Now! China - Protecting Your Business: The Role of Independent Financial Investigations [Issue No.34]

Business fraud is a pervasive issue, affecting organisations of all sizes, from small local businesses to global enterprises. Every year, thousands of incidents cost organisations millions of dollars, with the US being a prime example.

In 2022 alone, the FBI's Internet Crime Complaint Center received 800,944 complaints, leading to total reported losses of more than $10.3 billion—an increase of 49% from the $6.9 billion reported in 2021. Similarly, in China, over 30 listed companies were penalised by regulatory authorities for financial fraud in 2023.

Financial fraud takes many forms, including revenue manipulation, expense fraud, occupational fraud, and vendor fraud. It can be uncovered through routine internal audits, whistleblower reports, external lawsuits, or shareholder disputes. When suspicion of fraud arises, companies often engage an independent agency to investigate, assess the potential business impact, and recommend remedial actions.

The standard investigation process may include:

Forensic accountants play a crucial role in these investigations, analysing fraudulent activities and calculating the financial losses and damages caused by such acts.

China Updates

Accounting and Taxation

• Notice of the GACC General Office on Measures for Further Optimising Customs Revenue Services to Help Foreign Trade Improve Quality and Stabilise Quantity

1. Optimising the management of tariff guarantees.
2. Improving the management of examination and confirmation of duty-free entitlements.
3. Enhancing follow-up management of imports entitled to duty reliefs.
4. Promoting domestic freight deductions for imported goods.
5. Facilitating access to preferential treatment under existing agreements in Free Trade Zones (FTZs).
6. Strengthening research and interpretation of taxation policies.

• Announcement on the Pilot Taxation Policies for Temporary Entry for Repair in China (Shanghai) Pilot Free Trade Zone

On 2 July 2024, the Shanghai Municipal Finance Bureau and the Shanghai Municipal Tax Service, State Taxation Administration, issued an Announcement regarding pilot taxation policies for the temporary entry of goods for repair in the China (Shanghai) Pilot Free Trade Zone.

The key points are as follows:

• In the special customs supervision zones within the Shanghai Pilot Free Trade Zone (including the Lingang section), goods temporarily entering from overseas for repair are subject to the following policies:
  
  -If such goods are re-exported from China, customs duties, import value-added tax, and consumption tax will be exempted.
  -If such goods are sold domestically after repair, the import declaration shall be completed, and import duties, import value-added tax and consumption tax will be calculated based on the actual condition of the inspected goods after repair.
• These policies are applicable to the Customs supervision zones of the following Bonded Area/FTZ:
  
  -Yangshan Special Comprehensive Bonded Zone
  -Shanghai Pudong Airport Comprehensive Bonded Zone
  -Shanghai Waigaoqiao Port Comprehensive Bonded Area
  -Shanghai Waigaoqiao Free Trade Zone
  -Other special Customs supervision areas in the Shanghai Pilot FTZ (including the Lingang section), as approved by the State Council.
• The scope of goods for repair activities includes:
  
  -Goods listed in the catalogue of products for repair in comprehensive bonded zones
  -Other goods permitted for bonded repair in the special Customs supervision areas of the China (Shanghai) Pilot Free Trade Zone (including the Lingang section) in accordance with relevant provisions.

This announcement is effective from 2 July 2024. For any imported goods subject to tax levied before this date, the relevant tax will not be refunded.

Human Resources

• On 13 September 2024, the Standing Committee of the National People's Congress issued the Decision on Implementing the Gradual Extension of the Statutory Retirement Age and the Measures of The State Council for the gradual extension of the Statutory Retirement Age. This decision will take effect on 1 January 2025.

1. The statutory retirement age for male and female employees will be gradually delayed. The retirement age for male employees will increase from the original 60 years to 63 years, while the retirement age for female employees will rise from the original 50 years and 55 years and 58 years, respectively, over a period of 15 years.
2. The gradual delay of the statutory retirement age will adhere to the principles of small adjustments, flexible implementation, classified promotion, and overall consideration.
3. People's governments at all levels should actively address challenges posed by an aging population, encouraging and supporting workers to find employment and start businesses, while effectively protecting workers’ rights and interests. Coordination in promoting old-age care and related initiatives is essential.
4. The State Council’s Measures on Gradually Postponing the Statutory Retirement Age will be approved. Based on actual needs, the State Council may supplement and refine the implementation of these measures.
5. This Decision will come into effect on 1 January 2025. The provisions concerning retirement age in the Interim Measures of The State Council on the Placement of Old, Infirm and Disabled Cadres, as well as the Interim Measures of the State Council on the Retirement and Retirement of Workers approved by the Second Session of the Standing Committee of the Fifth National People's Congress, will no longer be implemented.

Corporate Governance

• On 7 September 2024, the Ministry of Commerce (MOFCOM) released a Circular in collaboration with the Ministry of Commerce, the National Health Commission and the National Medical Products Administration, focusing on the expansion of pilot programs in healthcare.

According to the Circular, foreign-invested firms in the biotechnology sector will be permitted to engage in the development and application of human stem cell, and genetic diagnosis, and treatment technologies within the China (Beijing) Pilot Free Trade Zone, China (Shanghai) Pilot Free Trade Zone, China (Guangdong) Pilot Free Trade Zone, and Hainan Free Trade Port. All products that are registered, marketed and approved for production can be utilised nationwide. Additionally, foreign investors will be allowed to set up wholly-owned hospitals in Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou and Shenzhen, and throughout Hainan province.

Contact Us