Notes

Setting Up A WFOE In China: The Process Explained
If how to setup company in China follow this blog site, you may have read posts on the distinctions in between WFOEs (noticable "wuh-fee"), Agent Workplaces (ROs), and Joint Ventures (JVs)-- on the various types, the Advantages and disadvantages, and a lot more. In this article, we broaden on this knowledge base and set out the application procedure for setting up a WFOE in China.

Before we begin, let's simply revitalize on the essentials.

What is an Entirely Foreign-Owned Business?
A Completely Foreign-Owned Enterprise or a WFOE is a privately held minimal liability company in China in which all the investors are foreign. It is the most favoured investment vehicle as it gives complete autonomy and control to the foreign moms and dad company. They likewise can be found in various kinds:

Consulting WFOE, which is the most convenient to establish;
Manufacturing WFOE, which allows business to manufacture in China
Trading WFOE or a Foreign-Invested Commercial Enterprise (FICE), which grants business both import and export licenses and permits them to trade locally.
When beginning an organization in China, there are several necessary details you ought to take note of, from selecting the right business type to being tax compliant according to accounting in China - it's vital that this structure is strong prior to getting the application process started. With various aspects to think about, the procedure of establishing a WFOE can be broken down into 2 parts, specifically: the Pre-License Procedure and the Post-License Treatment. While the procedure varies depending upon the kind of enterprise being established, we detail the primary aspects that are common to all three types below.

Pre-License Procedure for China WFOEs
Action 1: Select Your Chinese Service Name
The initial step in the application procedure is to apply for your official Chinese service name. There are fixed standards that need to be followed when choosing an acceptable name. Read our post discussing the very best practices for selecting a Chinese business name here.

Step 2: Prepare Your Legal Paperwork
Once you have selected your company's name, you then require to prepare all the essential legal files for the company registration, consisting of the lease contract for a leased office space or building, the Expediency Study Report (FSR), and the bank reference letter.

Action 3: Look For Your WFOE Organization License
The next action is to submit the ready paperwork and apply for a business license at the regional authorities. These consist of the Ministry of Commerce (MOFCOM) and the Administration for Industry and Commerce (AIC).


Post-License Treatment for China WFOEs
Step 4: Register For Taxes
Once you have actually been approved your business license, you have to sign up for taxes at the State and Local Tax Bureau. Numerous documents need to be attended to the registration. In China, as official documents are just legitimate once stamped, you will also require a business stamp. It carries out the exact same function as a signature in the rest of the world.

It deserves pointing out that because the COVID-19 outbreak, many tax relief policies have actually been carried out to relieve the functional problem that the pandemic has actually brought upon many organizations, specifically WFOEs.

Step 5: Register With Other Authorities
The 2nd last step is to sign up the company with other relevant authorities. There are 12 different authorities that a business needs to get registered with to be established. These authorities include the Innovation Guidance Bureau, the State Administration and Foreign Exchange, the Financial Bureau, and the Statistical Bureau.

Step 6: Open Your Checking Account
The final action of establishing your WFOE is to open a bank account that operates in RMB. Your WFOE will likewise require a foreign currency savings account for the contribution and verification of foreign-invested capital.

Opening a Savings Account in China Remotely

China is widely known for its stringent banking regulations, specifically for foreign investors. This, paired with new world requireds brought on by COVID-19, has actually made it more difficult to make an application for a bank account in China. Considering that the start of the pandemic, Chinese banks have executed services and policies that permit foreign companies to open a checking account in China remotely.


The most popular process for remote savings account registration in China follows these three steps to make sure the validity of the business:

Send out info by means of video - You will need to send out the bank needed info in a scripted video, which will then be analysed and validated by the compliance department.
Company place see - As soon as your video evidence of identity has been authorized, an agent from the bank will organize a visit to your physical company place in China
Last authentication - After your service place has actually been approved, the bank will enable your legal agent to come to the bank with all the needed files, and you will be asked to carry out real-time authentication through a call.

Just how much Does It Cost to Set Up a WFOE in China?
As straightforward as it is, establishing a WFOE in China does come with an expense. You're probably wondering: after I spend hours trying to understand the Chinese taxation system, how much will I need to pay in legal charges to get my business up and running in China?

The short answer is that it depends on whether you will work with a consultant to assist you through the process or select a do it yourself method-- the do it yourself technique is not recommended due to the complexity of the process. Setting up a WFOE in China might cost you as much as $100,000 if you employ an international law business to assist you, but there are more budget friendly options through regional specialists. If you would like to learn more about the kinds of expenses you will incur and the most affordable options for choosing your China business partner, take a look at our blog site, which explains these in detail.

How to Proceed With Setting up Your WFOE in China.
The process of setting up an Entirely Foreign-Owned Business in China can be frustrating for people and organisations who are not familiar with the procedure. It is imperative to comprehend how it all works before you begin - to avoid errors that could increase expenses and cause delays. It is always a great concept to speak with professionals to ensure your application is managed rapidly and effectively.

Hongda has a group fluent with the intricacies of developing a WFOE. Our specialists help you navigate the bureaucracies of the system for a worry-free setup procedure. If you have any concerns relating to the procedure or how Hongda can assist you, please feel free to leave a remark listed below, or schedule a complimentary assessment with our specialists.

Read More: https://www.hongdaservice.com/wfoe-in-china