Wholly Foreign Owned Enterprise Formation In China

Information provided below will guide you to:
● Introduction of Wholly Foreign Owned Enterprise (WFOE)
● Documents Required & Registration Procedures of WFOE
● Accounting services after WFOE Incorporated in China
● 1 Year All Inclusive Package (Company Formation, Accounting and Audit All Included)
● De-registration of a Company (WFOE) in China (Shanghai, Beijing, Shenzhen)

Last Updated: March.16, 2017
[Since March 1, 2014] No. minimum registered capital is required for WFOEs with scope of business of consulting, Trading, retailing, information technology etc. in China. There is minimum registered capital still required for some industries for instance: Banking, Forwarding etc. You may find detailed information about registered capital, required documents and procedures to establish a WFOE in below cities:

First tier cities:   SHANGHAI  BEIJING  SHENZHEN



In Mainland China, there are 4 modes of business presences for foreign investors: WFOE (65%), Representative Office (20%), FIPE (10%), and Joint Venture (5%). The majority of Jilian's clients chose WFOE as their China business entity since a WFOE could freely conduct its business in China like anyone Chinese domestic companies, a roughly comparison between these 4 modes.

Wholly Foreign Owned Enterprise (WFOE)

Introduction of WFOE

The Wholly Foreign Owned Enterprise (WFOE) is a limited liability company wholly owned by the foreign investor(s). In China, WFOEs were originally conceived for encouraged manufacturing activities that were either export orientated or introduced advanced technology. However, with China's entry into the WTO, these conditions were gradually abolished and the WFOE is increasingly being used for service providers such as a variety of consulting and management services, software development and trading as well.
The registered capital of a Wholly Foreign Owned Enterprise (WFOE) should be subscribed and contributed solely by the foreign investor(s). A WFOE does not include branches established in China by foreign enterprises and other foreign economic organizations. The Chinese Laws on WFOE do not have a clear definition of the term of "branches". The term of "branches" should include both the branch companies engaged in operational activities and representative offices, which are generally not engaged in direct business activities. Therefore, branches and representative offices set up by foreign enterprises are not WFOE.

Different types of WFOE
There are many businesses for WFOEs. The following are frequently chosen by our clients:
1.If the WFOE manufacture here, we call it a Manufacturing WFOE.
2.If the WFOE is allowed to do Consultancy or Service, we call it Consultancy (or Service) WFOE.
3.If the WFOE is allowed to do trading, wholesale, retail or franchising in China, we call it a Trading WFOE or Foreign-Invested Commercial Enterprise (FICE).

Advantages of WFOE
The advantages of establishing a WFOE include, but are not limited to:
1.Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of a Chinese partner.
2.Ability to formally carry out business rather than just function as a representative office and being able to issue invoices to customers in RMB and receive revenues in RMB.
3.Capability of converting RMB profits to US dollars for remittance to its parent company outside of China.
4.Protection of intellectual know-how and technology.
5.No requirement for Import / Export License for its own products.
6.Full control of human resources.
7.Greater efficiency in operations, management and future development.
8.Investor does not have to be established for more than 2 years, compared to a Representative Office’s parent company that is required to have been established for over 2 years.
9.Shareholder liability limited to sum of original investment.

Business scope
One of the most important issues in WFOE application is business scope. Business scope needs to be defined and the WFOE can only conduct business within its approved business scope, which ultimately appears on the business license. Any amendments to the business scope require further application and approval. Inevitably, there is a negotiation with the approval authorities to approve as broad a business scope as is permitted. Generally business scope includes investment consulting, international economic consulting, trade information consulting, marketing and promotion consulting, corporate management consulting, technology consulting, manufacturing, etc. With China's entry into WTO, more and more business is open to WFOE especially in Trading, Wholesale and Retail business.

Social Security In China
A new rule on foreign employees’ social security takes in effect starting October 15, 2011. It is said that if a company hires a foreign employee, the company shall register this employee with the local social security authority within 30 days of the employee receiving his work permit.

General Tax Information
Since Jan. 2008, China's new corporate tax rate is 25%. (the rate depends on the places where the company is registered and the industry that a company engaged). All enterprises are required to report to the Tax Administration Department monthly, quarterly and annually. Jilian provides outsourcing accounting services for our clients.

Annual Audit Report
The foreign invested companies in China should summit annual audit report to the relevant authorities. Statutory auditing of financial statements can be provided with local experienced CPAS as required by the applicable regulation. Any company will be subject be to a fine if the Annual Audit Report is not submitted in a timely manner.

Profit Repatriation
China Government allows Foreign Invested Enterprises remit their profits out of the country and such remittances do not require the prior approval of the State Administration of Foreign Exchange (SAFE). Dividends cannot be distributed and repatriated overseas if the losses of previous years have not been covered while dividends not distributed in previous years may be distributed together with those of the current year. Repatriating the registered capital to home countries is forbidden during the term of business operation.

Terms and Termination
In China, terms of 15 to 30 years are typical for a manufacturing WFOE (although some may have a longer term). It is also possible to obtain extensions of the WFOE's duration. For projects in which the amount of investment is large, or the construction period is long and the return on investment low, projects producing sophisticated products using advanced or key technology provided by the foreign partner, or for projects producing internationally competitive products, the term of WFOE may be extended to 50 years. With special approval from the State Council, the term may be even longer than 50 years.
The WFOE may be terminated under certain conditions. For example, the inability of the WFOE to operate due to heavy losses, or in the occurrence of an event of force majeure, etc..

De-Registration
To closing down or de-registration a WFOE in China would be much more complicated than establish a New WFOE. It could be stuck there if the liquidation report can't be approved by local tax authority, thereafter, investor has to spend great amount of time on the closure of a WFOE. Find it here about required documents, procedures and cost to de-registration a WFOE in China. Contact our offices below to get a free review of your WFOE.


Information provided below will guide you to:
● Introduction of Wholly Foreign Owned Enterprise (WFOE)
● Documents Required & Registration Procedures of WFOE
● Accounting services after WFOE Incorporated in China
● 1 Year All Inclusive Package (Company Formation, Accounting and Audit All Included)
● De-registration of a Company (WFOE) in China (Shanghai, Beijing, Shenzhen)