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China Market Entry Services
How do I form a company or representative
office?
We will examine your proposed business activities in China and
advise you of the options available to you under Chinese investment
regulations and WTO market access commitments made by China. Other
than financial institutions, a foreign company cannot set up a branch
office in China. We can also advise on the tax-effectiveness of your
shareholding structure and your funding arrangements.
How do I form the entity that I need?
We can assist you with the establishment of a representative office
or a wholly foreign owned enterprise ("WFOE") in China. The documentation
may differ depending on local requirements. Not all situations will
qualify for the establishment of a wholly foreign owned enterprise,
but this may change gradually under China's commitments to join the
WTO. After a business license is issued for the representative office
or wholly foreign owned enterprise, we can assist you to register
with the local tax bureaus and confirm its taxation basis or tax preferences.
We can also help you to register domain names in China.
What is a WFOE?
For some foreign investors, the prospect of having to partner
with a Chinese investor presents too great a hurdle to investing in
a China enterprise. Others hesitate to share technology or business
strategies. Still others simply lack the necessary contacts.
The Wholly Owned Enterprise (WFOE) Law of the People's Republic of
China was adopted at the Fourth Session of the Sixth National People's
Congress, effective April 12, 1986. Rules regulating the WFOE were
not implemented until December 12, 1990. The WFOE rules require businesses
to satisfy certain requirements before being allowed to operate a
100% foreign owned enterprise in China. These original regulations
required that the WFOE:
- Be a manufacturing business
- Be in a business area conducive to the development of China's
national economy
- Be capable of gaining remarkable economic results
- Meet at least one of the following conditions:
- Use advanced technology and equipment, engage in the development
of new products, conserve energy and raw materials, and cause
the upgrading of products and the replacement of formerly
imported products; or
- Export more than 50% of annual output value of all products.
On 12th April 2001, in order to eliminate legal barriers that would
impede China's joining the WTO, China announced significant changes
to the WFOE regulations, including the repeal of the restrictions
to WFOEs described above. As a result, the WFOE has become even more
popular. Additional changes allowing the establishment of WFOEs for
sales or trading companies located in special economic zones, such
as certain trade zones around Shanghai, have further enhanced the
standing of the WFOE among foreign investors.
The WFOE limited liability company is a separate legal person and
offers limited liability protection to the investor. Requirements
include:
- Only foreign owner(s). Owner can be a foreign company or a foreign individual person
- Only one director, unless the company forms a Board of Directors,
for which three to thirteen directors are required, the sole director or Chairman of Board of Directors is the Legal Representative, none of whom need be Chinese
citizens or residents
- A general manager/president, who is not required to be a Chinese
citizen or resident
- A minimum capitalization of approximately US$ 200,000 (this
requirement may vary depending upon local regulations).
The process of applying for approval of a WFOE can be complicated.
Preparing the WFOE application, leasing space in one of the free trade
zones and laying other groundwork can take several months. Once the
WFOE application and the Articles of Association of the WFOE are filed
with the appropriate Chinese authorities, the authorities will respond
to the WFOE application with an approval, denial or a request for
additional information.
What are the employer and employee issues?
A foreign assignee in China is required to apply for a Z visa
and a residence permit. If the assignee is attached to a representative
office, a resident representative card is also required. We can assist
your assignees to obtain these documents. Since the top rates of Chinese
income taxes are rather high, planning an assignee's remuneration
package is very important. Representative offices are required to
hire their local staff through a government agency. We can arrange
for the recruitment of local staff and payroll administration.
When can my foreign investment enterprise
apply to set up a branch?
Your wholly foreign owned enterprise or joint venture can normally
apply to set up a branch in another locality in China after it has
fully paid up its registered capital. The prerequisites for a branch
may be different in different locations. Under current policies, foreign
investment enterprises in certain industries or locations will not
be approved to establish branches outside of its location. We can
assist you in assessing the viability of a branch and applying for
the registration of a branch.
Can GTA Worldwide help me set up a joint
venture?
Yes. Historically, the establishment of a Joint Venture has been
the most common form of foreign investment in China. We are able to
assist our clients in finding their local joint venture partners through
our network of contacts.
What other China business services does
GTA Worldwide offer?
Bespoke services relating to the identification of suitable tax
advisers, lawyers, local partners, premises, factories, management,
staff and expatriate housing.
Professional corporate administration. We have the capacity to deliver
a turn-key back office function for an operation in China. This service
encompasses communication services, accounting and handling a broad
range of commercial work including documentary credit services and
managing an import or export operation.
So, if you are an executive tasked with setting up a WFOE, representative
office, joint venture or otherwise interested in China market entry or
our China Business Services, you should contact us by clicking on the
button below:
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