Wholly foreign foreign owned enterprise (hereinafter referred to as WFOE) is a common investment vehicle for mainland China-based business wherein foreign parties (individuals or corporate entities) can incorporate a foreign-owned limited liability company. WFOEs are among the most popular corporate models for non-PRC investors. Below is a brief introduction to WFOE registration in China.
Advantages of WFOE
The benefits of establishing a WFOE include, but are not limited to:
(1) the ability to uphold a company's global strategy free from interference by Chinese partners (as may occur in the case of joint ventures);
(2) a new, independent legal personality;
(3) total management control within the limitations of the laws of the PRC;
(4) the ability to both receive and remit RMB to the investor company overseas;
(5) increased protection of trademarks, patents and other intellectual property, in accordance with international law;
(6) exempt from having to obtain an import/export license for products manufactured;
(7) shareholder liability is limited to original investment;
(8) easier to terminate than an Equity Joint Venture;
(9) simpler establishment than a Joint Venture;
(10) full control of human resources.
Different Types of WFOE
The following are different types of WFOE. Commonly,
(1) If the WFOE only be allowed to manufacture here, it is called manufacturing WFOE.
(2) If the WFOE is allowed to do consulting & service,it is called Consulting WFOE.
(3) If the WFOE is allowed to do trading, wholesale, retail or franchise in China, it is called Trading WFOE or FICE (Foreign-Invested Commercial Enterprise).
Registered Capital and Paid Up Capital
The registered capital of a WFOE should be subscribed and contributed solely by foreign investor(s). There is a minimum capital requirement to set up a WFOE. It varies among industries, but typically 15% of the total investment should be injected within one month after obtaining the business license starting from 50,000 USD.
However the amount of registered capital is dependent upon factors like Scope of Business and Location. In reality local authorities will review the feasibility study report (and check the lease contract) approve the investment on a case-by-case basis; reduced registered capital could be negotiated in some cases.
.jpg "China Company Formation")
Taxation of WFOE
(1) Corporate tax: 15% to 25% (depending on the WFOE’s location and industry).
(2) Income tax: rates up to 35% of business profits.
(3) Consumption tax:1% to 56% of sales revenue of goods. Export are exempt.
(4) Stamp duty tax: 1%
(5) Land appreciation tax: 30% to 60% of gains on transfer.
(6) Resources tax: 1% to 20% depending on material.
How to set up a WFOE in China?
The first point of order is that you must engage a licensed PRC entity (legal firm) to submit all of the documentation to incorporate a WFOE to the relevant Chinese authorities.
(1) Name, registration with State Administration of Industry and Commerce (SAIC);
(2) Certificate of Approval by Ministry of Commerce or Foreign Economical Cooperation Bureau;
(3) Application for Business License with SAIC;
(4) Reviews made by Public Security Bureau (PSB);
(5) Organization Code License by Technical Supervision Bureau (TSB);
(6) Tax Certificate by Taxation Bureau;
(7) Registration and approval with State Administration of Foreign Exchange (SAFE);
(8) Open foreign currency and RMB bank account;
(9) Transfer capital from investor’s overseas bank account;
(10) Capital Verification Report by 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 applicable for a Trading & Manufacturing WFOE.
Contact Us
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website www.tannet-group.net, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
Previous：China Trading Company Registration
Next：Hong Kong Corporate Formation