When foreign investors desire to establish a Chinese company in China, there are two options, Wholly Foreign-Owned Enterprise and Sino-Foreign Joint Venture.
This article focuses on establish a WFOE in China under the current Foreign Investment Law,Company Law and their relevant regulations.
A WFOE is a wholly foreign-owned enterprise in China, it is a Limited liability company wholly owned by the foreign investor(s).
WFOEs can be registered as one of three main types-
1. manufacturing WFOEs;
2. trading WFOEs- these businesses could be in consulting or other related services;
3. consulting WFOEs- covering businesses in the trading, wholesale, retail or franchise sector.
1. Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;
2. Ability to formally carry out business rather than just function as a representative office and being able to issue invoices to their 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. Control of intellectual property and human resources, as long as you work within Chinese laws;
5. For Manufacturing WFOE, no special requirements for Import / Export license for its own products;
6. Greater efficiency in operations, management and future development.
Before Foreign Investors decide to set up a WFOE in China, they should check whether the business they are going to invest in China is subject to any restriction or not under currently the Special Administrative Measures for Access of Foreign Investment (Negative List) (2021 Edition).
Needing materials of Application
1. The notice of pre-approval of enterprise name;
2. Original articles of association;
3. Qualifications of all investors (the legitimate business setting up certificate or personal identity, their subject qualifications or identity of natural persons should be provided together with the local notary notarized documents);
4. Assignment documents of legal representative andidentity documents;
5. Lease agreement;
6. Other required materials.
Application process
1. The customer provides the original notarized certificate of passport and Chinese translation (if it is a translation company, each page needs to be stamped with the official seal of the translation company, and the copy business license of the translation company with stamped with official seal);
2. Scan and send all documents above to pre-approve the company name;
3. Send the registration materials to the customer, and after the customer's signature is confirmed, send them back together with the original passport/ notarized certification;
4. After the information has been collected and materials have been received from above steps, an online application for preliminary examination to China’s registration authority (Administration for Market Regulation) at the location where the company will be established will be filed. After approval of the online application, the application documents (some will be generated by the AMR system upon the approval of the online application) will be signed by the investor’s authorized representative. Signed and stamped application documents can then be submitted to the AMR for issuance of the Business License. Issuance of the Business License marks the formal establishment of the company.
After Registration
Once the WFOE has been established, several post-registration steps need tobe completed:
1.Carve business stamps (including the company stamp, financial stamp, legal representative stamp, invoice stamp);
2. Tax registration– including as general taxpayer;
3. Register with the State Administration for Foreign Exchange (SAFE) and open bank accounts;
4.Record foreign trade operator with Commission of Commerce (CoC) (applicable if the WFOE will engage in import/export business);
5.Register with Customs (applicable if the WFOE will engage in trading business);
6.Record with SAFE for goods trading enterprise (applicable if the WFOE will engage in trading business);
7.Apply for electronic port cards for import / export (applicable if the WFOE will engage in trading business);
8.Open social security account and housing fund account.