Under the strong economic growth of China’s economy, companies may intent to expand their business to China. Since December, 2004, China has committed to open various business fields to foreign investors after joining World Trade Organisation (“WTO”). Nowadays, setting up a trading company or a franchise in China will be as easy as in USA, Hong Kong and Singapore or Taiwan.
In general, there are several approaches for foreign enterprises to step in China, they are Wholly Foreign-Owned Enterprises (“WFOEs”), Joint Ventures (“JVs”) and Representative Office (“RO”). Although set up a foreign enterprise in China is much easier now, it is still a challenging experience if customers would like to apply by themselves. With our experience in China, we can help you smoothen the application.
Wholly Foreign-Owned Enterprises
It is an independent legal entity in China with limited liability, wholly owned by one or more foreign investors and established entirely with foreign capital. “WFOEs” can carry out business within its registered business scope. This kind of company is increasingly being used for service providers such as a variety of consulting and management services, software development and trading.
Advantage of “WFOEs”
· Carry out business in China with VAT invoice
· Capability to convert RMB to US dollars and remit out of China as dividend
· Freedom for importing and exporting products
· Full control over its resources
Capital requirement for “WFOEs”
There is no expressed minimum capital requirement for the establishment of “WFOEs” nowadays, tough it is recommended to set with a sufficient amount to cover the initial capital investment and expenses of WFOE before deriving its first income. As additional cost will be incurred, if reapply for permission to increase capital, additional licensing fees, renewals of business license and so on. Moreover, the setting up time may be difference from city to city.
Equity Joint Ventures (“EJVs”)
It is a legal entity with limited liability and is incorporated by a Foreigner with a Chinese partner. The Chinese partner must be a company instead of an individual, while the Foreign partner can be either of them. Both partners’ liability is limited to the capital contribution to the JV.
Tax System in China
All Chinese enterprises are required to fulfil Individual Income Tax (IIT), Value-Added Tax (VAT), Corporate Income Tax (CIT) and various District Tax and Surcharges reporting throughout the year. Deadlines for reporting each type of taxes and levies are different and it varies depending on the type of tax payer the enterprise belongs to. Our own professional team in China can help you to keep track of your accounts and tax status to avoid missing any deadlines. There may be tax rebates or benefits in some specific regions in China, talk to our consults now to find out how you can enjoy the tax benefits