Trading Company

| Shanghai | Shenzhen | Xiamen |

China Business and Trade Company

China Business and Trade Company

With the rapid development of China's economy, international trade has become increasingly frequent.

In recent years, it has been favored by many foreign companies and investors. The investment market has turned to China, and foreign capital has entered China to invest in China.

If you want to invest in China, you need to carefully plan when choosing the type of company to apply for. At present, the most common type is a commercial and trading company.

I.What are the benefits of registering a China trading company?

  • There is no doubt that China is a global economic center and a paradise for investors. Beginning with economic reforms in the 1970s, China has become the perfect springboard for companies that want to expand and invest globally. 
  • Since the beginning of 2006, the Chinese central government has formulated an opening-up policy that allows foreign investors to set up trading companies in the mainland. What are the functions and advantages of registered trading companies for investors?

II.Investment Amount-Regulations on Registered Capital Amount

In China, the “Company Law” amended in 2013 changed the amount of registered capital of mainland Chinese companies.

The amount of capital only needs to be in place within the operating period. It cancels the statement that the company’s shareholders (promoters) should be two years from the date of establishment of the company. If the capital is fully paid within, the investment company shall pay the capital within five years.

In the registration of a trading company in China, paid-in capital is no longer an item of company registration.

Although the Chinese Company Law has relaxed the amount of registered capital of a company, the actual operation still needs to be implemented and adjusted in accordance with the business project and the investment policy of the local government. 

Before investing, it is still necessary to ask the agency company with practical experience to avoid investment Difficulties and troubles in the operation and scheduling of funds.

For trading companies operating wholesale and retail, they usually register 500,000 to 1 million RMB.

III.Basic tax burden of foreign trading companies

In China, trading companies have the same tax rates and standards regardless of domestic and foreign investment. The main taxes are as follows:

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Corporate income tax

Corporate income tax 25%

The tax conditions for establishing a company are a type of tax levied on the production and operation income and other income of domestic enterprises and business units. The corporate income tax rate is 25%.

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VAT 13% & 6%

1. General taxpayers (13%) Enterprises whose annual taxable sales exceed the standards for small-scale taxpayers. Small-scale production enterprises with sound accounting can be recognized as general taxpayers.

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For individuals, non-corporate units, and companies that do not often have taxable activities, even if their annual taxable sales exceed the standards for small-scale taxpayers, they are regarded as small-scale taxpayers to pay taxes.

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The tariff rates of import duties are set at ordinary tariff rates and preferential tariff rates. Goods originating in countries or regions that do not have reciprocal tariff agreements with China are taxed at ordinary tariff rates;

Note 1: Preferential Treatment for Corporate Income Tax

From January 1, 2022, to December 31, 2024, for small and micro-profit enterprises with annual taxable income not exceeding 3 million yuan, 25% of the amount shall be deducted and included in the taxable income, and the corporate income tax shall be paid at a rate of 20% (actual tax rate of 5%).

Note 2: Preferential Treatment for Value-Added Tax

From January 1, 2023, to December 31, 2023, a reduced tax rate of 1% shall be applied for value added tax levied on taxable sales revenue for small-scale taxpayers subject to a 3% tax rate. For the value-added tax prepayment program subject to a 3% prepayment rate, a reduced prepayment rate of 1% shall be applied. In addition, value-added tax is exempted for small-scale taxpayers with monthly sales below 100,000 yuan (including the amount itself).

IV.How to set up a trading company-Documents and procedures should be prepared:

If you want to start a business in China and choose to set up a foreign trading company, you may need to prepare the following information first:

Preliminary preparation stage:

  • Choose an agent to help you register:
    Although the Chinese government has made a lot of efforts in supporting enterprises, we must understand that registering a company is not easy. From the interpretation of the company law to the preparation of the required documents, the information may dazzle you, and the process may be overwhelming. Therefore, the best option is to find a professional agency for assistance. The agency company has a wealth of practical experience in helping other investors register a Chinese company. It will know the best steps you should follow and the mistakes to avoid. In addition to helping you register a company in China, professional agency companies can also provide continuous services in subsequent employee recruitment/accounting and taxation/secretary affairs.
  • Confirm the company’s business scope:
    All projects that a Chinese company intends to operate need to be registered in accordance with the law, and the company should engage in business activities within the business scope approved by the registration authority. If the business scope involves legal or administrative legal reactor restrictions, it must be registered in accordance with the law. Approve or apply for a concession.
  • Company registered address:
    China has a vast territory, and each region has different characteristics. Commercial regulations and labor laws vary from region to region. Investors of commercial trading companies generally choose to register in China’s first-tier cities, such as Shanghai, Shenzhen, Hangzhou, and Kunshan. In addition to the convergence of industrial supply chains, related industrial and commercial and administrative resources are also the most abundant and sufficient. You can choose the traditional model to find a suitable physical office, but now more investors choose to use the business link method, which not only saves the time to find an office, but also saves the initial rental cost.
  • Chinese company name:
    The company name must be approved by the General Administration of Market Supervision and Administration. In order to avoid duplication, it is generally necessary to provide 5 to 10 or more names in advance. The company name must follow the following order:

    >>Font size + industry category + area + limited company
    >>Region + font size + industry category + limited company
  • Investor information:
    Confirm the candidates of shareholders and legal representatives and provide relevant valid certificates.

Application Process:

The procedure for establishing a foreign trading company is as follows:

  1. Name Approval
    Provide company name approval.
  2. Filing of foreign-funded enterprises
    Information filing of foreign-invested enterprises.
  3. License Application
    Apply for a business license to obtain a unified credit code.
  4. Bank Account Opening
    Open a bank account and open online banking.
  5. Tax Registration
    Enterprises conduct tax/invoice verification and apply for invoices.
  6. Foreign Exchange/Import And Export Application
    Open a capital account (investment account); Register import and export qualifications.

1.Name approval

Provide company name approval.

2.Filing of foreign-funded enterprises

Information filing of foreign-invested enterprises.

3.License application

Apply for a business license to obtain a unified credit code.

4.Bank account opening

Open a bank account and open online banking.

5.Tax registration

Enterprises conduct tax/invoice verification and apply for

6.Foreign exchange/import and export application

Open a capital account (investment account); Register
import and export qualifications.

  • In China, in addition to the unified national policy promulgated by the State Council of China, the establishment of foreign companies in the mainland will also have regional differences due to differences in local taxes/local governments. Generally, agency companies say that the so-called company registration may only be the completion of the application for the company’s business license. Investors think that as long as these documents are completed, they can officially operate. They don’t know that there are many follow-up matters for the establishment of a mainland company, such as foreign exchange registration/banking account opening/Online banking/13% value-added tax (general taxpayer) application/Import and export right application, etc. Generally speaking, it will take at least 2~3 months for a trading company to officially start import and export operations.

V.Notice-Foreign investors should pay attention to the establishment of trading companies

  • The requirements on the amount of registered capital required for foreign investors to apply for the establishment of a company in China have been relaxed, and the actual time for the capital to be available is not required. It is recommended that the amount of capital be registered above 500,000 RMB.
  • The registered address of a Chinese commercial trading company should be confirmed whether it can be used to register the company, whether it is a sublet, or whether the address has duplicate registration.
  • Note that when applying for the investor documents of a mainland trading company, there are documents that need to be certified and the validity period to be confirmed. Once they are missed or overdue, they must be re-certified.
  • A newly registered company in China does not have import and export rights. If a trading company wants to import and export products by itself, a trading company with import and export qualifications needs to apply separately, and it is recommended to apply for general taxpayer qualifications in addition to value-added tax Deduction.
  • If the products of a Chinese trading company involve special items such as food/alcohol, the trading company must apply for a franchise before it can sell.

VI.We are committed to the sustainability and efficiency of corporate development

  • With many years of practical experience in the establishment of various types of companies in mainland China, Inter Area can provide customers with not only a basic registration agency for the establishment of trading companies in mainland China but also complete consultation and application documents from the establishment process of trading companies and related issues. Production, local industrial, and commercial registration to follow-up Accounting service agent/Administrative Service.
  • Inter Area has deployed personnel to set up service bases in Shanghai, Shenzhen, Xiamen, and other places in China, in order to provide customers with a truly one-stop complete and consistent service, so that customers can rest assured to focus on local business operations.

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