Company Registration in China
No limit for registered capital
No requirement for local partnership
Complete foreign ownership allowed
Joint venture registration is allowed
China market entry strategy
Company Registration in China is a tedious task. Before starting company registration in China, consider all the factors, the urgency to register a company in China, or the formation of an Umbrella company does suffice.
About Umbrella company
Umbrella Company is a legal entity that works on the behalf of any foreign entity wishing to do business in China. It looks after employees, manages work. Alongside looking after sales, marketing, import-export, recruitment of staff, accounts etc.
Establishing an umbrella company is cost-effective and hence the best way to start a service sector business in China.
Steps of Company Registration in China
For Company Registration following steps to be followed:
- Submission of an application to register the company to the company registration authority in compliance with Chinese Company Law.
- After the registration, the entity is registered as a limited liability company or company limited by shares; but if the concerned authority is not satisfied with the required conditions, then the proposed entity shall not be registered.
- The public can easily make any inquiry on company registration matters from the company registration authorities.
- The business license will be issued by the company registration authority. The date of establishment of the company and date of issue of the license is same.
- The name, domicile, registered capital, business scope and the name of the legal representative etc of the company will be mentioned in the license.
- In case, if anything mentioned in the business license needs to be changed, the company need to follow the appropriate procedure under the law. The company registration authority shall issue the new business license for the same.
Different Types of Business Entity in China
- Wholly Foreign Owned Enterprise
- Foreign Invested Commercial Enterprise
- Representative offices in China
- Joint Venture Company registration in China
1. Wholly Foreign Owned Enterprises (WFOEs)
Wholly Foreign Owned Enterprise (WFOs) is a limited liability company where the complete shareholding is of foreign individuals and entities. Only International business enterprises or foreign individuals can be the shareholders in WFOEs and a Chinese partner is not mandatory.
WFOFs is the best investment vehicle if the investor is wishing to manufacture, process, or assemble in China. There is no requirement of having paid up capital for establishing consulting, trading or IT business etc. in China. To avoid the violation of intellectual property that has already cursed China, the foreign company planning to sell or make high-value products generally prefers to a WFOEs.
Registered Capital is the amount required to operate the business until it arrives at the break-even point. WFOEs will operate from the registered capital until it is able to manage from the own cash- flow.
Minimum Registered Capital Requirement
- RMB 100,000 – Consulting WFOE
- RMB 500,000 – Trading WFOE
- RMB 500,000 – Manufacturer WFOE
Adviced Registered Capital
- RMB 300,000 < Consulting WFOE
- RMB 1,000,000 < Trading WFOE
- RMB 1,000,000 < Manufacturer WFOE
Business Scope of WFOEs
WFOEs can work within the limited approved business scope that is specified on the business license. Further application and its approval are required for changes regarding the business scope of WFOEs. The common business scope includes the consulting services of investment, international economic, trade information, international economic, manufacturing, etc with emerging scopes in trading Wholesale and Retail business.
2. Foreign Invested Commercial Enterprise
The regulations for registering a Foreign Invested Commercial Enterprise are relatively easy and provide the larger scope for the foreign investor to administer the trading activities. They are established for the purpose of retailing, wholesaling, franchising or trading business in China.
The minimum registered capital required
- RMB 500,000 – Wholesale FICE.
- RMB 300,000 – Retail FICE
Adviced Registered Capital
- RMB 1,000,000 < Wholesale FICE
- RMB 1,000,000 < Retail FICE
3. Representative Offices (ROs) in China
Representative offices represent the parent company and are used for market research activity to understand the scope and depth of Chinese Market for the future investment scope. Representative Offices are not allowed to do any business for profit, sign contracts on behalf of the parent enterprise, receive revenue, issue official tax invoices, buy property or import production equipment.
TAX on ROs
ROs in China are taxable on all the expenses incurred by it, including staff salary and rental. The tax rate is approximately 10% of the total amount. ROs need to submit a monthly report to the Chinese Tax Administration Department.
Staff recruitment cannot be done by ROs themselves. They need to seek the advice of an HR agent which is appointed by the Chinese government for recruitment purposes.
4. Joint Ventures Company
Types of Joint Ventures Company:
- Equity Joint Ventures
- Cooperative Joint Ventures
In the Joint- Venture as the name suggest, it is the combination of both domestic and international entity and is guarded by both, foreign and Chinese partners. It is built for the purpose of transfer of technology.
The similarity between WFOEs and Joint Ventures Company:
- In case of a foreign employee, his registration is mandatory with the local Social Security Authority within 30 days of employment.
- Corporate taxes vary from 15% – 25%, depending on the company’s jurisdiction and industry sector. There is a requirement of reporting to the Tax Administration Department monthly, quarterly and annually. The cost of an annual audit report will be around RMB 6,000 and if not submitted company will subject to a fine.
- The company can easily repatriate the profit, there are no such conditions by China Government. If a company wants to remit the profits out of the country, then the approval of the State Administration of Foreign Exchange is not required. However, if the losses of the previous year have not been completed then distribution and repatriation of profit are not allowed. Registered capital cannot be repatriated to the home country during the term of business operation.
- Generally, the working period for the manufacturing for WFOEs are 15-30 years. The duration can be easily extended with the prior approval from the government. The WFOEs term is extended to 50 years if the company has:
1.a huge investment
2. a long construction period
3. manufactures internationally competitive products
4. advanced technology for producing cultured products
5. received key technology from a foreign partner