Chinese taxation SaaS provider Yunzhangfang closes $85m round

Yunzhangfang, a corporate tax management software-as-a-service (SaaS) provider based in Nanjing, has closed its series D round financing, bagging US$85 million from investors led by London-headquartered Vitruvian Partners, 36Kr reported on Tuesday.

Photo credit: Pixabay

This new round for the startup, which was founded in 2015, came about one year later when it closed the 300 million yuan (42.8 million) series C round led by Hillhouse Capital in November 2018.

New funds will be used for technological research into areas including robotic process automation, elastic computing, platform-as-a-service, and financial knowledge graph. It also plans to spend on marketing to expand the client base and to hire talent.

Many small- and medium-sized enterprises in China tend to outsource their financial bookkeeping to professional agencies.

Yunzhangfang’s integrated and automatic bookkeeping tools first came to serve such agencies, sparing them lots of manual work and thus improving their efficiency. It claims that it has served more than 3,000 bookkeeping agencies in China on its website.

Later on, the startup rolled out tools to serve SMEs, helping them evaluate and prevent corporate taxation risks and also aiding them in paying employees’ personal income taxes and public insurance premiums.

Each month, companies in China need to deduct the personal income tax and premiums for various public insurance policies such as medical insurance and unemployment insurance from an employee’s entire salary before paying the remaining part. The company also needs to hand over the deducted sum to the corresponding government organizations on behalf of the employees the next month.

Yunzhangfang claims that by now it has served more than 1.4 million SMEs located in 26 provincial regions in China, according to 36Kr.

The number of SMEs in China had exceeded 30 million by the end of 2018, said Miao Wei, minister of the Ministry of Industry and Information Technology, according to Shanghai Securities News.

Vitruvian Partners managing director Richard Chen and partner Thomas Studd said that recent changes in China’s taxation regulations and technological revolution has provided a good opportunity for financial SaaS providers to grow.

For example, since the start of 2019, China has increased the basic personal income taxation threshold from 3,500 yuan to 5,000 yuan and allowed the bar to go up if taxpayers hand over proof of various costs, such as rent costs and children-raising costs. Previously, there was only a fixed threshold.

Although these changes could benefit individuals, they could also usher in complexity to companies which thus need more financial SaaS services.

Studd added that his VC firm will work together with Yunzhangfang’s management to consolidate the startup’s leading position in the industry in China.