Company incorporation in China

China, with its vast consumer market and strong manufacturing base, remains one of the top destinations for foreign businesses seeking to expand in Asia. Despite the complexities involved, incorporating a business in China offers significant growth opportunities in industries like technology, manufacturing, and e-commerce.

Most Common Business Forms for Foreign Companies

The most common business structure for foreign companies in China is the Wholly Foreign-Owned Enterprise (WFOE).

• WFOE is a limited liability company that allows 100% foreign ownership, giving the parent company full control of operations.
• It is the most flexible and popular structure for foreign companies, particularly in the manufacturing, service, and e-commerce sectors.
• Requires at least one shareholder and one director, both of whom can be foreign nationals. However, a local legal representative is required.

Another option is the Joint Venture (JV)</strong), where foreign companies partner with Chinese firms. Joint ventures are common in industries like automotive and real estate but are less flexible than WFOEs.

Setting Up a Company in China

Incorporating a Wholly Foreign-Owned Enterprise (WFOE) in China involves several steps:

1. Choosing a company name and ensuring it complies with local regulations. The name must be in Chinese and be unique.
2. Determining the company’s business scope, which defines the activities the company can legally undertake in China.
3. Applying for a business license from the local Administration for Industry and Commerce (AIC) or relevant local authority.
4. Registering the company with the tax authorities and obtaining a tax registration certificate.
5. Opening a Chinese bank account and depositing the initial registered capital (the amount required can vary based on the business scope and location).

Foreign nationals can serve as directors, but a Chinese national must act as the company’s legal representative. The legal representative has significant authority and is liable for the company’s actions under Chinese law.

Taxation and Withholding Taxes

Corporations in China are subject to national and local taxes. The corporate income tax rate for foreign companies is 25%, though some preferential rates may apply to specific industries or regions (such as high-tech zones or economic development areas).

Regarding dividends:

• Dividends paid to foreign shareholders are subject to a 10% withholding tax, which can be reduced or eliminated under China’s double taxation treaties with other countries.
• China has numerous tax treaties with countries to help reduce the tax burden on foreign investors, making it easier to repatriate profits.

Service Providers for Company Incorporation

• HZGK
• China Legal
• ESCF China
• Dezan Shira & Associates
• CorpSec

These service providers offer support with company formation, legal compliance, and tax registration in China, ensuring that foreign entrepreneurs navigate the incorporation process successfully.