FAQ – WOFE registration in China
Definition of WFOE
Wholly foreign owned enterprise – is a common investment vehicle for foreign parties (either individuals or corporate entities) to establish a foreign-owned limited liability company in mainland China. The unique feature of WFOE is that the involvement of a mainland Chinese investor is not required, as oppose to a joint venture establishment.
Why WFOE
- Able to implement the worldwide strategies of the parent company without the complication of having a Chinese partner
- Unlike representative office, a WFOE is able to receive and remit RMB to the investor company overseas
- Higher operational, management control and future development efficiency
- Lower risk of IP leakage (trademarks, patents and others)
- Simplified process of establishment and termination
Preparation required
STAR Accounting & Consulting specialized in helping foreign investors with company formation, finance outsourcing, tax planning, banking, HR & payroll and other relevant services for 13 years. Instead of pulling your hair out to try to figure out how to properly setup a WFOE, having STAR to assist you from beginning to end will save your time tremendously.
The only document the investor needs to provide us is:
- the original passport of the WFOE investor. Or the passport notarization issued by the local Chinese embassy.
- If the WFOE is to be setup by a corporation overseas, the business license required to be notarized by the local Chinese embassy.
It is worth mentioning that if the legal representative is a natural person, having a business supervisor is the legal requirement for WFOE registry.
Address selection
One of options for registered address is virtual address – instead of an actual one, certain economic parks, with the approval of the government, provide virtual addresses for corporate registration to attract investments. The cost involved is the one-off payment for using the address and occasionally certain economic park would request for management fee. As the address is not an actual one, WFOE would need an actual address for contact – usually would be the office address.
Registered capital
The new corporate law of China has modified the statutory capital system to one that combined with subscription capital system. The impact on a practical level for the investors is that they can now decide when to complete the capital injection, as long as it is within the term of operation (generally 20 years). In another word, the requirement of capital injection upon the registration of WFOE no longer stands.
Timeline for WFOE registration
Under usual circumstance, the registration process takes around a month. Upon completion, the business license will be issued. Certain additional licenses are required depending on the business scope. For example, if exporting and importing is part of the operation, then the relevant license for exportation would be necessary. Typically, it takes around a month to acquire. And the application could only be submitted after the WFOE has been properly established.
When can I start my business operation?
Business operation could commence once the business license is obtained, bank account is established, and tax verification is completed.
Typically, it takes up to 2 weeks to establish a bank account. The bank account could only be established after the business license is in place as it is required by the bank. Tax verification process is able to commence as soon as the bank account is established successfully, which could take another day to complete.
Therefore, generally, it would take 6weeks to get the business running.
When can I start recruitment process?
The WFOE can start sponsor foreign staffs to work in China or hiring local employees upon receiving the business license.
Documents required for recruitment
- Employees’ highest academic credentials are required be certified by the relevant state embassy.
- No criminal record (6 months). Typically, it should be issued by the police station within the local jurisdiction of their birthplaces.
- Medical check-up record
For more information on WFOE registration/accounting & tax advisory, or a complementary consultation, please contact Nancy on Nancy@www.star-acc.com. Feel free pay a visit to our WeChat official account, LinkedIn or official webpage: star-acc.com.