WFOE is a company with 100% foreign investment. This type of Chinese company will suit you if you plan to carry out activities related to trade, consulting, logistics or production in China. There are different types of WFOE, but they all have a number of advantages compared to other types of Chinese organizations:
- the ability to independently export-import
- VAT refunds
- formal employment
What is included in the package of services?
- preparation of a package of necessary documents
- company registration
- post-registration procedures
- bank account opening
- obtaining the right to a refund of VAT
- work permit for the organization director
- registration of a residence permit in China for the director
What are the reasons to register WFOE in China?
At some point, doing business with China reaches a scale that requires direct presence of your business in China.
Registration of the company will allow you to legally engage in commercial activities in China, obtain the right to refund VAT, obtain a residence permit for the director and foreign employees of the company.
There are 3 types of Chinese companies with 100% foreign investment:
A. Production (with the right production in China)
B. Consulting (with the right to provide services in China)
B. Trading (with the right of wholesale and retail trade, export-import)
How to register Chinese WFOE?
1. Prepare a package of necessary documents
2. Select the name of the future organization
3. To approve the name in the Chamber of Commerce and Industry (CCI)
4. Obtain permission to register with the Committee on Commerce
5. Register a company in the CCI *
6. Making a seal
7. Open a bank account
* Reform of the company registration system in China “3 certificates in 1” from 1.10.2015. has canceled the need to register with the tax, commerce and quality control authorities. You can find out more about the reform and its implications for business here.
Term of registration WFOE: 3-4 months depending on the species.
However, company is considered to be established from the moment of obtaining a certificate of the right to conduct economic activity, that is approximately after 1.5-2 months.
What kind of taxes are imposed on the Chinese WFOE?
1. Income tax: the general rate of 25%
2. Personal income tax: the rate varies from 5-45%, with the following incomes taxed:
Income less than 3,500 yuan per month – for residents (citizens of China);
Income less than 4,800 yuan a month – for non-residents
3. When hiring Chinese employees-deductions: 44-62% of the official salary
4. For companies selling goods on the territory of China – VAT: a total rate of 17%
5. Companies rendering services in China transferring rights to intellectual property objects are obliged to pay business tax: 3-5% depending on the field of activity
6. Other taxes depending on the city and the province (tax on roads, etc.)