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China is a growing manufacturing hub of the world and also the largest market in the world with respect to its population. Hence it is a lucrative destination for foreigners to set up their business. It may seem enticing but setting up a business in China is a complex and lengthy drive. We at SWIFTIBC professionally help and guide foreign investors / entrepreneurs through the set of procedures to set up their businesses flawlessly and within standard government rules and regulations.
It is basically a limited liability company wholly owned by foreign investors / entrepreneur. The WFOE can generate income in all major industries as included by the government and simultaneously also will be subject to Chinese taxation.
WFOE can conduct business in all manufacturing and also trade its products/ services internationally. It is neither restricted by law nor penalized for conversion of RMB earnings to US dollars to its parent company outside China.
The minimum share capital ranges between US 15000 dollars to US 140000 dollars. To maintain an optimum time probability for completing the registration it is preferred to keep the share capital to US 140000 dollars. 20% of the paid up capital (US 28000 dollars) would be required prior to the registration and the balance to be paid up within 2 years. The WFOE should entail the following:
Post incorporation the WFOE has to report to the Tax Administration Department monthly, quarterly and annually. SWIFTIBC helps you manage this in a reasonable and reliable way.
Foreigners who form an export-oriented WFOE and register in a SEZ (Special Economic Zone) are said to have a China Free Zone Company. Certain requirements will vary as per the company location in China; normally it includes minimum number of job created, minimum capital requirement and technology transfers.
It is also known as an Equity Joint Venture (EJV) company. It is a standard limited liability established between a foreign client and a Chinese joint venture partner. It requires higher share capital and licensing time is delayed. The joint venture company is beneficial if the local Chinese partner is skillful and possesses specialist knowledge
China Joint Venture companies are required to:
1) Startups enjoy 20% tax
2) High-tech companies enjoy 15% corporate tax
3) Companies involved in hiring handicapped employees enjoy 100% refund on wages
A) China Branch Office – Foreign investors / clients are not permitted to have branch offices in China. It is only made possible for WFOE and China Joint Venture Company. The use of the China Branch Office is mainly preferred for investors who plan to expand their geographical reach for their existing businesses in China.
B) China Representative Office – The regulations in China allow foreign companies to open representative offices in China. They have simpler procedures as compared LLC’s and Branch Offices since their approval is only administered by the State Administration for Industries and Commerce. These companies best for investors who do not want to pursue any production-related or commercial activities in China.
C) China Offshore Company – This is basically a Hong Kong company. Registering a Hong Kong company helps the foreign investor to avail a better taxation system being in China and also helps in overseeing other productive and commercial activities in China.
Benefits: A Hong Kong company can be used as an international trading arm of a Chinese Business Company and also as the holding company facilitating investment in China.
1) Annual statutory audit under Chinese GAAP framework requires companies to prepare their respective financial statements
2) VAT returns are to be filed before the 15th of every month
3) Tax returns to be filed with local tax authorities before 15 days of the end of each quarter
4) Annual tax returns and settlement to be submitted within 5 months post the completion of the tax year
5) Non compliance to full settlement will attract 0.05% on the unpaid fees daily
1) Retirement scheme, medical insurance and unemployment insurance need to be complied- with by the companies
2) Termination of employees within the employment tern needs to be justified with proper reasoning
3) US 300 dollars is considered as the minimum monthly wage in China
4) American citizens are required to file all the details of the Chinese holdings with the Internal Revenue System. Failure to do so incorporates 10 years of imprisonment OR US 50000 dollars fine.
1) A lease agreement of company premises must be pre-approved by local government and municipal authorities before incorporation
2) In accordance to the Companies Law of Peoples Republic of China a Chinese public accounting firm needs to audit and certify the paid up capital
3) China Company will need to employ
4) Registration of the controlling person of the WFOE has to be done through China’s foreign invested enterprise online filing
5) Article 38 of the Companies Law of the Peoples republic of China states that the appointed Chinese legal representative can act on behalf of the company to conclude contracts and submit reports. He also has the authority of a director and shares.
6) Limited Liability Companies (LLC) need to have certain shareholders and employees as the board of supervisors who are serving as a government reporting body. They can report directors, supervisors or senior officers during any breach
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