China WOFE Formation

Advantages of China WOFE Registration

There are few restrictions on the activities of a China WFOE. Healy Consultants assists international entrepreneurs obtain licenses to carry out manufacturing, wholesale, retail and franchising activities in China. The normal term for a WOFE business license is 15 to 30 years, although extensions are available to 50 or more years with special approval from the State Council. Extensions are usually granted for i) projects with large investments ii) projects employing advanced technologies provided by the foreign investor and iii) competitive export-orientated products.

A China WOFE requires only one director (unless the investor sets up a Board of Directors, in which case the minimum number of directors is three). A director can be any nationality and can be resident anywhere. However, corporate directors are not permitted.

A China WFOE can be 100% foreign owned. China WOFE formation requires only one shareholder, who can be any nationality, but the shareholder can not reside within China. Corporate shareholders are permitted.

A company secretary is not required for China WOFE registration.

A China WOFE is eligible for legal tax exemptions if located in Free Trade Zones, Export Processing Zones or provinces which encourage foreign investment. Healy Consultants assists foreign investors identify tax incentives and recommend investment strategies for the China WOFE.

Disadvantages of China WOFE Registration

International entrepreneurs should prepare for China WFOE set up to be completed in four to six months, due to complex licensing procedures and bureaucracy. For example, a China WOFE must obtain multiple approvals from government agencies during incorporation, depending on the nature of business to be carried out.

Incorporating a China WOFE is expensive. A China WOFE must pay a minimum 20% of the registered capital into a corporate bank account in the first three months of incorporation, the remaining 80% is to be paid within two years. Under China company law, the minimum share capital for a company with multiple shareholders is just RMB30,000 (US$5K). However, to successfully register and operate a WOFE requires minimum RMB 100,000 - RMB 500,000 (or higher), depending on the industry and region within China.

A China WOFE must prepare audited accounts according to Chinese accounting standards. It must also submit a copy of audited financial statements to the local tax office in the city of incorporation. A China WOFE is required to disclose details of beneficial owners to the local municipal and provincial authorities.

Corporate directors are not permitted when setting up a China WOFE.

A China WFOE is required to appoint a legal representative and a supervisor. The supervisor of a China WOFE cannot be i) chairman of the board of directors ii) the managing director or iii) the general manager.

Healy Consultants' fees to set up a China WOFE amounts to US$18,500, although the final engagement cost depends on the range of services required by our clients.

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