tax filing services

l  Remediation execution or agency services (e.g., correcting past non-compliance)

l  Replacement of mandatory audits or regulatory inspections

l  Any guarantee of “risk-free” compliance status

This is a judgment and explainability-focused advisory service, not an execution or outsourcing package.

4. Final Deliverables

• China Compliance Risk Review Report  (Bilingual: English & Simplified Chinese)

• Executive Summary (English) for Management and Headquarters

• Prioritized risk observations (sorted by impact and urgency)

• Recommended next-step pathways (non-mandatory, tailored to the company’s needs)

5. Who This Is For

• Foreign-invested enterprises (FIEs)  with operations in China

• Companies facing increasing scrutiny of China operations from headquarters

• Entities preparing for tax audits, due diligence, or internal compliance reviews

• Management teams seeking clarity on China-specific compliance exposure and risks

6. Position in the Overall Service Framework

China Compliance Risk Review™ typically serves as a critical first step in a company’s China compliance journey, functioning as:

• An advanced assessment following our China Entity Foundation™ service

• A gateway to specialized compliance advisory services (e.g., targeted VAT or outbound payment support)

• A decision-support input for remediation planning, governance enhancement, or exit strategy development

China Compliance Risk Review™

is not about finding faults, but about assessing whether your compliance position can withstand scrutiny.

Contact Us

We do not make decisions for you; we only help you clarify facts and risks.

Phone : 400 800 7472

Email : info@rtfcpa.com