Definition & Legality
All companies have an official business address which needs to be specified and verified during the registration process. Virtual address registration is to establish a company with a virtual address as the business. Each district government allocate a portion of shared addresses in an actual office building for the company to register as their business addresses, which serves as a mean to attract district inbound investment and tax revenue. One of the functions of the business address is to determine the jurisdiction on the district level. The registration process and subsequent matters will need to be compliant to district regulations.
Sooner start & Offshore setup
Before registration, if the company decide to have itself registered with a physical address, the first matter would be to settle the office lease. The process of probing for a suitable space, negotiation the T&Cs of contract and preparing the paperwork would add on the time of registration. The leaser, first of all, might not even feel comfortable to have the address be utilized for business registration, which could potentially create an unforeseeable legal burden.
Whereas virtual address allows companies to jump-start the process right away without much paperwork, which typically only takes approximately 4 weeks to obtain a business license. Moreover, it provides a possibility for those who are not able to travel into China to establish a WFOE (wholly foreign-owned enterprise), which is another prominent advantage in the context of COVID-19.
Lower cost & Less subsequent work
The fee associated with virtual business address will only be a fraction to the monthly office lease payment. For the business that is at the initial stage of building up their presence in China, or having minimal operational activities, virtual address registration will be a sensible option.
In the case of each reallocation with physically registered address, all certificates and governmental systems are required to be updated, including ones with the tax bureau, which entails extra expenses and cumbersome paperwork. The evacuating time is at the leaser’s discretion – some may allow 30 days while others require immediate evacuation.
A company with a virtual address, on the other hand, is spared from such a hustle as their official address are not affected by the office reallocation. Moreover, each district, after specific evaluation, may offer a various percentage of tax rebates to the businesses in the district.