China Company One-Stop Services

A) China CompaniesBrief

Joint Venture

A joint venture (JV) is a form of foreign invested enterprise (FIE) that is created through a partnership between foreign and Chinese investors, who together share the profits, losses and management of the JV. As a foreign investor, there are two major reasons to create a JV, (1) when entering a certain industry requires a local partner according to the restrictions outlined in the PRC Foreign Investment Industrial Guidance Catalogue, (2) when a local partner is able to offer tangible benefits such as well-established distribution channels, government relationships or significant knowledge of the local market. As with any partnership, in addition to the advantages of working together, JVs also face serious challenges. It is strongly recommended that prior to choosing this form of investment vehicle you consult with the foreign partner of an existing JV in order to better understand the advantages and disadvantages of the JV structure.

 

Advantages

  • The use of local partner’s existing workforce and facilities
  • Existing channels for sales and distribution
  • Use of a partner’s network to build good relationships, avoid red tape and other bureaucratic complexities
  • Entry into industrial sectors which exclude wholly foreign-owned investment

 

Disadvantages

  • Cost & complexity of establishment – authorities carefully inspect all documents presented to them and may ask for clarification or changes
  • Conflicting interests with partners
  • Merging different management styles
  • Liability associated with inheriting staff
  • Risks with technology transfer and intellectual property management
  • Division of profits

Representative Office

The Representative Office in China (also known as a Liaison Office) is a separate legal entity that represents a foreign company in China;

This solution is considered an inexpensive and easy method to create a legal entity. However, despite the low number of prerequisites, the RO structure is often not recommended due to the fact that there are many operational limitations. Usually, this form of implementation is utilized when foreign companies perform marketing and research activities in order to see if China is a viable option.

Advantages

  • Easy and simple to create (duration usually takes less than 1 month).
  • Ability to study the market in another territory while promoting the foreign company.
  • Create a local contact network, gather information and develop advertisement.
  • Rent commercial and residential premises.

Disadvantages

  • Cannot sign contracts nor bill customers.
  • Due to the limited operational range, the average duration is usually 2 years.
  • Subjected to a number of different taxes depending on business plan, location, etc. (Effective tax rate is 11% of the company’s spending).
  • Enterprise must be at least two years-old and the RO certificate will last for as long as the foreign parent company exists.

Overall, a RO is recommended for companies that are still not 100% sure that the Chinese market is a viable option for them or companies that are in a hurry to establish themselves in China. Companies like these, ought to first establish themselves in China through a RO, conduct market research and then, start to build a local network. If this process is successful, then the company can change its form of establishment to other alternatives.

Wholly Foreign Owned Enterprise

 

A WOFE/WFOE (Wholly Owned Foreign Enterprise) is a company setup in China that is 100% owned by a foreign investor/company. A WOFE is a completely independent, economic entity, bearing legal liability independently. The structure of a WOFE is gaining more and more popularity and is probably one of the most well-known structures out there. In most cases, the WOFE is preferred by companies with a relatively high amount of employees (10 or more). Generally, many companies prefer this legal form as it allows them to act independently and there is no need to collaborate with a Chinese partner (i.e. Joint Venture). One of the most common forms to establish a WOFE is the creation of a Limited Liability Company (LLC). In general, there are three types of WOFE’s;

  • Manufacturing WOFE
  • Consultancy WOFE
  • Trading WOFE (Foreign Invested Capital Commercial Enterprise)

Manufacturing WOFEs are dedicated to businesses, consultancy WOFEs are allowed to provide a service, and trading WOFEs denotes the WOFE is for “trading” the wholesale, retail, and franchise operations in China. companies can simply work in the business area that is laid down in the business license. Furthermore, investments carried out exclusively with foreign assets are restricted with special laws and additional restrictions.

Advantages

  • No need for a Chinese partner. Thus an independent management is possible, which contributes efficiency in daily business.
  • The long-term licensing (15-30 years).
  • A WOFE is able to invoice directly and the payment can be in RMB.
  • The ability to create filial companies in other cities.

Disadvantages

  • The establishing process is long, difficult, and complex
  • The high capital requirements of the enterprise
  • Subject to all applicable Chinese taxes.

B) Shanghai Free Trade Zones Brief

Since it was established on September 29, 2013, the China (Shanghai) Pilot Free Trade Zone (FTZ) has carried out institutional reform and innovation in areas of investment, foreign trade, finance and post-filing supervision to form a legal framework for investment and trade within the zone. It has adopted the negative list for investment management, simplified foreign trade supervision procedures, promoted financial system reform to realize RMB capital account convertibility, and advocated post-filing supervision as a way to transform government functions.

The State Council decided on December 28, 2014 to introduce the practices of Shanghai FTZ nationwide and established free trade zones also in Guangdong, Tianjin and Fujian. It approved the expansion of Shanghai FTZ by incorporating Lujiazui Financial Area, Jinqiao Export Processing Zone, and Zhangjiang High Tech Park, enlarging the FTZ from 28.78 square kilometers to 120.72 square kilometers to provide more space for reform trials.

Advantages

  • Free Trade Accounts (FTAs)

Companies within SFTZ, will be allowed to freely transfer funds between FTAs and accounts outside Mainland China as well as in-between FTAs. Transactions with the accounts within Mainland China are administered as cross-border.

  • No Registered Capital Required
  • Virtual Address Provided
  • Bonded Zone
  • Fast Set-up

C) Services provider for China Company

Shanghai Company Registration

  • ONE-STOP Service Solution.
  • Business Registration Services.
  • Providing a Legal virtual address to register your Company.
  • Accounting & Tax Services.
  • Legal Consulting.
  • Opening a Chinese Bank Account.

Accounting & Tax Services For China Company

  • Tax registration / alteration for corporate entities
  • Implementation of tax filing software
  • Monthly bookkeeping services
  • Monthly tax filings for business tax (BT), value added tax (VAT), consumption tax
  • Quarterly tax filings for corporate income tax (CIT)
  • Application for general VAT payer status
  • Application for tax exemptions and benefits
  • Specific tax issue settlement

Other Services

  • Virtual Registered Address
  • Payroll & HR Services
  • China VISA Services
  • Licenses Application
  • Trademark Registration