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A free trade zone (FTZ) is a specific class of special economic zone. It is a geographic area where goods may be landed, stored, handled, manufactured, or reconfigured, and re-exported under specific customs regulation and generally not subject to customs duty. The establishment of Shanghai Free Trade Zone (SHFTZ) is major decision made by the Central Committee of the Communist Party of China in response to new challenges posed by the new situation. It is envisioned to explore new paths and accumulate good experience for all-round reform and opening-up.
Brief Interoduction to Shanghai Free Trade Zone
The State Council approved the establishment of China (Shanghai) Pilot Free Trade Zone on August 2013 and the FTZ was officially launched on September 29 of the same year by merging four bonded areas under the special administration of Shanghai Customs, namely Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area, and Pudong Airport Free Trade Zone. The 28.78-square-kilometer FTZ is China’s experiment field to test policies for government reform, financial reform, business innovation, foreign investment and tax reform. It also allows Shanghai to vigorously develop re-export trade and offshore businesses.
Corporate Establishment
The zone cancels out a number of financial requirements for setting up a company in China, including the minimum registration capital of RMB30,000 for limited liability companies, the RMB100,000 minimum for single shareholder companies, and the RMB5 million minimum for joint stock companies. Moreover, under the FTZ's new capital registration system, foreign investors are no longer required to contribute 15-percent capital within three months and full capital within two years of the establishment of a foreign invested enterprise (FIE).
Instead, shareholders of companies established in the zone may agree upon the contribution amount, form, and period of contribution at their own discretion. However, shareholders are still liable for the authenticity and legality of capital contributions and will be held accountable to the company within the limits of their respective subscribed capital or shares.
In addition to these financial reforms, the FTZ also introduces a simplified procedure for foreign investors to establish a company in China. The "one-stop application processing platform" unique to the zone requires that all application materials be submitted to and handled by the Industry and Commerce Authority (AIC) in the zone. The relevant approval and filing procedures are then conducted via inter-departmental circulation, after which the various licenses and certificates (including the business license, enterprise code certificate, and tax registration certificate) are issued to the applicant(s) by the AIC.
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