Compliance & Stable Operations in China

Trademark Protection in China

The First-to-File Reality

China operates a first-to-file trademark system, not first-to-use. If you don't register before entering the market, someone else can — and has likely already tried. Over 30,000 foreign brand trademark squatting cases are filed annually.

Practical Steps

1. Search CNIPA database for existing conflicting marks
2. File through CNIPA directly or via Madrid System (designate China)
3. Monitor for bad-faith filings during the 3-month opposition period
4. Enforce: Customs records your trademark for border seizure of counterfeits

2026 development: Punitive damages (up to 5× loss) are being actively applied since the Supreme Court's May 2026 judicial interpretation. Customs can seize infringing imports proactively.

Tax & Accounting

Corporate Income Tax (CIT)

• Standard rate: 25%
• HNTE rate: 15% (if certified as High & New Technology Enterprise)
• Small Low-Profit Enterprise: Effective ~5% on first RMB 3M taxable income
• R&D super deduction: 200% of qualifying R&D expenses deductible

Value-Added Tax (VAT)

• Goods: 13%
• Services: 6%
• Small-scale taxpayer: 3% if annual revenue < RMB 5M
• Monthly filing by the 15th

Key Filing Deadlines

Tax Incentives Available

• Reinvestment credit (2025-2028): 10% CIT credit for reinvesting domestic profits
• Free Trade Zone benefits: Reduced rates in certain zones (Hainan 15%, Qianhai 15%)
• R&D super deduction: 200% of R&D expenses

HR & Payroll

Employment Fundamentals

• Written labor contracts: Required within 30 days of hire. Failure = double wage penalty.
• Probation period: 1-6 months depending on contract length. During probation, wages must be ≥80% of contracted wage.
• Termination: Strong employee protection. Unlawful dismissal = 2× severance.

Social Insurance & Housing Fund

Total employer cost: ~28-41% of salary

Foreign Staff

• Z-visa (work visa) + work permit + residence permit required
• Employer must demonstrate the position cannot be filled by a Chinese national
• Foreign staff must also participate in social insurance (some bilateral agreements exempt)

Data Privacy (PIPL)

Does PIPL Apply to You?

If your WFOE collects personal data from Chinese consumers or employees, the Personal Information Protection Law (PIPL, 2021) applies. Penalties: up to CNY 50M or 5% of prior-year revenue.

Key Obligations

1. Consent: Obtain informed consent before collection; separate consent for cross-border transfer
2. Minimization: Collect only minimum data necessary — no "just in case" collection
3. PIPIA: Conduct Personal Information Protection Impact Assessment before cross-border transfer
4. Cross-border data transfer: Choose one of three pathways:
   1. CAC Security Assessment (for large volumes)
   2. Standard Contract Filing (SCC — for most SME cases)
   3. Personal Information Protection Certification (since Jan 2026)
5. Domestic representative: Appoint a person or entity in China for PIPL compliance

Risk Management

Commercial Bribery Risks

China's Anti-Unfair Competition Law (revised Oct 2025) defines commercial bribery broadly. Key risks:

• Gifts to procurement staff > ~CNY 200 per item
• Payments through third parties without clear service contracts
• Entertainment expenses without transparent records

Intellectual Property Enforcement

• Record your trademark with China Customs for border seizure
• Monitor e-commerce platforms for counterfeits (Tmall and JD have IP protection portals)
• File administrative complaints with SAMR — faster and cheaper than court action
• Patent protection: File invention patents (20 years) and utility models (10 years) as appropriate

Emergency Response

• Product recall: Mandatory reporting to SAMR within 2 hours of identifying a defect
• Data breach: Notify CAC and affected individuals within 72 hours
• Labor dispute: Mediation through local labor bureau before litigation

Compliance Checklist