Foreign Investment Enterprise
THE CONCEPT OF WFOE
WFOE stands for wholly foreign owned enterprise, which is a limited liability company wholly owned by either a foreign legal entity or a foreign natural person.
In China, only Chinese company names are officially used, while English company names are for the purpose of reference only. NOT every name will be accepted by the Company Registry. For some sectors such as education, logistics, medicine and food industries, application for a special license is needed. It is important that the wording of a company name conforms to the registered capital and business activities.
The words “international”, “investment”, or “industrial” within a company name suggest that the registered capital should be more than RMB 10 million, while the words “group” or “holding” implies a registered capital of more than RMB 30 and 50 million respectively. If the word “China” is used within the company name, pre-approved by the State Administrative Bureau of Industry and Commerce (in Beijing) is required.
SHAREHOLDER, DIRECTOR, SUPERVISOR AND LEGAL REPRESENTATIIVE
The positions of Shareholders, Directors, Supervisor representative and Legal representative should be considered and arranged before set-up of the business. 1. A shareholder could be a legal person (foreign company) or a natural person (individual). 2. A director could be acted by a foreign or Chinese person. 3. A supervisor representative should be appointed to supervise the company’s operation and management. (A foreign or Chinese person, other than the shareholder, can be appointed) 4. A legal representative is a person in charge of corporate operation, management and development, and is responsible for all legal affairs arising from the running of the business.
The WFOE can conduct business within its approved business activities described on the scope of business in the business license. Amending the business scope requires further application and approval.
REGISTERED AND PAID-UP CAPITAL
Different business sectors are subject to different requirements. In Shenzhen, the registered capital is equal to the paid-up capital. For a trading enterprise, the required registered capital is usually RMB 500,000 or above. For a manufacturing enterprise, the required registered capital required is usually RMB 1 million or above. For the service sector, such as consultancy, technology, market research and development, the registered capital is usually required at RMB100, 000 or above.
The full amount of registered capital can be paid:
At one time, within 6 months after the date of the issuance of the Company’s business license, or
15% of the registered capital to be paid within 3 months after the date of the issuance of the Company’s business license, and the remainder amount to be paid for within two years
The terms of payment is determined by the volume of registered capital. If the registered capital is paid in one time, the fee of paid-up capital verification can be reduced.
TAXATION IN CHINA
Investors are strongly advised to better understand tax departments, tax categories, tax rate and official invoices in China. China has two functional tax departments: the National tax department (NTD) and Local tax department (LTD). In every city in China, there are national and local departments. Anyone can contact these departments for information.
Taxpayer should know which tax department to go to and the tax rate before filing their tax return. Here are some guidelines: Value Added Tax should be paid to NTD at rate of 0-17% monthly, Business Tax to LTD at rate of 3-20% monthly, Individual Income Tax to LTD at rate of 5-45% monthly, Enterprise Income Tax (EIT) is 25% to NTD is on a quarterly basis and annual renewal.
TAX CATERGORIES & RATE
The China tax could be classified as follows:
Value Added Tax (VAT) at rate of 0-17%, Business Tax at rate of 3-20%,
Enterprise Income Tax at rate of 25%, Individual Income Tax at rate of 5-45%,
Consumption Tax by customs at rate of 3-5%,
Resource Tax, City Maintenance and Construction Tax at rate of 1%,
House Property Tax, Stamp Duty at rate of 0.5-1%.
FILING OF TAX RETURN
Tax Return should be done monthly, quarterly and annually.
Amount of Tax is collected on the basis of the volume of invoices.
SERVICES BY UWS
UWS provides a wide range of company formation and business services to our clients.
We offer the following services…
Wide range of company formation in China and Hong Kong
Accounting & Auditing services
Tax Return services
Annual Renewal / Return Services
“Z” Visa Application
Trade services and many others…