WFOE Registration
Written by jayshaw   

WFOE Introduction

Establishing Steps

Checklist for Clients

 

WFOE Introduction

The Wholly Foreign Owned Enterprise (WFOE) is a Limited liability company wholly owned by the foreign investor(s). shareholders are liable for the the debt of WFOE is limited to their registered capital contributed. As an Chinese legal business entity, WFOE operate business independently by issuing official Fapiaos in receiving business payment.  Foreign investors will be facing few disputes which usually and frequently arise between foreign shareholders and Chinese shareholders in JV. Besides, WFOE is allowed to make investment in foreign currency and converting RMB profits to foreign currency to be remitted to outside of China. WFOE also enjoys full control of recruiting local employees contrary to RO which must do through local qualified agents, entailing additional cost of payroll.

There are different standards of minimum registered capital for WFOE applicable to different industries. For Consulting WFOE, RMB 100,000; Trading WFOE, RMB 500,000; Manufacturer WFOE RMB 500,000; others: RMB30,000.

For a specific WFOE registration, the amount of registered capital is dependent upon the Feasibility Study Report which shall be submitted to the local Commerce Bureau for approval like Scope of Business and Location. The capital must be sufficient for the business scale. Therefore, in reality local authorities will review the feasibility study report to approve the registered capital on a case-by-case basis. Moreover, registered capital can be paid by two installments, the initial Paid-up would be 20% of the registered capital, the balance should be remitted within 2 years.

As for the general tax regulation of a WFOE in China, enterprises in different industries are applied by different tax portfolio and consequent tax rate as follows:

Trading or Manufacture WFOE: Value-added Tax (0-17%) + Corporate Income Tax (25%)

Consulting WFOE and others: Business Tax (3-20%) + Corporate Income Tax (25%)

The taxes mentioned above are the major ones. Besides, there are Consumption Tax, Tariff, individual income tax and etc, which are payable by some sectors or for some special circumstances. In addition, all enterprises are subject to do routine monthly report to the Tax Administration Department.

Establishing Steps

  • Step 1: Name Registration with local State Administration for Industry and Commerce (SAIC)

  • Step 2:Pre-approval from local government authorities concerned if business scope entails such pre-approval

  • Step 3: Certificate of Approval by local Ministry Of Commerce

  • Step 4: Apply for temporary Business License with local SAIC

  • Step 5: Chops made by Public Security Bureau (PSB)

  • Step 6: Organization Code License by local Bureau of Quality and Technical Supervision (BQTS)

  • Step 7: Tax Certificate by Taxation Bureau

  • Step 8: Registration and Approval with State Administration of Foreign Exchange (SAFE)

  • Step 9: Open Foreign Currency and RMB bank account

  • Step 10: Inject Capital from investor’s overseas bank account

  • Step 11: Capital Verification Report by Certified Public Accountant (CPA)

  • Step 12: Applying for Permanent Business License with SAIC

  • Step 13: Financial certificate Registration with Ministry of Finance

  • Step 14: Statistics license Registration with local National Bureau of Statistics

  • Step 15: Import/Export license (Applicable for Trading & Manufacturing WFOE only)

 

Checklist for Clients

1. Five optional company names and business scope description

2. 2x investor's ID certified by Chinese Embassy

For corporate investor, the certified document including:

  • Business license

  • Investor’s shareholder list

  • BOD member list

  • Authorization resolution on signing representative

  • The photocopy of the signing representative’s ID

 

For individual investor, certified ID photocopy

For individual investor who is living in China need not fulfill ID certification

3. 2x Bank Reference Letters from investor’s bank to declare a good standing

4. Letter of Appointment with ID photocopies of ID of related persons:

  • BOD members

  • Chairperson of BOD

  • General Manager

  • Supervisors

 

5. Letter of appointment on legal representative when BOD is not required for WFOE

6. WFOE legal representative's CV and 8 photos

7, Feasibility Study Report (drafted in foreign language is acceptable)

8. Registered office address

For company landlord, 2x photocopy of lease, ownership certificate and business license

For individual landlord, 2x photocopy of lease, ownership certificate and landlord ID

9. Additional documents when business scope entails approval of government authorities concerned

 


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