Procedure to Setup WFOE in China and Why to choose SZQH Shenzhen Free Trading Zone
Eastern part of Asia has the one-party sovereign country named as People Republic of China. China has the status of most populous country of the world with the population of about 1.404 billion people. China has the geographical area of 9,600,000 square kilometers, approximately. Renminbi (RMB) is the currency of China, having YUAN as the common unit.
Communist Party is the only governing party of China because China has the one-party political structure. Governing and controlling jurisdiction of People’s Republic of China is extended to more than twenty-two provinces, five autonomous areas, two special administrative units such as Hong Kong and Macau as well as control over four municipalities such as Beijing, Tianjin, Shanghai and Chongqing.
Beijing has the status of being the Capital of People’s Republic of China while Shanghai is the largest city and the business hub of China. Mandarin has the status of national language of China and is included in the five working languages of United Nations. China has total of fifty-five minorities communities and each community possess its own national language. Southern part of China has the local dialect known as “Cantonese”.
Residential Perks of China
China is considered to be unique country, as it has the dynamic and large national structure. Where there are numerous opportunities for temporary residents in China, there are some implications too. But generally, it is seen that driving force which compels expats to live in China, is the wonderful and versatile culture of China. Other benefits of living in China includes:
- Chinese people warmly welcome their foreign guests and in case of any problem, foreigners can easily seek the help of locals as they would readily help foreigners in case of any problem or confusion. Social structure of China is so secure that you don’t have to sleep hungry as food is provided free of cost to needy.
- China has the status of rapidly growing economic center of the world. Hence, on account of healthy economic structure, there are various opportunities available for well paid jobs. There are various job opportunities for English teachers, artists, musicians, architects, marketing aspirants and International trade experts.
- China has the well-developed public transport system and nearly all cities of China has the facility of high-speed trains. Major cities of China have the subway system. In addition to subway system, there are facilities of public transport and bike hiring applications. For the situation where you don’t own conveyance, then there is the “Didi” service available, which is quite similar to Uber.
- As far as fine dining is concerned, tier 1 cities such as Beijing and Shanghai have various dining options. You can find food from all around world in almost all cities of China and in case you can’t access them, then you can get it ordered at your door step.
- Apartment rents in China is quite cheap as compared to other countries of the world. Food and other amenities can easily be accessed in the premises of apartment.
Wholly Foreign Owned Enterprises in China
Incorporating a WFOE in China is not as easy as it seems because you may experience some difficulties and challenges in incorporation process. However, you can avoid these anticipated difficulties with proper research, so that you know how to incorporate a WFOE in China, and how much finances are needed to incorporate WFOE in China?
WFOE in China is a private and limited liability company, having foreign shareholders. On account of having complete control and independence to the foreign parent organization, WFOE is a recommended plan of investment.
There are total three forms of WFOE through which WFOE can be incorporated which includes:
- Manufacturing WFOE: They have the permission to carry out manufacturing activities in China.
- Consulting WFOE: Most convenient way to incorporate WFOE.
- Trading WFOE: Allows the WFOE to conduct import, export and trading business in China.
Advantages to Incorporate WFOE in China
Following are some of the advantages of incorporating a WFOE in China:
- To import or export own products, there is no need to obtain license.
- Business license is valid for the span of 15-30 years.
- Profits earned from the business shall be transferred to the WFOE.
- There is no requirement of having a Chinese partner and business will be under your full control. Hence, you are independent to implement and abide by the global strategies of your parent organization.
- You will have full control over the working force of the company. You are allowed to hire local work force on low wage rate.
- You can effectively protect your technology and the local expertise.
- You have the facility to issue and receive revenue in RMB. Rather than being the representative of the WFOE, you shall be liable for the corporate operations of the WFOE.
- The revenues and profits made in RMB can easily be remitted to the foreign parent organization by converting RMB into USD.
- Corporate activities, development and management of WFOE is very feasible and effective.
- Shareholder is supposed to be responsible only to the investment made in the company.
Procedure for Setting up WFOE in China
The procedure to incorporate a WFOE is supposed to vary because it is totally dependent on mode of business to be incorporated. However, following are some of requirements which are applicable to all three types of WFOE:
- Company’s certificate of incorporation.
- Each director of the company is required to provide passport copies.
- Address of company’s registered office.
- Letter from the banker of the investor certifying that investor has the good reputation.
- Company’s outline such as the scope of the business, registered capital of the company and the proposed name of the company in Chinese.
- Business plan of the company.
Apart from general requirements there are some documents which needs to be provided in case of Trading WFOE:
- Study report of the feasibility.
- Appointment letter as well as identity of the legal representative.
- Articles of Association of the company.
- Custom HS code for goods to be imported or the products to be exported.
- Identity numbers and the appointment letters of company’s managers.
- Copy of recent annual audit of the foreign parent company should be submitted by the certified public accountant.
- Certificate ascertaining the capital assessment of the company.
Additional documents required for the Manufacturing WFOE includes:
- Business plan of the WFOE.
- Proposed and approximate capital investment.
- Proposed size of the project.
- Environment assessment report along with the evaluation report of the project/ manufacturing plant.
- Operational structure and the employee size of the manufacturing unit.
- Full list of the manufacturing unit’s equipment.
- Legal and written permission to use the land proposed for the establishment of manufacturing unit.
- Proposed measures taken or anticipated for the environment conservation.
- Proposed water and power supply needs for the manufacturing plant.
SZQH Shenzhen Free Trading Zone
Qinghai Finance Business District promotes the business related to the financial information, technology and other professional services.
Business District of Shekou encourages the tech and cultural business such as the business related to the development of technology and internet services as well as the business related to the cultural and innovative industry.
Western port area of Shenzhen deals with the business related to the supply chain management, international trade, development of port logistics and the business related to the top-class shipping.
Following are some of the benefits of SZQH Shenzhen Free Trading Zone:
- Condition for capital injection is one third of the company’s share capital for most of the startup companies, which is approximately RMB 10,000.
- Foreign investors can control the business operations in China.
- For certain businesses, there is the requirement to provide registered and virtual address for the registration of the company.
- There are necessary measures taken up by the SZQH Shenzhen Free Trading Zone to facilitate arrangements like Closer Economic Partnership Arrangement (CEPA).
- There is the permission to get products of company advertised, promoted by way of contracts with the foreign investors and they are allowed to carry on their business activities across China. For such transaction, they neither need true Chinese office nor there is any compulsion of large capital, so they can do so with the small amount of RMB 10,000. Hence, in short, investors can freely promote their business through following promotion platforms:
- Newspapers and magazines could provide the promotion through mass media.
- Television commercials.
- Chinese search engines such as Baidu, Alibaba and Taobao.
- Sale premises establishment in China
- Promotion through the local Chinese distributors.
- SZQH Shenzhen Free Trading Zone includes the 15% enterprise profit tax on certain businesses. It also imposes only 25% enterprise profit tax on all the traded goods and services.
- On account of China being the largest economy of the world, Chinese people usually consume products and services in large volumes. As Chinese products are cheap and possess good quality, they are in great demand outside of China.
- For the situations where customer refuses to pay for the goods and services, then investor has the facility to protect its business needs through legal assistance. In addition to this, for any legal assistance regarding commercial activities, investor is allowed to seek legal help.
- Mandatory procedures such as the opening of bank account or registration can be done remotely, and it is not required for foreigners to visit China for this purpose. However, to collect the account number, token and pin, in case of approval of bank account, foreigner will need to visit China.
- SZQH Shenzhen is just on a one-hour drive from Hong Kong.
- Apart from using promotion methods mentioned above, investor is allowed to use other communication modes such as Skype, QQ and direct line forwarding to the origin country.
- There is the facility to open bank account in any currency such as in RMB, USD or EURO. Internet banking service is also provided so that foreigner can control its bank account even from outside China.
- It takes about one month to complete the company incorporation procedure.
Procedure to Register WFOE in SZQH Shenzhen Free Trading Zone
Following is the procedure to register WFOE in SZQH Shenzhen Free Trading Zone:
- Registration of existing or new company in Hong Kong.
- Preparation of required documents to incorporate business in Hong Kong.
- Bank account in Hong Kong or if bank account does not exist than initiation of procedure to open bank account.
- Appointment of directors, legal representatives, managers or supervisors who would have the authority to operate company’s bank account.
- Preparation of any document which require attestation from Chinese authorities.
- Confirmation from Chinese Registration Office stating that proposed name of the company is approved to be used commercially.
- Preparation of Feasibility Study Report which entertains the proposed commercial activities of the company and all the corporate activities conducted by the company.
- Preparation of proposed startup’s corporate constitution.
- Furnishing of documents to the Chinese Registry office for application processing.
- Issued Company chops by the Public Security Bureau.
- Application for the Local, Central and Value Added Tax licenses.
- Initiation of the formal procedure to open overseas and normal bank account in China under the name of the company.
- Deposit of capital funds to the bank account of the company and the presentation of Capital Injection Verification report from the local auditor.
- Application to the relevant Chinese authorities to avail the required business licenses.
- Buying of Value Added Tax from the local tax authority. Initiation of business operation by issuing Value Added Tax invoices to the corporate customers.
- It normally takes about 25 days to incorporate the WFOE in China. However, it may take additional eight days to approve the proposed name of the company from the competent authority.
It is highly suggested that you seek the services of professional company registration firm like Stephen M.S Lai & Co CPA Ltd to process your company registration application. Benefiting from the professional firm like us, would help you save your money and time.
Our team is composed of highly experienced professional who has successfully helped our worthy clients in acquiring following business licenses in SZQH Shenzhen Free Trading Zone:
- Gaming industry
- Non-cash financing
- General services enterprises
- Translation services
- Logistics companies
- Advertisement agencies
- Software development
- General goods wholesale and retail trading
- Environmental services
- Interior designing
- New materials and energy
- Cloths designing
- Asset management services
In addition to this, if you want our services for the promotion of your company and business activities in China, then you are more than welcome to contact us. We will be glad to help and guide you.
Apart from WFOE incorporation, we have our incorporation expertise extended to other countries such as:
- British Virgin Island
- Costa Rica
- Cayman Islands
- Marshall Islands
- New Zealand
- United Kingdom
We encourage you to contact us for any inquires and looking forward to providing you with our excellent professional services.