China is a country on a mission. The Chinese government has put structures for supporting businesses to ensure they succeed, and the strategy is working. By mid-2021, the GDP of China had reached $16.66 trillion, which is only second to that of the United States. If your company is not performing well back home, you have a clear plan for expanding offshore or have fully conquered the local market; China is the place to go. To enter and take advantage of the Chinese market, here are the main requirements for a WFOE set up in China.
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Why China?
When investors think of setting up companies in China, what comes into their minds is the large market. With more than 1.4 billion people, you are sure to have a very large market for your products. However, this is not all. China has signed bilateral trade agreements with most countries in Asia-Pacific region, making a total of 2.8 billion people. This large population might be all that you need to triple your company’s profits in no time. Other benefits of expanding to China are:
- Favorable government policies.
- Multiple growth opportunities for businesses.
- Facilitative environment for business growth
- Social and political stability.
- Highly skilled talents.
- A highly developed structure.
- Low taxes.
WFOE Setup in China: What are the Requirements?
WFOE, abbreviation for wholly foreign-owned enterprise, is the most common type of company structure in China. It is preferred by foreigners for offering them the autonomy for running their companies after incorporation. WFOEs in China can be divided into three main categories: consulting WFOEs, trading WFOEs, and manufacturing WFOEs.
Once you select the preferred WFOE, here are the main requirements for registering the company:
1) Select the preferred business name: You need to make sure the name is unique and does not conflict with other registered companies. Working with an expert can simplify the process of identifying a name and getting it reserved.
2) Prepare all the documents required for company registration: This is perhaps the most challenging stage because the documents required are many. These documents include the estimated amount of investment, statement of business purpose, operating structure, lease of office, business plan, and particulars of company directors, shareholders, and legal representative.
3) Apply For business license: Once you have prepared all the business documents, present them to the local Ministry of Commerce (MOFCOM). They should also be presented to the Administration for Industry and Commerce (AIC) office. The license you get will be required in the subsequent stages.
4) Register your company for taxes: Immediately the business license is issued, you are required to use it for tax registration with the tax bureaus. Also, apply for the company chop from the Public Security Bureau (PSB).
5) Open a bank account: Now, you can go ahead and open a bank account for the company with the preferred financial institution. At this point, it is important to be extra careful and only work with the banks that can provide you with funds when in need.
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6) Get permits from other departments where necessary: In some cases, a business and tax license will not be enough to get you started. In addition, you might need permits from other offices, such as the State Administration and Foreign Exchange and the Technology Supervision Bureau.
This process can be pretty complex, right? Many investors who try to do it on their own end up getting stuck in the midway or raising the risk of applications getting declined. This is why you need to work with an agency of experts. These professionals have been in the industry for years, and you can count on them to simplify and cut the cost for company setup in China. Even after registration, you can count on them for due diligence, payroll management, accounting, and filing tax returns.