Starting a company in China as a foreigner is becoming more and more easy every day. Only a few months ago the situation was different than it is today. Therefore, it’s very hard to write a precise article on exact steps and procedures to register a company that will always stay true – they will keep changing – at least for the next few years, until the company laws in China are polished and developed enough to capture the interests of locals and foreigners completely, and we recommend you check the latest requirements and policies before you start the process of registering your company in your chosen location in China.

NOTE: Laws and policies might differ from location to location, but the general – nationwide requirements and procedures are more or less the same.

General procedures and requirements to register a company in China for foreigners:

1. Capital requirements:

a) Minimum Registered Capital: Since March, 2014 there’s no Minimum Registered Capital is required to set up a WFOE (Wholly Foreign Owned Enterprise) in Trading, Consulting, Retailing, and IT industries in Shanghai, Beijing, Shenzhen, Tianjin, Guangzhou, Hangzhou, Ningbo, Suzhou and other major cities of China.

b) Paid Up Capital: Since 2016, no Paid-Up Capital is required to set up a WFOE (Wholly Foreign Owned Enterprise) in Trading, Consulting, Retailing, and IT industries in Shanghai, Beijing, Shenzhen, Tianjin, Guangzhou, Hangzhou, Ningbo, Suzhou and other major cities of China.

NOTE: By law, certain types of WFOEs still have Minimum Registered Capital and Paid Up Capital requirements, such as Banking, Freight Forwarding and others (please check)

In reality:  Although legally there are no fixed amounts, practically, there are recommendations for registered capital for ALL types of WFOEs – the amount depends on the business cope of the company.

Who determines this amount?

It’s local governments. They normally have a recommended amount for WFOEs based on their business scope. Also, experienced and well-known local accounting firms and company registration agencies have a pretty good understanding of the current requirements and recommendations from the local governments. Good news is, shareholders are not required to inject any registered capital in the beginning – while registering the company – they are allowed to do it within 20 years or so – but the registered capital has to be chosen and it will be mentioned on the WFOE business license.

For example, it is advised that a trading WFOEs registered capital be around 300 000 USD. This amount will be mentioned on the business license of the company, and the shareholders are required and expected to inject this amount within the validity period of their business license – normally it’s 20 or 30 years – or never (if they wish to deregister the company at some point before their business license expires)

If the Administration for Industry and Commerce (AIC) and Ministry of Commerce – government bodies which accept application – find that the chosen registered capital amount is lower than the recommended amount, the incorporation application might get refused.

Also, it’s important to note that choosing an appropriate amount of registered capital creates some tax benefits, and conversely, not choosing an appropriate amount will result in heavy tax burdens. Because capital injections in the amount of chosen registered capital (approved amount) are not taxed. For example, if a WFOE chooses 300 000 RMB as its registered capital, and injects this amount in to the company, it will not be taxed for this. But, if a WFOE chooses 150 000 USD as its registered capital, and, after injecting this amount, if they find that they need more capital to run the company, the further injections will be considered as income and will be taxed accordingly.

Requirements:

Before we talk about the other requirements, it’s important to mention that there are two options to set up a WFOE:

Option 1: Using a parent company to set up a WFOE in China

Option 2: Setting up a WFOE as an individual shareholder(s)

Following are required to establish a Trading, Service, and Consulting WFOE if you choose the option 1 above (Using a parent company to set up a WFOE in China):

1. 2x Copies of Certificate of Incorporation, Articles of Formation or Equivalent document certified by Chinese embassy or Chinese consulate overseas – the country where the parent company registered in.

2. 2x Bank Reference Letters from the parent company’s bank (showing a good standing)

3. Passport copies of parent company’s director, WFOE’s Legal Representative and Supervisor.

NOTE: Legal Representative and Supervisor are the two required positions in any WFOE

4. 6x 2” photos for the Legal Representative

5. Brief Resume in Chinese for the Legal Representative

6. Business Scope – has to be decided by the parent company.

7. Registered capital – has to be decided by the parent company.

8. Proposed company names for WFOE in Chinese and English.

9. Office address in China, 2x leasing contracts, 2x certificate of real estate ownership, 2x copies of landlord’s ID card.

10. 4x copies of Letter of Authorization – Power of Attorney signed between investor(s) and the PRC entity (agency) that will deal with the company registration procedure on behalf of the investor(s)

NOTE: In most cities, foreign investors are not permitted to directly submit the application and the incorporation documents for a WFOE to the relevant authorities in China. They must retain a PRC entity that is authorized or permitted by relevant authorities to act as an agent. The agent will submit all the documents to the examination and approval authorities on behalf of the foreign investor(s).

11. A copy of the latest annual audit report from the parent company. Provided by a Certified Public Accountant (CPA) and Customs HS Codes of proposed Import/Export products in China.

For Manufacturing WFOE, there are additional requirements:

1. Purpose and estimated investment

2. WFOE’s operational structure and number of employees

3. Permission for land use, environment evaluation report

4. Products, size of production, detailed list of equipment, and business plan

5. Environmental protection measures

6. Requirement for utilities such as power and water supply

Following are required to establish a Trading, Service, and Consulting WFOE if you choose the option 2 above (Individual as a shareholder(s)):

1. 2x Passport copies of Investors certified by Chinese embassy or consulate in their home country.

NOTE: If individual investor(s) is currently in China some cities allow them to submit the copies of their passport without any certification from Chinese embassy or consulate. Please check with us.

2. Passport copies of China company’s Legal Representative and China company’s supervisor (NOTE: Legal Representative and Supervisor are the two required positions in any WFOE)

3. 6x 2” photos for the Legal Representative

4. Brief Resume in Chinese for the Legal Representative

5. Business Scope – has to be decided by shareholder(s).

6. Registered capital – has to be decided by shareholder(s).

7. Proposed company names for WFOE in Chinese and English.

8. Office address in China, 2x leasing contracts, 2x certificate of real estate ownership, 2x copies of landlord’s ID card.

9. 4x copies of Letter of Authorization – Power of Attorney signed between investor(s) and the PRC entity (agency) that will deal with the company registration procedure on behalf of the investor(s)

NOTE: In most cities, foreign investors are not permitted to directly submit the application and the incorporation documents for a WFOE to the relevant authorities in China. They must retain a PRC entity that is authorized or permitted by relevant authorities to act as an agent. The agent will submit all the documents to the examination and approval authorities on behalf of the foreign investor(s).

For Manufacturing WFOE, there are additional requirements:

1. Purpose and estimated investment

2. WFOE’s operational structure and number of employees

3. Permission for land use, environment evaluation report

4. Products, size of production, detailed list of equipment, and business plan

5. Environmental protection measures

6. Requirement for utilities such as power and water supply

General Registration Procedures:

1. Name registration with State Administration of Industry and Commerce (SAIC)

2. Obtain the Certificate of Approval by Ministry of Commerce or Foreign Economic Cooperation Bureau

3. Apply for Business License with SAIC

4. Get the chops and seals (印鑑 yìn jiàn) done at Public Security Bureau (PSB)

5. Obtain the Organization Code License from Technical Supervision Bureau (TSB)

6. Obtain the Tax Certificate from Taxation Bureau

7. Registration and Approval with State Administration of Foreign Exchange (SAFE)

8. Open foreign currency and RMB bank account

9. Inject capital from investor’s overseas bank account

10. Obtain Capital Verification Report from a Certified Public Accountant (CPA)

11. Apply for permanent Business License with SAIC

12. Financial certificate registration

13. Statistics license registration

14. Import/Export license (for Trading & Manufacturing WFOEs)

How long does it take?

As we mentioned above, every place of incorporation in China might have its own policies and requirements, therefore it may take anywhere between 1 and 2 months to complete the whole process. For e.g. in Shanghai, it takes around 2 months from start to finish, including obtaining the work permit card and visas for WFOE Legal Representative and Supervisor, i.e 1 month for company registration, and another 1 month for visa procedures.

Example:

1. Signing Authorization Letter (Power of Attorney) – 5 March

2. Company name approval – 13 March

3. Visit to Government Office to submit the incorporation application – 19 March

4. Waiting period

5. Business License  is out – April 8

6. Applying for Medical Report at the authorized hospital, visiting the Government Office to apply for work permit account for your WFOE, and opening a corporate bank account in RMB and foreign currency.

7. Visas: Application takes around 5 days to be approved, then 10-15 days to get work permit card and residence permit (visa sticker). Total time is around 1 month

NOTE: There’s also an interview process before you actually receive your residence permit (work visa sticker), and the time depends on the immigration officer, and the applicants’ (Legal Representative and Supervisor) performance in the interview. Interview questions are all about business and newly established WFOE – why the investors want to do business in that particular location in China, what are their intentions, their business plans etc. Most of the immigration officers speak English in Shanghai and other Tier 1 cities. If you register a company through us, our representative will be accompanying you to the bank and the Governments Offices.

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