China company registration

DOING BUSINESS IN CHINA

Since 2003, Healy Consultants has been efficiently and effectively assisting our foreign Clients with a spectrum of international business services including i) business registration in China ii) business license with the State Administration of Industry and Commerce iii) corporate bank account opening in China iv) China visa strategies for foreign employees v) business support and guidance to investors and vi) office rental solutions.

Healy Consultants’ video guide on China company registration

  • Benefits and problems

    Benefits of China company registration

      China business registration - advantages, disadvantages, best uses

    1. Our foreign Clients can register a Chinese WFOE (Wholly Foreign-Owned Enterprise) having met below conditions:
      • One shareholder and one director;
      • Both shareholder and director can be foreigners and not ordinarily resident in China;
      • A minimum capital from US$4,400 to US$140,000 depending on province;
      • A feasibility study approved by the State Administration for Industry and Commerce (SAIC);
      • Read more on the available business entities options for registration in China.

    2. Our Clients looking to establish in China should expect to record high sales as the local market benefits from:
      • The largest population in the world (1.4 billion inhabitants);
      • The second largest economy in the world, with a GDP recorded at US$17.6 trillion in 2016;
      • A robust economy with a projected annual 6.6% growth in 2016 and beyond;
      • A growing consumer economy expected to expand by US$2.3trillion over the next half decade.

    3. Our Clients often relocate some operations of their manufacturing business to China because:

    4. Setting up in a Chinese export processing or industrial development zones is beneficial because:

    5. Our Clients setting up in China will enjoy access to other beneficial aspects to their new businesses including:
      • Access to a considerably large trained and qualified labour pool;
      • Availability of various sector specific incentives and grants to assist startups;
      • Availability of a massive service industry with a myriad of shipping agents, banks and financial institutions;
      • Access to more than 100 double taxation avoidance treaties that can minimize withholding taxes on dividends remitted abroad.

    Problems with China company registration

    1. Starting a business in China can be a complex process taking up to 4months to complete because:
      • Depending on province, the minimum paid-up share capital required can be as high as US$140,000;
      • Companies with foreign shareholding must go through a rigorous pre-approval process involving at least 4 state agencies;
      • Company incorporation process involves more than 10 procedures taking at least 30 working days to complete;
      • Thus, China is ranked as the 11th worst place in the world for the number of procedures required to form a new business.

    2. The Chinese Government can be termed as discriminatory to foreign investors because:
      • Equity restrictions apply for foreigners in certain lucrative industries such as banking, telecommunications, automobile and finance, and require joint ventures with locals;
      • Foreigners are also prohibited from investing in certain sectors such as education, entertainment, technology, and media;
      • The Government also tends to favour the local companies and citizens over foreigners in commercial disputes.

    3. Our Clients running a business in China will also face Government-related difficulties including:
      • Monthly reporting obligations such as i) financial statements ii) sales tax reports and iii) payroll reports;
      • Pre-approval requirements by the Government before a foreign subsidiary can repatriate their earnings abroad;
      • A borderline draconian regulatory environment that exerts laws that prohibit use of certain superlatives such as “the best” in advertising;
      • Counterfeiting is rampant in China as copyright laws are poorly enforced and businesses risk losing millions in stolen intellectual property.

    4. China’s language and culture can be an impediment to doing business for foreign entrepreneurs because:
      • Business documents in China are written in standard mandarin and can be challenging to foreigners who don’t understand the language;
      • Less than 1% of the Chinese population speak English fluently, consequently communication barrier is imminent;
      • During the Chinese New Year, businesses in China slowdown to a halt for at least one week for the celebrations;
      • The Chinese people are quite superstitious and our Clients should avoid usage of certain numbers that may be considered unlucky.

    5. Our Client should also expect to suffer steep operations costs doing business in China because of:
      • High office rental costs in main Chinese cities like Beijing and Shanghai with rents up to US$1,300psm per annum;
      • Income taxes including i) 25% corporate income tax ii) 17% value added tax iii) 13% custom duties iv) personal income tax rate of up to 45%;
      • Our Clients should watch out for hidden or extra costs as the Government requires hiring of local consultants prior to proceeding with certain projects.

  • Best uses for a China company

    1. China is an excellent location for the formation of a company with manufacturing operations because of:
      • Considerably low wages in the manufacturing sector;
      • Availability of several tax incentives;
      • Access to a dense network of suppliers and customers with excellent market proficiency.

    2. China is also a perfect jurisdiction for setting up a trading company in order to take advantage of the large market size and strong consumer base.
SummaryTax resident LLCFast business setup solutionFree zone LLCEquity Joint Venture CompanyRepresentative officeHong Kong Tax exempt LLC
Best use of company?All purposesClose a customer deal nowGlobal tradingProfessional ServicesMarketing & researchGlobal Trading/Holding
How soon can you invoice Clients/sign sales contracts?3 months1 month2 months3 months3 months1 week
How soon can you hire staff?4 months1 month3 months4 months4 months1 week
How soon can you sign a lease agreement?1 day1 day2 months1 day1 day1 day
How long to supply corporate bank account numbers?4 months1 month3 months4 months4 months1 week
How long to supply company registration / tax numbers?3 months1 month2 months3 months3 months1 week
Corporate tax rate on annual net profits?25%25%25%25%around 10% on expenses0%
Limited liability entity?YesYesYesYesNoYes
Government grants available?YesYesYesYesYesNo
Government approval required for foreign owners?YesYesYesYesYesNo
Resident director/partner/manager/ legal representative required?NoNoNoNoYesNo
minimum paid up share capital?US$1US$1US$750,000US$1US$1US$1
Can bid for Government contracts?YesYesYesYesNoNo
Corporate bank account location?HSBC ChinaICBC ChinaChina Construction BankSCB ChinaDBS ChinaBank of China
Can secure trade finance?YesYesYesYesNoYes
VAT payable on sales to local customers?17%17%17%17%No sales allowed0%
Average total business set up engagement costs?US$16,650US$46,810US$15,650US$15,650US$17,650US$7,910
Average total engagement period?5 months8 months4 months5 months5 months1 month

See full table

Accounting and tax considerationsLimited Liability CompanyJoint Stock CompanyFree Zone CompanyBranch officeRepresentative officeLimited Liability Partnership
Statutory corporate tax payable?25%25%25%25%around 10% on expenses0%
Legally tax exempt if properly structured?NoNoNoNoNoYes
Group HQ tax incentives?YesYesYesNoNoNo
Must file an annual tax return?YesYesYesYesYesYes
Must file annual financial statements?YesYesYesYesYesYes
Must appoint an auditor?YesYesYesYesYesYes
Access to double taxation treaties?YesYesYesYesNoNo
Withholding tax on payments to foreign owner / parent company?10%10%10%10%0%0%
Company RegistrationLimited Liability CompanyJoint Stock CompanyFree Zone CompanyBranch officeRepresentative officeLimited Liability Partnership
Resident director/partner/manager/ legal representative required?NoNoNoNoYesNo
Minimum number of shareholders/partners?1111parent company1
Maximum shareholding for foreigners?100%100%100%100%100%100%
Minimum statutory paid up share capital?US$1US$1US$750,000US$1US$1US$1
Security deposit to be kept with Government?NoNoNoNoNoNo
Shelf companies available?YesYesYesNoNoYes
Time to incorporate a new entity?3 months1 month2 months3 months3 months1 week
Can easily convert to a PLC?YesYesYesYesNoYes
Public register of shareholders and directors?YesYesYesYesYesYes
Can have preference shareholders / partners?YesYesYesYesNoYes
Business ConsiderationsLimited Liability CompanyJoint Stock CompanyFree Zone CompanyBranch officeRepresentative officeLimited Liability Partnership
Good entity for trademark registration?YesYesYesYesNoYes
Can secure an import and export license?YesYesYesYesYesNo

Sponsorship by a local citizen required?No
Our Client needs to travel to China for business set up?No
Temporary physical office solutions available?Yes
You need a local resident as bank signatory?No
Can be wholly foreign owned?Yes
The entity will likely be regulated by?SAIC
Minimum number of directors/managers?1
Monthly GST reporting to the Government?Yes
Must sign an office lease agreement during incorporation?Yes
Shareholders & directors documents to be attested/translated?Yes
Each foreign director needs a personal income tax number?No
Foreign non resident director needs a work permit?No
Maximum number of staff allowed?No maximum number for any entity
Expatriate to local staff ratio?None
Can secure residence visa for business owner?Yes
Other useful information
What will be included in my customer sales invoice?Click link
This country has signed free trade agreements?Yes
This country is a member of WIPO/TRIPS?Yes
This country is a member of the ICSID?Yes
Average custom duties suffered?12.47%
Government foreign investment approval required?Yes
Average monthly office rental? (US$ per sq m)US$ 10
Minimum statutory monthly salary?US$ 300
Average monthly US$ salary for local skilled employees?US$509
US$ deposit interest rate? (1 year average)0.20%
Overseas remittance currency controls?Yes
Banking considerations
Multi-currency bank accounts available?Yes
Corporate visa debit cards available?Yes
Quality of e-banking platform?Good
Crowd funding available in this country?Yes

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Contact us

For additional information on our company registration services in China, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi