Chinese company registration in Beijing
 
Introduction of Wholly Foreign Owned Enterprises (WFOEs)

Documents required to register a business
Processing procedure (diagram)
Fee for company formation (based in Beijing)
Documents to be handed over after completion


Wholly Foreign Owned Enterprises (WFOEs)

Wholly Foreign Owned Enterprises (WFOEs) are limited liability companies established under Chinese Company Law. The shareholders are 100% foreign. It can be an international business or foreign citizen(s) who would own the company 100%. Limited Liability is recognized by the amount of registered capital injected into the business. Although this may in fact be a combination of two assets, cash injection and equipment, the total value of these also represents the extent of the WFOE's liability.

WFOEs have become the investment vehicle of choice for the international investor wishing to manufacture, process, or assemble in China. It negates the need for a Chinese partner and does not require large amounts of registered capital to fund - Manufacture WFOEs

Although WFOEs are in essence to be used for facilities involving production lines, they have under certain conditions also proved suitable for service industries - Consulting / Service WFOEs

China has ratified new regulations that permit foreign companies to establish fully operational WFOE trading companies that can buy and sell in China, carry out wholesale, retail, franchise activities and are able to import/ export. These rules became effective from 2004. - Trading WFOEs or Foreign Invested Commercial Enterprises (FICEs)


Minimum registered capital required

Consulting WFOE RMB 100,000
Trading WFOE RMB 500,000
Manufacturer WFOE RMB 500,000

Suggested registered capital

Consulting WFOE > RMB 300,000
Trading WFOE > RMB 1,000,000
Manufacturer WFOE > 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.


Business Scope

One of the most important issues in WFOE application is business scope. Business scope needs to be defined and the WFOE 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.

Business Terms

In China, terms of 15 to 30 years are typical for a manufacturing WFOE (although some may have a longer term). It is possible to obtain extensions of the WFOE's duration.

General Tax Information

Consulting WFOE Business Tax + Corporate Income Tax
Trading WFOE Value-added Tax + Corporate Income Tax
Manufacture WFOE Value-added Tax + Corporate Income Tax

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.

Staff Recruitment

Under China's Labor Law, enterprises can decide for themselves the timing and means of recruiting staff as well as the relevant requirements and number.

 

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