China company registration

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.

  • 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.
Chinese companies’ summaryWFOEEJVBranchRep OfficeFree ZoneOffshore Hong Kong
Best use of company?All business activitiesManufacturing & distributionTradingMarket researchManufacturing and logisticsHolding company
Corporate bank account location?HSBC ChinaHSBC ChinaHSBC ChinaHSBC ChinaHSBC ChinaBank of China
Client must travel?NoNoNoNoNoNo
Corporate tax payable?25%25%25%None25%0%
Limited liability entity?YesYesNoNoYesYes
China resident director must be appointed?NoNoNoNoNoNo
VAT payable on sales to local customers?17%17%17%N/A17%N/A
Withholding tax on payments to parent company?10%10%10%NoNoNo
Average engagement costs in US$?15,65015,65013,55017,65015,6506,655
Average total engagement period?7 months7 months7 months7 months4 months3 months
Accounting and tax considerationsWFOEEJVBranchRep OfficeFree ZoneOffshore Hong Kong
Must file an annual China tax return?YesYesYesNoYesYes
Must file annual financial statements?YesYesYesNoYesYes
Audit of financial statements required?YesYesYesNoYesYes
Withholding tax payable on dividends?Yes, 10%Yes,10%Yes, 10%NoNoNo
Must apply for a tax registration certificate?YesYesYesNoNoNo
China company registrationWFOEEJVBranchRep OfficeFree ZoneOffshore Hong Kong
China resident director required?NoNoNoNoNoNo
China resident manager/partner required?NoYesNoNoNoNo
Minimum number of shareholders?12NoneNone11
Minimum number of directors?12NoneNone11
Minimum paid up share capital?US$15,000NoneNoneNoneUS$15,000US$1
Shelf companies available?NoNoNoNoNoYes
Time to incorporate a new entity?4 months4 months4 months4 months4 months4 weeks
Public register of shareholders and directors?YesYesNoN/AYesYes
China business banking considerationsWFOEEJVBranchRep OfficeFree ZoneOffshore Hong Kong
Multi-currency bank accounts available?YesYesYesYesYesYes
Corporate visa debit cards available?YesYesYesYesYesYes
Quality of e-banking platform?ExcellentExcellentExcellentExcellentExcellentExcellent
Can secure trade finance?YesYesYesN/AYesN/A
Chinese business considerationsWFOEEJVBranchRep OfficeFree ZoneOffshore Hong Kong
Can invoice local customers?YesYesYesNoYesNo
Can hire local staff?YesYesYesYesYesNo
Can rent office in China?YesYesYesYesYesNo

Average monthly office rental US$ per sq m?US$95
Minimum statutory monthly salary?US$303
Average monthly US$ salary for skilled labor?US$7,500

Monthly VAT reporting to the Government?YesYesYesN/AYesN/A
Double taxation treaty access?YesYesYesN/AYesN/A

China CNY deposit interest rate0.30%
US$ deposit interest rate0.05%
Overseas remittance currency controls?No

Healy Consultants’ video guide on China company registration

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