Documents
required to register a business
Processing procedure
(diagram)
Fee for company formation
(based in Beijing)
Documents to be handed over
after completion
Wholly Foreign Owned Enterprises (WFOEs)
Wholly Foreign
Owned Enterprises (WFOEs) are limited liability companies
established under Chinese Company Law. The shareholders are
100% foreign. It can be an international business or foreign
citizen(s) who would own the company 100%. Limited Liability
is recognized by the amount of registered capital injected
into the business. Although this may in fact be a combination
of two assets, cash injection and equipment, the total value
of these also represents the extent of the WFOE's liability.
WFOEs have become
the investment vehicle of choice for the international investor
wishing to manufacture, process, or assemble in China. It
negates the need for a Chinese partner and does not require
large amounts of registered capital to fund - Manufacture
WFOEs
Although WFOEs
are in essence to be used for facilities involving production
lines, they have under certain conditions also proved suitable
for service industries - Consulting / Service WFOEs
China has ratified
new regulations that permit foreign companies to establish
fully operational WFOE trading companies that can buy and
sell in China, carry out wholesale, retail, franchise activities
and are able to import/ export. These rules became effective
from 2004. - Trading WFOEs or Foreign Invested Commercial
Enterprises (FICEs)
Minimum registered capital required
Consulting WFOE
RMB 100,000
Trading WFOE RMB 500,000
Manufacturer WFOE RMB 500,000
Suggested registered
capital
Consulting WFOE
> RMB 300,000
Trading WFOE > RMB 1,000,000
Manufacturer WFOE > RMB 1,000,000
It should be noted
that Registered Capital is additionally the amount that is
required by the business to operate until it can break even.
The term "Minimum registered capital" is used by
local governments as a guideline only, and as mentioned, the
WFOE needs funding via its registered capital until it is
able to support itself from its own cash-flow.
There are additional
issues with local governments, seeking foreign investment,
not being fully aware of tax and customs requirements - too
low capital can mean issues such as refunds on export VAT
can be problematic and so on. It is vitally important you
address the registered capital need against the businesses
operational requirements and not against 'minimum' specified
amounts bandied about elsewhere. It is an operational cash-flow
issue, not a regulatory licensing matter.
Business Scope
One of the most
important issues in WFOE application is business scope. Business
scope needs to be defined and the WFOE can only conduct business
within its approved business scope, which ultimately appears
on the business license. Any amendments to the business scope
require further application and approval. Inevitably, there
is a negotiation with the approval authorities to approve
as broad a business scope as is permitted.
Business Terms
In China, terms
of 15 to 30 years are typical for a manufacturing WFOE (although
some may have a longer term). It is possible to obtain extensions
of the WFOE's duration.
General Tax Information
Consulting WFOE
Business Tax + Corporate Income Tax
Trading WFOE Value-added Tax + Corporate Income Tax
Manufacture WFOE Value-added Tax + Corporate Income Tax
All enterprises
are subject to do routine monthly report to the Tax Administration
Department.
The taxes mentioned
above are the major ones. There are Consumption Tax, Tariff,
Urban Real Estate Tax, Stamp Duty, Vehicle and Vessel Usage
License Tax and etc, which are payable by some sectors or
for some special cases.
Staff Recruitment
Under China's Labor
Law, enterprises can decide for themselves the timing and
means of recruiting staff as well as the relevant requirements
and number.
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