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Procedure of Company Incorporation in China

Narendra Kumar

| Updated: Jan 22, 2018 | Category: Company Registration, Global Registration

Company Incorporation in China

In order to set up a company in China, or doing business with a company in China, it is important to first have a grasp about how the system of Company Registration in China works. The more you educate yourself about Chinese laws and business procedures, the more success you will have conducted business in the country. Understanding Company Incorporation in China is also an important consideration if you are assessing the legitimacy of a Chinese company and the business information and credentials they are providing you with.

Types of Company Incorporation in China

  1. Wholly Foreign Owned Enterprise-

WFOE refers to company incorporation in China that is solely established by foreign conglomerates, and that does not have any direct involvement of a mainland Chinese investor or a resident holder. Setting up a WFOE requires an agreed level of foreign capital to be invested and registered with the authorities for setting up.

However, there are certain entry norms to be fulfilled.

It is the most popular & attractive form of setting up a business in China which allows complete transparency & freedom to operate.

  1. Joint Venture Entities-

It is a Collaboration Agreement whereby the foreign party & the resident investors from Mainland China are part of the contract to create an organization for long-term value creation. However, in some restricted industries, such as media, operating as a Joint Venture is the only resort for foreign companies looking to get into Chinese Territory

  1. Representative Office Registration in China-

This sort of entity exists only to represent the foreign entity in mainland China & is not a legal entity on its own. However, it is not that easy & even liberal to operate as they can’t employ staff or capital in an accurate manner.

This sort of presence is not much popular in Chinese territory.

  1. State Owned Enterprise-

It is also known as a government-owned corporation. The contribution of this organization to China is comprehensive & regarded as to a boost up for the economy in the long run. They are also considered by the world’s largest companies.

They operate in Strategic sectors which are key elements for government & it’s up gradation.

  1. Private Enterprise-

The most incentivized, popular & attractive mode of business set up in mainland China is a Private Limited Company. This has, in turn, created a reform & has helped the transition of the Chinese economy from Gov. Control to a vibrant & dynamic economy.

It should be however important for it to be legally registered & get a business license to operate.

  1. Individually Owned-

It is a sole proprietorship firm owned by individuals. It can be either on the grounds of a small one person company or a sole trader wants to set up his business.

It must be a company which has a small capital base & is formed by either one or two individual in which one must be necessarily a Chinese resident.

Steps for Company Set up Or Registration in Mainland China

We will discuss the Registration of a Chinese Wholly foreign-owned enterprise in detail. It is the most popular type of entity & owned by foreign nationals. All the filings must be done in accordance with Companies Law of the People’s Republic of China.

  • Depending upon the city of company incorporation in China, the Minimum subscribed capital ranges between US$ 15000 & US$ 140,000.
  • Appointment of at least one Shareholder & Director& secondly one Chinese legal representative with the board of supervisors.
  • It must go through a complex approval process by authorities which are as follows:
  • Pre-approval of a business plan by China National Development & Reform Commission.
  • Incorporation clearance by PRC Ministry of Commerce.
  • Foreign exchange registration with China’s State Administration of Foreign Exchange.
  • Preparation of a project study on China detailed business plan& optimum utilization of resources.
  • Acquiring & execution of a lease agreement for registration of local premises as company place.
  • Pre-approval of Company name & notice of business activities from Chinese Company Registrar of the relevant state of incorporation
  • Filing of all the relevant documents with the State Registry for the incorporation on the approval of name.
  • Application for the opening of Bank Account with the required amount of Capital.
  • On successful application with the Ministry, a Certificate of Incorporation & Business License to operate the Chinese company from the State Administration of Industry & Commerce.
  • Get VAT, Sales Tax & other Tax Registration done from State Administration of Taxation for the relevant jurisdiction.
  • Filings did for the certificate for Recruitment Registration& with Social Welfare Insurance Authority.
  • On Bank Account Approval, You have to deposit 15% of Paid up capital for Capital Verification & thereby issuance of Bank Statement & Deposit Certificate.
  • People’s Bank of China needs to issue certain approvals for Foreign Exchange Controls &increased liberalization of RMB with $.

Documents Required For Submission To The State Authority

  • Standardized personal & corporate documents i.e. KYC & AML.
  • Notarized & Legal Passport Copies:
      • Legal Representative
    • Supervisor i.e. need not be Director of Chinese Company
  • Power of Attorney granting Powers to a Legal consultant to act as a representative of the company
  • Detailed business proposal for an investment plan
  • Articles of Association & Memorandum attached
  • Copy of lease agreement for office premises to be located in Chinese Territory

Taxation Structure

  • Corporate Income Tax is flat 25% on all Corporate Gains.
  • Special CIT of 15% is applicable to the entities incorporated in the following regions:
    • Guangdong, Fujian, Hainan & entities with High Technology Status.
  • It levies withholding tax of 10% of Interests, Dividend & Royalties.
  • Capital Gains are also taxed for 25% & losses can be carried forward for next 5 years.
  • Standard Value Added Tax is China is 17%
  • A late fee of5% on unpaid taxes must be charged daily if a settlement is left.

For more info about company incorporation in China contact us via email on info@enterslice.com or call us on +91-9069142028.

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Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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