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Applying for a “5 in 1” Business License for Your China WFOE

Applying for a “5 in 1” Business License for Your China WFOE

A significant change was introduced in 2016 – the “5 in 1” WFOE (Wholly-owned enterprise) business license to simplify the business registration process in China. This innovation allows businesses to apply for five primary licenses required in a single application, drastically expediting the company registration process. In this article, we will delve into the following aspects:

  1. Understanding Business Licenses in China
  2. To operate legally in China, obtaining a business license is paramount. Establishing a WFOE involves three key registration steps:
    • Approval for registration from the Ministry of Commerce of the People’s Republic of China.
    • Application for a business license through the Administration for Industry and Commerce (AIC).
    • Securing operating certificates and licenses from various government departments.
  1. Notably, these licenses and certificates are physical documents, not mere electronic authorizations, and are often required for various company activities. In some regions, it’s customary to display copies of these certificates at the company’s premises.
  2. Streamlining Application with “3-in-1” and “5-in-1” Licenses
  3. Until a few years ago, businesses had to submit separate applications to different government departments for each required License. These applications were time-consuming and demanded extensive preparation and administration.
  4. Recognizing the need for improvement, the Chinese government took action. In 2015, they introduced the “3 in 1” business license, combining applications for three critical licenses into one streamlined process. This marked the first significant step toward simplification.
  5. In mid-2016, the government expanded this concept to offer the “5 in 1” License nationwide. Initially piloted in Free Trade Zones like Shanghai, this approach aimed to make the application process more efficient and accessible.
  6. What’s Included in the 5-in-1 License?
  7. The 5-in-1 License involves an online application to the local China AIC (Administration for Industry and Commerce) in the city where your business is registered. While the application process still requires extensive documentation, the AIC takes responsibility for sharing this documentation with the relevant government departments.
  8. Here are the five licenses included in this consolidated application:
    • Business License: This certifies that the company is fully registered under the local authority and allows it to commence operations, issue invoices, and hire staff.
    • Organization Code: Called the “organization registration certificate,” this provides a unique identifier for the company, essential for correspondence and further registrations.
    • Tax Registration Certificate: This proves registration with the local state taxation bureau is necessary for all future company tax filings.
    • Social Security Registration Certificate: This demonstrates registration for filing and payment of employee social security contributions, a requirement for WFOEs.
    • Statistical Registration Certificate: Issued by the local statistics office, this certificate verifies registration and necessitates monthly statistics reporting on financial data, employee details, and salary information.
  1. Does the License Make a Difference?
  2. While introducing the 5-in-1 License is a commendable step toward simplifying the registration process, it only partially transforms the complex application procedure. The primary advantage lies in time saved by not interacting with multiple departments individually, potentially reducing the WFOE setup duration by up to a month.
  3. However, it’s essential to appreciate the paperwork and administration still involved. The documentation requirements remain essentially unchanged, and rigorous preparation is necessary. Several permits and registrations, such as VAT registration, chop carvings permits, and import/export permits, are not included in the 5-in-1 License.
  4. Another potential drawback is the reduced opportunity for direct interaction and discussion with government departments due to online submission. In some cases, such interactions could clarify specific issues or errors in the application. Mistakes may lead to rejection and necessitate resubmission.

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The “5 in 1” business license for setting up a China WFOE represents a positive step in simplifying the registration process for foreign companies. While it does save time by consolidating applications, it still needs to eliminate the need for meticulous preparation and documentation. As regulations evolve, we may see further improvements, but understanding and navigating the current process is crucial for success in the Chinese market.

Applying for a “5 in 1” Business License for Your China WFOE

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