Onshore Company

Introduction Of

Company Establishment In China

The primary factor for foreign investment to enter the Chinese market is related to its growing middle-class consumer population. The size of the Chinese middle class is 300 million people, far more than any other Asian country: It is estimated that by  2030, 70% of the Chinese population will be middle class. In order to attract skilled, high-tech, advanced services and excellent talents, the Chinese government is actively expanding the potential for foreign investment. For example, the Foreign Investment Law, effective from 2020, provides foreign investment enterprises (FlEs) with greater flexibility to set up companies.

中國公司設立簡介

I.China Company Registration Advantages

  • In order to comply with the new trend of global economic and trade development, China has taken the initiative to open up major measures and strive to cultivate an international and legalized business environment. Its trade is becoming more frequent. Investors who choose to register trade/service companies in China are increasing day by day. The business has the following advantages:

II.What are the functions of registering a company in China?

  • Registered as a wholly foreign-owned enterprise, this independent legal entity will be able to:

>>Directly hire local employees to ensure that they pay social insurance and housing funds.

>>Independently decide and supervise the strategy in China without a Chinese partner.

>>Issuing deductible value-added tax invoices and collecting RMB/foreign currency payments.

>>After obtaining the local business license, you can legally conduct business and operations throughout China.

>>Obtain local subsidies and funds from government departments and obtain RMB loans or financing from Chinese and foreign banks.

>>Can import/export independently, export and apply for export tax rebate.

>>It can be used as a responsible unit in China for various businesses, such as imported cosmetics/medical equipment/food...etc.

III.Which city in China should we choose to register the company?

  • If you want to enter the Chinese market and register a company, it is important to understand that different cities and regions are suitable for different types of industries. For example, Shanghai is famous for investment in finance, automobiles, chemicals, and logistics, while Shenzhen is developing into high-tech industries such as smart phones, IT equipment, home appliances, robots, and drones.
  • Other factors to consider when finding a suitable location may be government regulations (especially in terms of environmental impact), infrastructure and trade routes, and customer and distributor bases.
  • Generally, coastal provinces, large cities such as Shanghai, Suzhou, Guangzhou, Beijing, Shenzhen, and Hangzhou, and first-tier cities are more friendly and familiar with foreign-invested companies. The following is a basic introduction to the major cities for foreign investment:
  1. Shanghai:
    Shanghai is the most populous city in the Mainland, and it is also a center of international finance and trade, innovation and technology, transportation and logistics. Many companies across the country will give priority to setting up companies in Shanghai. Shanghai is turning to a post-industrial economy and is striving to develop six industries: electronic information/
    automotive/petrochemical and fine chemicals/steel
    /biomedical industries. The top three industries are financial services, retail, wholesale and real estate. Surrounded by Zhejiang and Jiangsu provinces, Shanghai has close ties with Suzhou Industrial Park and Changshu Economic and Technological Development Zone, where domestic and foreign manufacturers and traders have established factories and warehouses.
  2. Shenzhen:
    Shenzhen has a strong development in trade, innovative technology, financial services, modern logistics and cross-border e-commerce. Many Chinese high-tech start-ups that have grown up in Shenzhen have rapidly developed into multinational automobiles, such as Tencent and Huawei. Therefore, many technology companies choose to register companies in Shenzhen.
  3. Suzhou/Kunshan:
    Many electronics-related industries will give priority to the establishment of companies in Kunshan. It is China’s first county-level city with an industrial output value exceeding one trillion yuan. It is currently vigorously developing emerging industries such as artificial intelligence, intelligent manufacturing, aerospace, and new materials. It is also a gathering place for manufacturers in the electronics/semiconductor industry, and the supply chain of related industries is complete.

1. Shanghai:

  • Shanghai is the most populous city in the Mainland, and it is also a center of international finance and trade, innovation and technology, transportation and logistics. Many companies across the country will give priority to setting up companies in Shanghai. Shanghai is turning to a post-industrial economy and is striving to develop six industries: electronic information/automotive/petrochemical and fine chemicals/steel/biomedical industries.
    The top three industries are financial services, retail, wholesale and real estate. Surrounded by Zhejiang and Jiangsu provinces, Shanghai has close ties with Suzhou Industrial Park and Changshu Economic and Technological Development Zone, where domestic and foreign manufacturers and traders have established factories and warehouses.

2. Shenzhen:

  • Shenzhen has a strong development in trade, innovative technology, financial services, modern logistics and cross-border e-commerce. Many Chinese high-tech start-ups that have grown up in Shenzhen have rapidly developed into multinational automobiles, such as Tencent and Huawei. Therefore, many technology companies choose to register companies in Shenzhen.

3.Suzhou/Kunshan:

  • Many electronics-related industries will give priority to the establishment of companies in Kunshan. It is China’s first county-level city with an industrial output value exceeding one trillion yuan. It is currently vigorously developing emerging industries such as artificial intelligence, intelligent manufacturing, aerospace, and new materials. It is also a gathering place for manufacturers in the electronics/semiconductor industry, and the supply chain of related industries is complete.

IV.Choices for foreign investors to set up companies in China

Foreign investors registering companies in China can be divided into two types according to their capital contribution methods:

  1. Wholly Foreign Owned Enterprise (WFOE)

    For business owners who want to do business in China, the top priority is the Wholly Foreign-Owned Enterprise (WFOE). According to Chinese law, WFOE is a limited liability company 100% owned by foreigners or operated by foreign companies. Since investors can hold 100% shares, this means that they can better control their operations, profit targets and income. As a limited liability company, this also means that it is an independent legal entity and limits your liability to the capital invested. This is the most advantageous choice for overseas companies aiming to enter the Chinese market. Advantages of WFOE:

    >>Allow companies to engage in all activities registered in China.

    >>The company’s decision can be made completely.

    >>When expanding the business to China, you can register your own trademark as a local independent legal person.

    >>You have full autonomy to hire employees.

  2. Joint Ventures
    Also known as a Sino-foreign joint venture, a joint venture is another type of enterprise that must be a joint venture with a Chinese partner and a company must be registered. Except for items that are restricted by China’s national policies, and there may be specific requirements for equity, the equity of the general business parties can be negotiated by each other. This means that unlike wholly foreign-owned enterprises, after all, partners will have certain control over the company’s daily operations. The main advantage of establishing a joint venture is that it can use the partnership’s expertise, distribution network and sales channels to quickly enter the Chinese market.

    Although these benefits are amazing, it is important to note that with limited control, you are only entrusting the investment to another person. For many investors, this is too much risk. This is why most investors still choose wholly foreign-owned enterprises as their first choice.

V.Type Of Registered Company In China

  • TRADING COMPANY
    It can carry out other related supporting business such as wholesale, retail, import and export of goods in China or other regions. In addition, it is necessary to operate the franchise qualification industry (such as alcohol, food, cosmetics, medical equipment, etc.). Apply for a license. To register a company in China, such as Shanghai, Suzhou, Hangzhou, and Shenzhen, you can find a professional agency company to handle everything.
  • SERVICE-TYPE COMPANY
    The establishment of investment company business in mainland China is mainly based on service nature, such as setting up mainland consulting, software APP development, marketing, agency, catering management, etc., and operating the franchise qualification industry (such as restaurants, travel agencies). …etc.), you need to apply for a license.
  • SOLE PROPRIETORSHIP FACTORY
    The enterprise must be conducive to the development of China’s national economy and adopt advanced technology and equipment, or all its products are exported or exported.
  • REPRESENTATIVE OFFICE
    Set up a representative office in the mainland. Investors can conduct market research and development in mainland China, but they cannot have any revenue activities in China. According to the amount of mainland capital, there is no need for capital.
  • CHINA BRANCH COMPANY
    Investors who set up companies in mainland China, and additional branches in other locations in the China Free Trade Zone, their accounts need to be merged into mainland subsidiaries.

VI.Comparison form of China company set up type

 NO.

Company type

Foreign trade

Foreign factory

Service type company

Office

Small-private-business

(HK、TW、MO)

1

Minimum capital

RMB 500,000

RMB 500,000

RMB 100,000

2

Personnel regulations

1 Director

1 Supervisor

(Or set up a board of directors)

1 Director

1 Supervisor

(Or set up a board of directors)

1 Director

1 Supervisor

(Or set up a board of directors)

Chief representative

person in charge

3

Certification before registration

a.registration certificate

a.registration certificate

a.registration certificate

a.registration certificate

b.Register of directors

b.Register of directors

b.Register of directors

b.Register of directors

c.Register of shareholders

c.Register of shareholders

c.Register of shareholders

c.Register of shareholders

d.Bank reference
e.Authorization letter of signatory

4

VAT

13%

13%

3% 

3%

5

Corporate income tax

25%

25%

25%

25%
(Revenue converted at cost)

6

Personal Income Tax

5%-45%

5%-45%

5%-45%

5%-45%

5%-45%

7

Earnings distribution withholding tax

10%

10%

10%

8

Import and export qualifications

X

X

9

Qualifications of shareholders or responsible persons

100% foreign investment

100% foreign investment

100% foreign investment

100% foreign investment

Hong Kong, Macao and Taiwan self-employed

10

Social security

11

Domestic reinvestment

X

X

X

VII.The establishment process of China company registration

VIII.Documents to be prepared for the registration of a China company

  1. The registration information of the investor company that establishes the mainland company must be certified by the embassy abroad.
  2. Register the establishment name of the mainland company.
  3. The registered address of the mainland company (a valid lease contract is required).
  4. The minimum provision for registration of a mainland company: one legal representative (person in charge of the company) and one supervisor.
  5. The amount of registered capital for the establishment of a mainland company.
  6. Establish a mainland company to establish business scope and operating period.
  7. Bank credit certificate.

IX.Inter Area provide China company registration related services

Company registration

Rich experience to provide correct and complete company registration suggestions, complete in the fastest and most convenient way.

Company registered
address assistance

Consolidate local business and administrative consulting, and find an office or registered address that meets the needs of customers.

Value-added tax and import and export rights

Apply for the qualification of deductible value-added tax invoices and complete import and export qualification records.

中國公司登記

Agency bookkeeping and tax services

Subsequent to provide agency bookkeeping and basic tax counseling consultation, saving local accounting expenses.

Local business
secretarial services

Local administrative secretary assistance, such as document collection and forwarding/ banking affairs agency/ phone agency...etc.

Various administrative changes

Various company changes such as change of person in charge/change of equity/increased business scope/capital increase.

X.Strengthen the global layout of high degree of flexibility and diversity

  • Inter Area Integrating a complete business service platform for customers, only through the seamless connection of information and information, we can continue to become a stable, safe and reliable service provider. Of course, these environmental conditions are very competitive, but we believe that only a person or company that is agile and transforms quickly can survive. There fore, strengthening the ability to improve the integration of the service chain is our top priority. We are working hard to strengthen investment rules and disciplines and will also improve transparency, and provide investors with unlimited possibilities for the future and huge growth potential. These changes will help Multinational corporate customers build a more diversified and more flexible supply chain, and local resources will be able to deepen their effectiveness and be widely used.

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