required to register a business
Fee for company formation (based in
Documents to be handed over
Foreign Invested Commercial Enterprises (FICEs)
Commercial Enterprises (FICEs) are pertinent for retailing,
wholesaling, franchising or trading businesses in China. New
regulations introduced make the applications procedure far
quicker and enlarge the playground available for the foreign
investor to conduct trading activities.
China has ratified
new regulations that permit foreign companies to establish
fully operational WFOE trading companies that can buy and
sell in China.
companies were restricted in their abilities to both purchase
domestically and then re-sell domestically in China. They
could form trading companies on their own only if they registered
in so-called Free Trade Zones (specific areas of free trade
designated by the Chinese government) or, otherwise, tie up
with a Chinese partner in a Joint Venture agreement. With
this latter arrangement, however, were very high thresholds
in terms of required registered capital and turnover.
have been allowed to establish
Venture Trading Companies starting from 1 June 2004
Wholly Foreign Owned Trading Companies starting from 11 December
- In detail, the
new regulations apply for the following five activities:
retailing - i.e. selling goods and related services to individual
persons from a fixed location, as well as through TV, telephone,
mail order, internet, and vending machines
- i.e. selling goods and related services to companies and
customers from the industry, trade or other organizations
transactions on the basis of provisions (agent, broker)
distribution and retailing by existing manufacturing companies
Minimum registered capital required
Wholesale FICE RMB 500,000
Retail FICE RMB 300,000
Wholesale FICE > RMB 1,000,000
Retail FICE > 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.
approval, foreign trading companies are allowed to operate
in the following business areas:
- retailing enterprises
: retailing, import of merchandise it sells, sourcing and
purchasing of domestic goods for export, related services
enterprises : merchandise wholesaling, commission agency
(except for auctions), import and export of merchandise,
Limitations apply to some specific products such as books,
periodicals, newspapers, automobiles, medicines, salt, agricultural
chemicals such as pesticides, crude oil and petroleum. If
a foreign investor has more than 30 retail stores in China
and distributes products mentioned in the paragraph above
from different brands or suppliers, the foreign investor's
share in a retail enterprise is limited to 49%. Retailing
enterprises, which do not distribute any of the limited
products, are not restricted on the number of stores in
From 11 December
2004, all geographical restrictions for retailing enterprises
have been removed - foreign investors have been allowed to
establish retail stores anywhere in China.
One of the most
important issues in FICE application is business scope. Business
scope needs to be defined and the FICE 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.
is limited to 30 years for foreign trading companies set up
in the developed coastal areas; companies established in the
Western areas are limited to business duration of 40 years.
General Tax Information
and Corporate Income Tax shall be paid by FICEs.
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.
Under China's Labor
Law, enterprises can decide for themselves the timing and
means of recruiting staff as well as the relevant requirements