Doing business in China

How quickly can I set up a business?

It depends on what type of entity you choose to set up in China.

Take WFOE (Wholly Foreign-Owned Enterprise), for example. Normally it takes 1-5 working days to obtain the company basic certificates after the registration materials submitted:

• Ministry of Commerce
• Administration for Market Regulation (Former: Administration of Industry and Commerce)

With the gradual development of the internet service technology of the Chinese government, the registration processing time has been greatly shortened. With complete documents, the application can be approved within one day.

But the preparation of the registration material will usually take 1-1.5 month, including:
• Certification of Shareholder
• Passport of new company’s key positions
• 3 or more company name choices
• Business scope
• Office address
• Registered capital

What is the minimum investment needed?

Like domestic enterprises, there is no minimum registered capital requirement in China.

But for some special business or special naming requirements, such as adding “China” or “XX Province” in the company name, it has a special capital requirement.

How can I raise finance?

In accordance with the law, enterprises with foreign investment may:

• Issue stocks and corporate bonds or other financing instruments to the public.
• Obtain loans from financial institutions or other means of financing within or outside China.
• Borrow foreign debts in accordance with the relevant provisions of the state.

What are the legal requirements for setting up my business?

Foreign investment into China can be done through various types of entities：

• Representative Office (RO)
• Wholly Foreign-Owned Enterprise (WFOE)
• Equity Joint Venture (EJV)
• Cooperative Joint Venture (CJV)

The most common entity is the WFOE.

What structure should I consider?

If you just need a contact office or service supporting function to start your business in China, representative offices are a low-cost and easy way to go. But the business activities are very limited: you cannot deliver any services or products. Most business owners do not tend to choose this.

A joint venture is a partnership between a foreign business owner and a Chinese citizen. Success requires mutual trust between the foreign business owner and the Chinese partner.

The most common type of entity is a wholly foreign-owned enterprise (WFOE). The foreign investor has full control of the business.

No matter what kind of business entity you choose, make sure that the industry and business activities you invest in are within the scope of government approval for foreign capitals.

What advice can you give me in regards to payroll and taxation requirements?

Locations:

It all depends on your China market plan; there will be some differences in labour cost and market situation.

Transport convenience:

a) Beijing/Shanghai and other cities in south-east of China, owning well-developed transportation networks.
b) Shanghai, Ningbo, Guangzhou, Tianjin, Qingdao and other cities have ports that are great locations for imports and exports business.

Preferential tax policies:

Hainan free-trade zone, the local government promises preferential tax policies for local enterprises, such as lower tax rate than other areas.

Payroll and HR requirements：

Before the company can hire an employee, it should finish the social security registration. The salary is usually paid monthly. Employees’ IIT and personal insurance should be withheld by the employer every month.

The company social insurance is declared once per month including：

• Social insurance: medical, pension, unemployment, injury, and maternity
• Housing fund

Tax reporting:

You should do the monthly filing after you resisted your company in the Tax bureau.

Main taxes in China:

VAT: VAT taxpayer can be classified as a small-scale taxpayer or a general taxpayer. Small taxpayer incurs a 3% VAT (services or goods) while general taxpayer incurs taxes at different rates depending on the industry, 6%, 9%, and 13%.

CIT: The CIT rate is set at 25% unless other qualifications are obtained.

IIT: IIT is imposed on income from wages and salaries at progressive rates ranging from 3% to 45%.

Annual report:

Joint Annual Inspection Report for Foreign-funded Enterprise and Annual report to National enterprise credit information publicity system.

Is there anything else that I should know?

List of government departments you should go to and what you can get from them:

• Get your License: Administration for Market regulation (Former: Administration of Industry and Commerce)
• Get the permit to set up a foreign investment company: Ministry of Commerce
• Official seal: Public security department
• Tax filling and Invoice application: Tax bureau
• Social insurance registration: Ministry of Human Resources and Social Security
• Housing found registration: Housing fund management centre.
• Foreign exchange registration：Administration of Foreign Exchange（Done in the bank when opening a bank account）

A working permit is required for any foreigner who works in China.