Taipei
TEL:+886-2-2557-5607

Taichung
TEL:+886-4-2320-2793

Shanghai
TEL:+86 21-6090-4391

Shenzhen
TEL:+86 755-83176807

interarea@interareapsp.com

| Shanghai Trading company | Shenzhen Trading company | Xiamen Trading company |

China Business and Trade Company

The most common form of foreign-invested enterprises in China is the commercial and trading company. With the rapid development of China's economy and the increasing frequency of international trade, a large number of foreign companies have been drawn to enter the Chinese market and shift their investment focus accordingly. Investors planning to establish a company in China should carefully consider the appropriate company structure to ensure compliance with local regulations and meet operational needs.

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

Since 2006, China has further expanded its policy of opening up to the world, allowing foreign investors to establish commercial and trading companies within the mainland. These companies have become a major channel for foreign capital to enter the Chinese market, enabling efficient operations in import and export, wholesale, and retail activities.
What are the functions and advantages of registering and establishing a commercial trading company for investors?

Trade-type wholly foreign-owned enterprises can engage in general trade, wholesale, retail, or franchise operations.
Can carry out domestic purchase and export sales, outsourcing and domestic sales of goods in China, as well as import and export related businesses.
A 13% value-added tax special invoice can be issued, and mutual certification can be deducted after obtaining the input special invoice.
On the premise of not exceeding the main business items, after application, you can also issue a 6% labor fee invoice.
Subject to the requirements of relevant documents, the exported goods can also apply for export tax rebate.

When establishing a commercial trading company in China, although paid-in capital is no longer listed as a business registration item, under the newly amended Company Law (2024), shareholders are required to fully pay the registered capital within five years from the date of the company’s establishment.
For trading companies in the wholesale and retail sectors, the typical registered capital range in practice is between RMB 500,000 to 1,000,000. The exact amount should be adjusted based on the scale of operations and local government investment policies.
It is recommended to consult a professional service provider with relevant experience before investing, to avoid future restrictions in capital allocation.

II.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. Registering a commercial trading company in China requires familiarity with the Company Law and the preparation of various legal documents. The process is complex and involves numerous administrative procedures, which can be confusing for foreign investors.
Choosing an experienced professional service provider is the best way to improve efficiency and ensure compliance. InterArea has years of practical experience in company formation in China and can guide investors through the correct procedures while helping them avoid common pitfalls.
In addition to company registration, InterArea also offers complete support services such as ongoing accounting, tax filing, and corporate secretarial services, assisting businesses in steadily expanding into the Chinese market.
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:
When establishing a commercial trading company in China, the choice of registered address is extremely important. Since commercial regulations and social insurance contribution rates vary across different regions in China, investors should select a location that suits their industry needs.
First-tier cities such as Shanghai, Shenzhen, Hangzhou, Kunshan, and Suzhou are often preferred by foreign-invested companies due to their comprehensive industrial supply chains and abundant administrative resources.
Regarding office arrangements, companies may choose a physical office to meet traditional business needs or opt for a virtual office registration (business address hosting) to reduce initial rental costs and save time on setting up workspace.
Chinese company name:
The company name must be approved by the State Administration for Market Regulation (SAMR). To avoid duplication with existing businesses, it is common for enterprises to submit 5 to 10 or more name options in advance for review. The composition of the company name must comply with the official format, with common structures such as:
“Brand Name + Industry Type + Region + Co., Ltd.” or
“Region + Brand Name + Industry + Co., Ltd.”
Before submitting a name application, it is advisable to prepare alternative brand names and industry descriptors in advance to increase the approval rate.
Investor information:
Confirm the candidates of shareholders and legal representatives and provide relevant valid certificates. For companies with a small number of shareholders, it is not mandatory to establish a board of directors. Instead, a single director (executive director) can be appointed to handle business operations and management. Additionally, according to the new 2024 Company Law of China, if all shareholders unanimously agree, a supervisor is not required either, allowing for further simplification of the company structure.

Application Process:

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

After establishing a commercial trading company in China, a series of statutory procedures must still be completed before the company can legally operate and engage in import and export activities. These include, but are not limited to: foreign exchange registration, opening a bank account, activating online banking, applying for 13% VAT (general taxpayer status), and obtaining import-export rights. The specific procedures are as follows:

1.Name approval

Submit company name for pre-approval to ensure it’s unique and not already registered.

2.Filing of foreign-funded enterprises

Foreign companies must file investment info with MOFCOM before further setup.

3.License application

Prepare documents and apply for a business license to get a Unified Social Credit Code.

4.Bank account opening

Open RMB and capital accounts, register for foreign exchange, and enable online banking.

5.Tax registration

Complete tax ID verification, apply for invoices, and register as VAT taxpayer if needed.

6.Foreign exchange/import and export application

Based on practical experience, it typically takes around 1.5 to 2 months for a trading company to complete registration and become fully operational. The exact timeline may vary depending on local administrative processes and specific business needs.
Therefore, before establishing a company, investors should have a clear understanding of the overall schedule and key procedures. It is advisable to engage an experienced professional consulting firm to assist with the setup, ensuring smooth progress and timely commencement of operations.

III.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.
If engaging in export trade, it is necessary to complete customs import and export registration and obtain the Foreign Trade Operator Registration Certificate. Export enterprises that meet the criteria can apply for tax refund eligibility.

IV.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.

China Business and Trade Company:
Frequently Asked Questions Q&A

Q1. Setting Up a Foreign Trading Company in China: Is the Registered Capital Required to Be Fully Paid?

According to the 2024 revised Company Law, shareholders of limited liability companies are required to fully pay the subscribed registered capital within five years from the date of the company’s establishment. For existing companies in mainland China, any overdue unpaid capital must be gradually adjusted and paid. If there are significant irregularities, the mainland Chinese authorities have the right to demand immediate payment.

Q2. Should overseas investments be made under an individual or a company name? What are the differences?

Both options have advantages and disadvantages:
• Individual Investment: Investing under an individual’s name has the advantages of a simpler process, no need for certification documents, faster setup, and no maintenance costs. However, tax planning for future equity changes and profit distribution is more difficult, and the individual bears all risks personally.
• Corporate Entity Investment: Investing through a corporate entity requires certification procedures, which take more time and cost more. However, it offers tax flexibility and helps with risk management and asset segregation.

Q3.What tax incentives are available for registered trading companies in China?

In China, both domestic and foreign-invested trading companies are subject to a corporate income tax rate of 25%. However, current policies provide significant tax reductions for qualified small and low-profit enterprises, with the effective tax rate lowered to as low as approximately 5%. This preferential treatment applies to companies with an annual taxable income not exceeding RMB 3 million. For startups or small to medium-sized foreign-invested companies, this is an important factor in reducing operating costs.

Q4. Does the legal representative need to be physically present during company registration?

The required documents and procedures may vary depending on the specific policies and requirements of different regions. For example, in cities like Shenzhen or Shanghai, the legal representative usually needs to be physically present when applying for the business license or opening a bank account (depending on the bank’s requirements), or alternatively, the original identification documents must be provided to authorize someone else to handle the process.

China Business and Trade Company:Frequently Asked Questions Q&A

Q1. Setting Up a Foreign Trading Company in China: Is the Registered Capital Required to Be Fully Paid?

A: According to the 2024 revised Company Law, shareholders of limited liability companies are required to fully pay the subscribed registered capital within five years from the date of the company’s establishment. For existing companies in mainland China, any overdue unpaid capital must be gradually adjusted and paid. If there are significant irregularities, the mainland Chinese authorities have the right to demand immediate payment.

Q2. Should overseas investments be made under an individual or a company name? What are the differences?

A:Both options have advantages and disadvantages:
• Individual Investment: Investing under an individual’s name has the advantages of a simpler process, no need for certification documents, faster setup, and no maintenance costs. However, tax planning for future equity changes and profit distribution is more difficult, and the individual bears all risks personally.
• Corporate Entity Investment: Investing through a corporate entity requires certification procedures, which take more time and cost more. However, it offers tax flexibility and helps with risk management and asset segregation.

Q3. What tax incentives are available for registered trading companies in China?

A: In China, both domestic and foreign-invested trading companies are subject to a corporate income tax rate of 25%. However, current policies provide significant tax reductions for qualified small and low-profit enterprises, with the effective tax rate lowered to as low as approximately 5%. This preferential treatment applies to companies with an annual taxable income not exceeding RMB 3 million. For startups or small to medium-sized foreign-invested companies, this is an important factor in reducing operating costs.

Q4. Does the legal representative need to be physically present during company registration?

A: The required documents and procedures may vary depending on the specific policies and requirements of different regions. For example, in cities like Shenzhen or Shanghai, the legal representative usually needs to be physically present when applying for the business license or opening a bank account (depending on the bank’s requirements), or alternatively, the original identification documents must be provided to authorize someone else to handle the process.

Content

| Shanghai Trading company | Shenzhen Trading company | Xiamen Trading company |

China Business and Trade Company

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