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FQA
Business
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Owner
of a WFOE
What kind of entity can set up a WFOE?
Either foreign individual (natural person) or a foreign company can
set up a WFOE.
Does it have to be an existing company outside of China to set up a
WFOE?
Not necessary, if the investor is a foreign individual.
Can
it be one or more foreign individuals in combination with a company?
Yes.
Can
foreign individuals or even companies be added later to the WOFE as
part owners?
Yes.
Are
there any stipulations for a minimum salary to be paid to the
owners, or can they take no salary in lieu of having a share in the
company?
No requirement on the minimum pay to the owners. Shareholders can
receive dividend if the company shows a profit.
Registered Capital
What is the minimum registered capital for a WFOE?
According to the Company Law (2005), the minimum registered capital
of a limited company is RMB30,000. As for a WFOE, it should be no
less than RMB100,000 or equivalent. The minimum registered capital
required varies depending on the industry. Please contact our
consultant for details.
Does the capital have to be brought into China all at once, or can
it be brought into China over a period of time?
According to the Company Law (2005) and relevant regulations, the
registered capital can be paid by installment. 15% of the registered
capital should be paid up within 3 months of the establishment of
company, with the rest to be paid within 2 years. Please contact our
consultant about the detailed regulations regarding the extension
period.
What are the differences between the total investment and the
registered capital?
The total investment refers to the sum of debt and equity of the
company. The registered capital of a limited liability company shall
be the total amount of the capital contributions subscribed for by
all the shareholders that have registered in the company
registration authority (Company Law, 2005). Liabilities to third
party are limited to the amount of the registered capital. To
prevent the trend of thin capitalization, the State released the
provisional regulation to restrict the debt to equity ratio of FIEs.
For further information, please contact our consultant.
Registration Fees and Time Frame
How
much is your service fee for WFOE registration?
It depends on how deep you need Global HR involved in the
registration procedures and which industry you are in. We calculate
the service fee based on the actual workload.
Is your price a total
inclusive price with no extra hidden charges at all?
We assist in preparation of the registration documents according to
the materials provided by client. All government documents are
written in Chinese. Besides the basic service fee, if you require
every government filing to be prepared bilingually, we will charge
an extra translation fee based on the additional workload. Our
service fee is billed excluding government fees. Government fees
vary by client. We will pay on behalf of you and claim reimbursement
by providing official receipts. Other customized services, like
office lease and recruitment, will be billed separately.
What are government fees?
The government fees include, but not limited to, registration fee,
cost of company chops, stamp tax on office lease contract, cost of
various registration certificates and administration fees. The
registration fee is 0.08% of the registered capital. For detailed
regulations of the registered capital, please contact our
consultant. The total amount of miscellaneous fees is around
RMB2,000.
How
long does the whole process take?
Once we receive all the necessary documents and information, it
normally takes about 2 months to obtain your business license and
other related government certificate. Businesses in industries
limited by the State are expected a longer period for obtaining an
establishment approval.
Operations
How does the company rent
an office if it doesn't yet exist? That
is, what is the legal entity that signs the contract for renting a
new office, since the company you are about to establish there does
not yet exist as a company.
After the pre-registration of company name, you can use WFOE’s name
to sign lease contract with landlord.
We
are currently a representative office. Is there any benefit in
keeping this open after the WOFE is set up?
If you have confidence in WFOE’s performance, you can close the
representative office (RO). If RO pays income tax and business tax
on a cost plus basis, you’d better close it. Otherwise you can keep
it as you wish.
What are the minimum costs the WFOE must show?
The maintenance costs include office rent, employee salary, office
equipment, utilities, etc.
What are the government requirements for a WFOE? For example, does
it have to have a tax consultant, an accountant, etc?
It really depends. There is no specific requirement. However, tax
and other administrative bureaus may randomly perform office visit
to see whether the company is in good operation.
You can outsource your accounting and tax function to a bookkeeping
firm.
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