China company registration (WFOE) is one kind of Tannet's business incorporation services. The Wholly Foreign Owned Enterprise (WFOE or WOFE) is a Limited liability company wholly owned by the foreign investor(s).
In China, WFOEs were originally conceived for encouraged manufacturing activities that were either export orientated or introduced advanced technology. It offers a wider business scope compared to a representative office (RO), and possesses several unique features compared to joint ventures, partnership enterprises (PE), Hong Kong companies and Shanghai Free-Trade Zone companies.
The registered capital of a Wholly Foreign Owned Enterprise (WFOE) should be subscribed and contributed solely by foreign investor(s). A WFOE does not include branches established in China by foreign enterprises and other foreign economic organizations. Therefore, branches and representative offices set up by foreign enterprises are not WFOE.
Different Types of WFOE in China
Following are different types of WFOE. Commonly,
(1) If the WFOE only be allowed to manufacture here, it is the manufacturing WFOE.
(2) If the WFOE is allowed to do Consulting & Service, it is the Consulting WFOE.
(3) If the WFOE is allowed to do trading, wholesale, retail or franchise in China, it is the Trading WFOE or FICE (Foreign-Invested Commercial Enterprise).
Advantages of a WFOE
WFOE’s offer the following advantages:
(1) Offers foreign investors the greatest range of permitted legal activities, beyond procurement and simple sourcing;
(2) A suitable investment vehicle for establishing a long-term presence in China;
(3) Avoids the challenges of forming a joint venture (a limited liability company between the foreign investor and a Chinese company, with shared equity, revenue, control and expenses);
(4) Avoids the 11-12 percent tax on expenses that representative offices (RO) pay;
(5) Not restricted like ROs to carry out more activities like making profits, employing staff and issuing invoices in RMB;
(6) Ability to provide a wide variety of services within their business scope;
(7) Can sell China-made products directly to Chinese consumers;
(8) Ability to eliminate extra commission charges and other fees, since intermediaries are not legally required. This means they don’t have to liaise with agents and distributors.
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Business Scope of WFOE
According to WFOE regulations, "Foreign investors are permitted to setting up a 100% foreign owned enterprise in industries that are conducive to the development of China’s economic benefits, and not prohibited or restricted by China government."
In China, Business scope of a business is a "one sentence description" covering all of the present and future activities of the WFOE; it is essential this encompasses every envisaged scope of future activity. The WFOE can only conduct business within its approved business scope, which ultimately appears on the business license.
Office Address of WFOE
Before submit the application forms of forming a WFOE in China, the foreign investor must rent a plant(manufacturing WFOE) or an office in advance, the office of WFOE can't be in a residence building nor residence and commerce (R&C) combined building. Virtual address is not allowed to be registered a WFOE there although it's widely existing for local companies. Anyway, a normal office building in China will be OK for register a WFOE.
Annual Audit Report of WFOE
Any limited companies in China should summit annual audit reports to the relevant authorities. The audit reports are including: balance sheets and income statements for their annual Chinese audit. The annual audit and licenses renewal cost is about RMB 6,000. Any company will be subject be to a fine if the Annual Audit Report is not submitted in a timely manner.
Contact Us
If you have further queries, don’t hesitate to contact Tannet anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020,Dongmen Rd South, Luohu , Shenzhen, China.
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