China WFOE ( Wholly Foreign Owned Enterprise)

• Pros & Cons
• Setup Key Points
• Setup Steps & Documents Required
• Tax Implications
• Setup Cost
• Maintenance Cost

• With separate legal entity in China.
   
• Can carry out all business activities ( subject to the business scope stated in business licence ).
   
• Can negotiate for tax incentive with local government.
   
• Can hire local staff.

• Appication process is more complex and each step may have profound impact in future development of the company: business scope, financing, tax rates, director board management etc.
   
• Capital injection is required to meet the minimum level for specific industry and in specific territory of China (such as free trade zones and export processing zones). The mimimum capital is around US$140,000.
   
• Even though WFOE is limited liability in nature, a legal representative needs to be appointed and take up unlimited liability of the WFOE.

• Shop around in China to decide where to form the WFOE because it seriously affects
  • the minmum capital
  • the tax rate
  • the operation efficiency
  • the amount of profit allowed to be "exported", etc.
     
• Select professional service company to handle application because all steps and documentation may have profound effect.
   
• A legal representative needs to be appointed who is the ultimate person taking up all responsibility of the WFOE.
   
• All the documents submitted to the government authorities must be conducted in CHINESE language.

Preparing and Presenting a Project Proposal

The foreign investor has to complete a project proposal and present it to the government authority that will decide whether or not to approve the proposal within approximately one month after receiving the proposal.

Submitting the proposed company names

3 optional names are required.

Preparing and Submitting a Feasibility Study Report

After the project is approved, the foreign investor has to prepare a feasibility study. The authority will help to coordinate on the project if any problems should arise.

Submitting the Articles of Association

While the foreign investor is preparing the report on the feasibility study, he may also draw up the articles of association and submit them to the authority that will reply around one month after receiving the feasibility study report and articles of association.

Application for the Approval Certificate

After the report on the feasibility study and articles of association are approved, the foreign investor has to apply for the Approval Certificate, which will normally be issued within one week.

Application for the Business License

The foreign investor has to make an official registration with the government authority within 30 days upon receiving the Approval Certificate and then apply for a Business License. The authority will normally issue the Business License within 30 working days.

The procedures and related documents may vary depending on specific projects, Chinese regulations and special approval as well. However, the Wholly Foreign-Owned Enterprise is officially established on the date when the Business License has been issued.

Document Requirements

• Bank creditbility statement of the foreign investor
• Project proposal (purpose, business scope, period, investment amount, among others)
• Certificate of registration
• Statement on the products and technologies
• Duplicate of confirmation letter of the 3 proposed company names
• Report on feasibility study
• Memorandum & Articles of Association
• Name list of the board and senior executives
• List of equipment to be provided (if any)
• Passport or residential card of the legal representative
• Lease agreement or purchasing contract of company premises
• Certificate of property of the lessor
• Authorisation documents for the board and senior executives
• Photos of legal representative
• Other documents that the authorities may require as per specific cases.

Tax duty of a WFOE includes

• Foreign and local staff's Individual Income Tax (IIT)
• Business Tax (BT)
• Income Tax (IT) etc.

As a WFOE may have different tax incentive from local government, different tax rates applies to different company.
However, one should bear in mind that tax in China can be categorized into wither federal tax or local tax (local government). In most cases, tax incentive can only be got from local tax.

Varies according to client's situation and requirement.
Our service ranges from basic registration to post-registration handling.
Please contact us for quotation.

Accounting, tax filing and auditing

• Tax filing has to be done on monthly and annual basis.
   
• Moreover, there are statutory audit on the expenses account and foreign currency bank account.
   
• Service fee for monthly accounting and tax filing starts from Rmb 2,500 while annual audit starts from Rmb 5,000 ( depending on the size of the WFOE and the volume of operation ).