The Simple Way for China Company Registration

How to expand your business to China by setting up Wholly Foreign Owned Enterprise

Setting up a China Wholly Foreign-Owned Enterprise.

What is a China Wholly Foreign Owned Enterprise?

Wholly Foreign Owned Enterprise is a limited liability company entirely foreign-owned and funded by one or more foreign entities or persons.

WFOE: Wholly Foreign Owned Enterprises make up most of China’s foreign-owned companies. Being foreign-owned, you have greater control over all business decisions, scope, operations, profit targets, and revenue.

WFOEs are “wholly-owned,” wholly and entirely owned by foreign investor(s), and do not require any Chinese partners.

Therefore a WFOE is an independent business entity with its operation, accounting, and legal responsibilities and is subject to annual auditing. Corporation China offers these accounting services and forms part of the post-registration process, having an in China

There are 4 company type’s

of WFOE’s

Consulting or Service WOFE.
Manufacture or Factory type WOFE.
Trading WOFE – Wholesale, Retail or Franchise in China.
FICE (Foreign-Invested Commercial Enterprise) FICE Registration.

Start your China Wholly Foreign-Owned Enterprise Today!

Business Scope of a China WFOE Company.

The Business Scope is narrowly outlined and understood for all businesses in China; a (Wholly Foreign-Owned Enterprise) WFOE could solely wrongfully conduct business at intervals within the business scope that seems on its business license.

In the application documents, the business scope is written as a listing of business activities that the WFOE can conduct in China. Therefore the initial commercial activity will outline the general nature of the WFOE for classification functions. The classification outlines the minimum needed capital, style of invoices, style of applicable taxes, etc. i. e., for a previous WFOE registration, the company’s business scope was written as “retail of cosmetic merchandise, coaching on cosmetic merchandise, after-sales services.” the Chinese authorities thus outlined the character of this WFOE as a “retail-trading WFOE,” so the desired registered Capital was RMB 300,000. As a result, it is ready to receive the Value-Added-Tax invoices essential to a commerce company in China.

Because the scope of business is crucially vital within the WFOE business registration application, we have a tendency to perpetually confers with the suitable officers to make sure each|that each} commercial activity that’s listed on the registration application is AN approved commercial activity which every commercial activity is intended as broadly speaking as allowable so that shoppers is a lot of latitude in what activities they’re allowed to conduct. So {we will| we’ll |we area unit going to} not apply till we tend to are assured that the appliance data follows the pertinent rules and laws, which will permit our shoppers to attain the most edges of running their businesses in China.

Wholly Foreign Owned Enterprise (WFOE)
China Incorporation.

A Wholly foreign-owned enterprise (WFOE) is an company established in China in line with Chinese laws and wholly closely-held by one or a lot of foreign investors. A WFOE could be a financial obligation company, which means that the liability of the shareholders is restricted to the assets they delivered to the business. Not like the easier representative workplace setup that is subject to variety of limitations, a WFOE will create profits and issue native invoices in RMB to its customers, that is crucial as invoices are the premise for getting tax deductions in China.

Compared to a venture, a WFOE has bigger freedom and independence, and might higher shield its intellectual properties. It may use native employees directly, while not obligation to use services from employment agencies. Though there’s no legal restriction on the amount of foreigners a WFOE will use, in follow the amount of foreign staff will depend upon the quantity of registered capital (discussed below) that the various company injects.

The Chinese government’s initial aim in allowing the institution of WFOE’s in 1986 was to introduce advanced technology into China and to encourage export-oriented producing activities. Since then, the scope of business allowed to WFOE’s has steady inflated.

After connexion the planet Trade Organization in 2001, WFOE’s were allowed in consulting and management services, software, development and commerce. Any sectors are more and more unfolded within the course of the past few years.

The elementary legal bases for
WOFE’s are:

Law on Foreign-invested Enterprises (“WFOE Law”), effective April 12, 1986 and revised in 2000;
Implementing Rules of the WFOE Law, effective in 1990 and later on revised on April twelve, 2001; and revised on April 12, 2001;
Company Law, effective January 1, 2006.

Four typical business WFOE setups

Consulting (or Service) WFOE.
Trading WFOE.
Manufacturing WFOE.
Food & Beverage WFOE.

About the 3 distinct WFOE setups.

While all three structures share an identical legal identity, they dissent considerably in terms of setup procedures, prices, and the variety of business activities during which they’re allowed to interact. Commerce WFOEs and producing WFOEs should derive the bulk of their revenue from that main business. However, they may offer associated services. Meanwhile, some Service WFOEs may conduct commercial activities associated with their services.

When applying to line up a WFOE, the business scope should be per the application. The business scope could be a one-sentence description of the business activities during which a business can interact and can seem on the business license. Note that the WFOE will solely conduct business activities at intervals in its business scope. Any amendments to the business scope need any application and approval, which might be quite intense. We tend to embody samples of the business scope for every WFOE setup below.

Starting a Consulting or Service WFOE

To engage in import and export activities still as domestic distribution (i.e., retail, wholesale and franchising trade activities) with the Ministry of Commerce, Ministry of Industry and Information Technology ( MOFCOM ).The may be established. Commerce WOFEs will mix completely different business activities, e.g., collection and providing services. Below is an associate example of business scope for a FICE:

“Wholesale, commission agency (excluding auction), import and export of XXX products; after-sales services; technology transfer; technology consulting; technology development and different business consulting services.”

Manufacturing WFOEs are corporations engaged in industries like machine producing and electronics, energy; building materials and construction; medical equipment; transportation; and animal and plant raising and breeding. A manufacturing WFOE must rent an industrial plant house as its registered address.

The native Administration of business and Commerce (AIC) can physically check the industrial plant house before registering the WFOE. Additionally, producing WFOEs is needed to get approval from the Environmental Protection Bureau. In some cases, a full report on the calculable environmental impact of the industrial plant issued by an associate-appointed agent is needed, which is meant to confirm that producing production processes fit nominative environmental norms. In addition, the Bureau would require info concerning the raw materials used, the machinery and instrumentation, consumption, and safe disposal of the cyanogenetic product.

An associate example of the business scope of a producing WFOE is:

“Design, develop and manufacture XXX product and connected components and elements, sale of self-manufactured products; wholesale, import, and export of comparable product and commission agency (excluding auction); provision of after-sale services and different associated services to the products; technical consulting, technical development,, and technology transfer.”

Starting a Trading WFOE.

“To engage in import and export activities still as domestic distribution (i.e., retail, wholesale and franchising trade activities) in China, a commerce company called a mongrel may be established. Commerce WOFEs will mix completely different business activities, e.g., collection and providing services. Below is an associate example of business scope for a FICE:

“Wholesale, commission agency (excluding auction), import and export of XXX products; after-sales services; technology transfer; technology consulting; technology development and different business consulting services.”

Starting a Manufacturing WFOE.

Manufacturing (Wholly Foreign-Owned Enterprise) WFOEs are corporations engaged in industries like machine producing and electronics, energy; building materials and construction; medical equipment; transportation; and animal and plant raising and breeding. A manufacturing WFOE must rent an industrial plant house as its registered address.

The native Administration of business and Commerce (AIC) can physically check the industrial plant house before registering the WFOE. Additionally, producing WFOEs is needed to get approval from the Environmental Protection Bureau. In some cases, a full report on the calculable environmental impact of the industrial plant issued by an associate-appointed agent is needed, which is meant to confirm that producing production processes fit nominative environmental norms. In addition, the Bureau would require info concerning the raw materials used, the machinery and instrumentation, consumption, and safe disposal of the cyanogenetic product.

An associate example of the business scope of a producing WFOE is:

“Design, develop and manufacture XXX product and connected components and elements, sale of self-manufactured products; wholesale, import, and export of comparable product and commission agency (excluding auction); provision of after-sale services and different associated services to the products; technical consulting, technical development,, and technology transfer.”

Registered Capital and Total Investment Quota.

Registered Capital and Total Investment Quota area unit 2 vital capital that the Chinese official can check to ensure that each area unit is listed correctly. The amounts for each sort of capital can be seen on the Approval Certificate and Business License.

The registered capital is the number of funds the Chinese government needs from foreign investors to contribute to their comes in China (e.g., WFOEs). The Chinese government sets the necessities for the minimum quantity of registered capital to start a business. Therefore, registered capital should be of AN quantity more significant than the minimum demand of the China Company Law (currently RMB100,000). The Registered Capital will solely come back from the foreign investors and should be paid into the corporate checking account and then verified by a certified accounting agency in China. The number of registered capital is augmented. However, official procedures are going to be needed. Registered capital should be no but seventieth of the entire Investment Quota, but the magnitude relation could also be shrunken once the number of Registered Capital exceeds US$ three million.

The actual quantity of Registered Capital needed is subject to the ultimate approval of the approval authority. The Chinese officers have the correct need for a business to extend (the quantity, the quantity, the number) of Registered Capital if they reckon the minimum Registered Capital amount as deficient for the necessities of the startup business in line with the project description as written within the application documents. The ultimate quantity of Registered Capital needed is typically a result of negotiations with the suitable officers throughout the registration amount.

Total Investment Quota is the total amount of funds that will be endowed within the WFOE throughout its entire planned operation. The entire Investment Quota should be more significant than or capable of the Registered Capital. In contrast to Registered Capital, which should be paid into the WFOE’s Chinese checking account before beginning business operations, the entire Investment Quota is the total quantity of funds planned to be contributed to the project over its period, and it doesn’t essentially need to be deposited within the bank.

The surplus quantity of the entire Investment Quota over the Registered Capital will come back from sources aside from the foreign investors listed within the Articles of Association of the WFOE; for instance, it is borrowed from banks or different sources either within China or from overseas. Therefore, this quantity is augmented; however, any extra amounts of Total Investment Capital should be approved by the relevant Chinese authorities.

In summary.

Compared to registering a business in most Western countries, registering a business in China is difficult to work full of work and functionary procedures. It’s not possible to correctly complete the registration method without a certified agency. Take care that the agency is qualified, and therefore, the agency has smart connections and relationships with the various native authorities, which possess comprehensive data concerning the many vital aspects committed wrongfully and adequately registering a wholly foreign owned enterprise in china

More on WFOE Registered Capital.

 The registered capital is the initial investment into a corporation needed to fund its business operations until it’s in a position to fund itself. The minimum capital needs beneath Chinese law are RMB 30,000 for multiple stockholder corporations and RMB100,000 for single stockholder corporations. However, the official needs for registered capital vary by business and region. With manufacturing WFOEs, for instance, the minimum registered capital is RMB1 million, subject to concerns like industrial plant size and instrumentation prices. Meanwhile, consulting WFOEs usually need RMB 100,000, and trading ones need RMB500,000 for VAT functions.

Generally, locally-obtained RMB can not be injected as registered capital – it should be offshore RMB or RMB reborn from foreign currency sent in from the overseas capitalist. Subject to approval from the relevant authority, a distant capitalist will create capital contributions with RMB gained by different foreign-invested enterprises that need to be established in China.

RMB isn’t a freely convertible currency; thus, beneath China’s pre-existing interchange administration regime, foreign investors have solely been ready to establish associated capitalize and FIE mistreatment of foreign currency, which might be reborn into RMB once the capital injection is finalized. However, as offshore RMB holdings have continued to grow, this previous rule has returned harassed. Starting in 2011, foreign investors were allowed for the primary time to use offshore RMB holdings to capitalize or acquire a Chinese FIE and fund its operations using a cross-border RMB loan. Mistreatment offshore RMB to ascertain associate FIE offers a variety of benefits over the employment of ancient foreign currency. For instance, currently-held offshore RMB could also be used while not the expense of conversion and exposure to volatility in foreign currency exchange rates may be lessened. These reasons alone could also be enough for corporations heavily concerned with cross-border trade and investment with China.

Registered capital contributions may be created in-kind (e.g., machinery and instrumentation, industrial property rights, know-how). Any machinery and instrumentation contributed should be necessary to the assembly of the WFOE involved and evaluated at traditional value. An in-depth list of evaluated and priced things should be submitted as a part of company review authority in China associated apply for a review associated 

A review report ought to be issued. However, it should be noted that any industrial property rights or ability contributed shouldn’t exceed twenty % of the registered capital. It should even be closely held by that foreign capitalist and evaluated in accordance with general international principles.

The payment schedule of the registered capital ought to be per the WFOE application for the institution and its articles of association. The foreign capitalist will pay the capital contribution in installments. However, the ultimate installment ought to be paid up at intervals of three years following the issuing of the business license. The primary installment ought to be no but fifteen % of the capital contribution signed by the foreign capitalist and paid up at intervals ninety days after

Required documentation for formulating a China WFOE Company.

Required Documents.

Individual investor: The copy of the Company Directors Passports. 2 x Passports Copies that are notarized by the local authority and endorsed by the Chinese Embassy in your country.
Overseas Company: 2x Certificate of Incorporations, Articles of Formation. All document certified by Chinese embassy or Chinese consulate overseas.
2x Bank Reference Letters from investor’s bank. The original bank reference of the Directors (Issued by the bank).
Passport copy of: (a) Parent company’s director (b) China company’s Legal Representative and (c) China company’s supervisor.
The China Legal Representative provide 6 photos (2 inches size on white background) and a brief resume CV (from the age of 18) (passport copy for foreigner and ID card copy for Chinese).
Registered capital.
Business Scope.
3 proposed Chinese names for the China company.
Registered Address.
2x copies of the property ownership certificate of the registered address.
2x copies of the original lease contract and invoice of the registered address (If you using our Registered Address-This will be supplied by us More info).
Other documents that support your application, a business plan and scope of work – in Chinese.