China: 'get paid up front or don't bother'

‘The most important issue in selling services to Chinese clients is how to get paid,’ says Stephen Dickinson on the China Law blog. He continues: ‘The payment issue with service providers is far more complicated than with those who sell goods. Service providers must therefore focus carefully on the payment issue.’
To combat any problems Mr Dickinson – a lawyer with Seattle-based firm Harris & Moure who has lived in China for many years – suggests two golden rules for those selling services in the country. Firstly, make sure that payment is received before work begins. Mr Dickinson suggests that 100 per cent payment is not necessarily required, but a substantial amount should be received before any work is done. He also notes that full payment should be received before the final work product is delivered.
Secondly, all payments to US companies are net side of Chinese taxes. As Mr Dickinson says: ‘The Chinese side must pay a sum certain to the American service provider and that amount is payable regardless of the taxes the Chinese side is required to pay before making the payment to the foreign service provider.’