Register company in China

Register company in China

To register company in China is a hassle-free process with Tetra Consultants’ assistance.

China’s rising economy and its strategic location makes it an attractive place to set up your new corporate entity. Simplifying business setup procedures, the recently introduced “5-in-1” business license aims to speed up the registration process. With all these benefits, it is understandable why many businessmen choose to register a company in China.

Our service package includes everything you will require to register a company in China:

• Company registration with the State Administration of Industry and Commerce
• Local company secretary and registered address
• Opening a corporate bank account
• Financial license applications
• Annual accounting and tax services

How long to register company in China and open a corporate bank account?

• Tetra Consultants will assist you to complete the process to incorporate your company in China within 2 weeks. After receiving the required due diligence documents of the directors and shareholders, we will proceed to check on the availability of your preferred company name and prepare the required incorporation documents.

• Throughout the registration process, we will offer non-travel solutions.

• After the setup is completed, we will courier the documents of your new company to your preferred address. The documents will include the Certificate of Incorporation as well as the Memorandum and Articles of Association.

• Upon company registration, Tetra Consultants will open a corporate account with a bank for you. This will take around 4 weeks to complete.

• We will seek to provide you with non-travel banking solutions.

• Within 6 weeks from our engagement, you can expect your company to be fully set up and ready for business.

Can a foreigner register company in China?

• China has repealed most of its protectionist foreign ownership limits in the financial sector, and allowed full foreign ownership in securities, fund management, futures and life insurance companies from 23 July 2020 onwards.

• Foreign company registration in China has been made easier since a new company structure specifically for foreign investors has been created. The Wholly Foreign-owned Enterprise (WFOE) is a specific form of LLC that is relatively easier for foreign owners to incorporate and manage.

• These foreign investments are protected under the Foreign Investment Law 2020 in the same way that domestic investments would be, offering the legal certainty needed to retain and attract foreign investors.

• Despite these improvements, the Special Administrative Measures for the Access of Foreign Investment still apply, with some 33 sectors still facing restrictions on foreign ownership and investment. Industries in the Free Trade Pilot Zones also have similar restrictions on 30 sectors. Certain sectors such as agriculture, rare earth mining or domestic transport require Chinese companies to have a controlling stake.

How to register company in China?

Registering a company in China can be a complex but rewarding process. With its booming economy and vast market potential, China offers numerous opportunities for businesses looking to expand internationally. This comprehensive guide outlines the essential steps and requirements for registering a company in China.

Type of business entities in China

• There are many types of business structures in China each with distinct levels of personal liability protection, tax ramifications, ownership and management flexibility, privacy policy as well as compliance requirements.

• Before the start of the engagement, Tetra Consultants will fully understand your business activities before recommending the most optimum business entity in China. Some considerations we take into account include the type of business activity, tax obligations and nationalities of shareholders and directors. Our consultants will also offer more information on the requirements imposed to set up these entities.

• Generally, for most companies in China, you will only require a director and shareholder of any nationality, a local listed address and registered agent. No minimum paid-up capital is necessary in incorporation.

Legal entities

Sole proprietorship

• Sole proprietorships must be operated by a single, natural person. This person must also be a Chinese citizen. Such household enterprises represent an extension of the person’s legal personality and thus do not provide any liability protection from the debts and obligations incurred as a result of doing business. This negates the minor benefits it has of no minimum capital and ease of incorporation, especially since it is becoming increasingly easier to incorporate companies.

Partnership

• Partnerships can be split into general and limited partnerships. Much like a sole proprietorship, they do not provide protection from legal liabilities of the business. In general partnerships, both general partners are wholly liable. In limited partnerships, only the general partner will be liable. The limited partner will not be liable, but as a result will not be able to directly manage the business as well. This negates the minor benefits it has of no minimum capital and ease of incorporation, especially since it is becoming increasingly easier to incorporate companies.

Limited Liability Company (LLC)

• This business structure creates a separate legal personality from its directors and shareholders, and can thus transact on its own, sue or be sued in its own name. Directors of an LLC are not to be personally liable for any debts or obligations incurred by the business. They will only be liable up to a specified amount of liability insurance declared. These companies provide different classes of members that come with specific rights, powers and duties.

• To set up an LLC, you will have to meet the following conditions:

• • There can only be less than fifty members.

• • You will also require a registered office in China to operate your business.

• • There is also no formal requirement for the amount of registered minimum capital.

Company limited by shares

• This business structure behaves as a public limited company would and thus faces stricter reporting and incorporation requirements in exchange for the ability to be listed, which allows it to secure capital faster. Shares can also be freely transferred, allowing for easier management of ownership of the company.

• As compared to a private limited liability company, companies limited by share must instead meet the following conditions:

• • The board must be appointed in a two-tier structure, split into the board of supervisors and the board of directors. If it is publicly traded, it must also appoint independent directors.

• • The company must hold regular shareholder meetings.

• • It is also subject to stricter financial reporting and auditing requirements.

Branch company

• Branch companies are not a distinct legal entity and represent an extension of the foreign parent company’s legal entity. Thus, this parent company would continue to be liable for any debts and obligations incurred by the branch office. However, foreign investors should note that branch offices can only be registered for existing businesses in China, therefore it is best used for expansion within the region.

• It is subject to the same financial reporting and tax requirements of other company structures, and similarly requires one local director and a registered office. No minimum capital is required.

Representative office

• Albeit not a legal business entity, a Representative Office in China exists to represent a foreign registered company. Through its set up, a foreign company can enjoy a limited presence in China. Representative Offices do not own any legal personality. In the case of any breach of contract, typically the foreign company would have to assume liability on its behalf. Generally, it is one of the simplest and fastest ways for a foreign investor to set up their business operations in China. 

• Typically, we encourage individuals who are looking to engage in market research, invest in the Chinese market or liaise and leverage on Chinese suppliers to opt for this option instead. However, it is to note that a Representative Office will not be suitable if you are intending to operate within the country.

• To register a legal Representative Office, your overseas parent company must be operating for more than two years. You should also own a relevant lease agreement. Following its registration, you will need to obtain a series of chops from the Public Security Bureau. These chops will function as official representation. No minimum capital input is required to set up a representative office. A local registered office is necessary.

Types of business license in China  

Business license for domestic enterprises  

• A business license is a mandatory permit for all entities in China. It is like permission for local businesses, like a corporate certificate. The license has key details like the company name, registration number, and more. Many entities, like Joint Ventures and Wholly Foreign-Owned Enterprises, need it. They, along with their company chops, need this essential document. Local authorities, particularly the Authority for Market Regulation, regulate it. The business scope, which outlines permissible activities, is vital. In China, this license is vital. It gives a detailed look at a company’s identity and lets it do approved operations. 

Business license for foreign-invested enterprises (FIES)  

• Foreign-invested enterprises (FIEs) in China must get a distinct business license. The Administration for Industry and Commerce (AIC) issues this license. It is mandatory for different FIE types, including wholly foreign-owned enterprises (WFOEs). Like local businesses, the FIE business license includes crucial information. This information comprises the company name, registration number, legal representative, and business scope. FIEs might need more licenses based on their industry. These could include import/export licenses, pharmaceutical permits, and construction licenses. Tetra Consultants offers professional guidance for the accurate acquisition of licenses and permits. 

Business license for enterprise legal person  

• In China, every entity must own a business license, regardless of ownership. This official permit acts as operational clearance for limited liability companies. It is akin to a corporation certificate. It includes crucial details like company name, registration number, and business scope. The business license is crucial for all companies in China. This importance applies to local entities, Joint Ventures, and WFOEs. The business scope outlines permissible activities. It is subject to approval by local or municipal authorities. This includes the Authority for Market Regulation (AMR). 

Import and export license  

• Companies engaging in import and export activities in China must retrieve licenses. The Chinese government issues automatic and non-automatic import licenses. The former is for permitted goods, and the latter is for restricted goods. The Ministry of Commerce (MOFCOM) manages the distribution of both license types. Certain industries, like pharmaceuticals, construction, and telecommunications, need more licenses. These are necessary for legal operations in China. 

5 in 1 business license in China 

• Inaugurated in 2016, the groundbreaking “5 in 1” business license in China has significantly transformed the company registration landscape, unifying various permits necessary for business activities. This innovative system streamlines the process with a singular online application submitted to the local Administration for Industry and Commerce (AIC) in the respective city of registration. Particularly advantageous for enterprises within China’s Free Trade Zones, the “5 in 1” license encompasses pivotal permits, simplifying the initiation of new businesses. 
• Operating within Free Trade Zones in China, provides a distinct competitive edge. These zones extend favorable conditions such as tax incentives, streamlined customs processes, and duty-free warehousing. Companies within these zones benefit from operating under specialized policies crafted for export-oriented ventures and international trade, fostering an environment conducive to business growth and efficiency.

Individual industrial and commercial household business license  

• The individual industrial and commercial household business license is crucial in China. The place of business registration authority issues this license. It is specific to a single business location. Unlike licenses for other business types, it has unique requirements. This applies to foreign-invested enterprises and domestic enterprises. Various businesses in China also need specific licenses. These licenses encompass various categories. They include pharmaceutical, construction permits, value-added telecom services (VATS), and food operation licenses. 

 Branch business license  

• A Branch Business License authorizes a company to operate at a designated location. This is a necessity for both domestic enterprises. It is also crucial for foreign-invested enterprises seeking to establish branches. This essential document ensures legal compliance. It also facilitates the expansion of businesses into specific regions within the country.

• Tetra Consultants specializes in assisting businesses in China to navigate the complex landscape of obtaining various business licenses. With expertise in the regulatory environment, Tetra Consultants facilitates the growth of businesses by ensuring compliance and efficiency in the licensing process. Whether it is acquiring the “5 in 1” business license or other permits tailored to specific business needs, Tetra Consultants provides invaluable support, helping businesses thrive in the dynamic and competitive Chinese market. 

Types of Companies to register in china

• These are more specific types of companies that can be found in China that use one of the legal business entities mentioned above.

Wholly Foreign-Owned Enterprises (WFOE)

• WFOEs are the most popular option for foreign investors to enter the Chinese market since they allow for full foreign ownership. This offers them greater flexibility and control over its operations, and you will get to enjoy the freedom and independence without the need to source for a Chinese partner. Popular examples of activities such companies engage in include consulting, management, software development or trading company.

• In general, no minimum capital is necessary, but this is dependent on your business activities. While no fixed legal capital is given, you will still require a fair amount capital as it will be reviewed by the local authorities when you make your business registration application.  A registered office is required. The business license of WFOEs usually last for around 30 years.

• WFOEs set up in China are also subjected to a tax rate on corporate income that may differ between industries as well as an annual audit report and license renewal costs. Generally, you will not require a local director to incorporate. Minimally, there should be 1 director when incorporating.

Joint venture

• Equity joint ventures or contract-based joint ventures allow investors to tap on the business experiences of their pre-existing networks in China to ease their entry into the Chinese market. It is subject to the same requirements for a WFOE, and also allowed to carry out the same activities as a WFOE would.

Holding company

• Mainly adopted to manage assets, holding companies are also ideal for investments. This tax-free structure is primarily used to also purchase assets such as mutual funds and real estate or to provide services to their subsidiaries. Typically, these companies are not permitted to engage in manufacturing or production activities. However, they are permitted to engage in trading, distribution as well as research and development activities.

• In recent times, the Chinese state has imposed greater regulations when it comes to foreign investment holding companies. These companies are required to reinvest income as registered capital before it is used to reinvest in Chinese projects. They are also subjected to a minimum of $30 million in registered capital investment requirement and to own at least one subsidiary in China. A resident director is not required. However, you may require a resident director, company secretary as well as a local registered office address to set up your China holding company.

• You may consider setting up a holding company in China if you are looking to expand your business direction and its portfolio. Otherwise, it may also be useful to manage your respective subsidiaries in China.

State-Owned Enterprises

• State-Owned Enterprises conduct business activities on behalf of the government. Typically, these companies operate specifically in areas that are deemed to be of greatest strategic importance to the Chinese government. These industries include aerospace, telecommunications and energy.

Accounting and tax obligations

• Accounting and tax considerations are important factors when incorporating your company. By outsourcing your China accounting and tax obligations to Tetra Consultants, you can be confident that you will be in the best hands. Our team of consultants will ensure that your firm’s financial statements, corporate tax returns and audits are completed without the need for you to travel.

• Additionally, outsourcing your accounting and tax needs to Tetra Consultants will allow you to reduce overhead costs while being ensured of timely reporting and filings. Before the start of the engagement, our accounting team will also keep you updated of all the required deadlines and expectations. Thereafter, we will prepare all required filings in advance to ensure that the stipulated deadlines are met.

Annual Reporting Requirements

• Typically, a Chinese entity’s financial year is from 1 January to 31 December.

• All China-incorporated companies are required to file an annual audit. For a foreign company, this report has to be prepared by a Chinese Certified Public Accounting firm.

• Companies are also required to complete an annual Income Tax reconciliation report. Based on the report, additional tax may be required to be paid or a reimbursement will be made. This is to be submitted by 31st May to the State Taxation Administration.

• Additionally, companies will have to file a detailed company and financial report to the Administration by 30th June.

• As all foreign exchange transactions are controlled by the Chinese government, companies will have to issue a statement regarding its current state of foreign investor’s equity. 

Corporate Income Tax

• China’s tax levied on corporate income is placed at 25%. However, the rate payable is also dependent on your industry as well as the profits your company makes. For low-profit companies, you can expect to make tax payments charged at 20%.

• Typically, it is paid monthly or quarterly within 15 days from the end of the period.

• It is also important to note that these payments will be reconciled through an annual Income Tax reconciliation report.

Withholding Tax

• For all non-resident enterprises, you can expect to be charged a withholding tax, which is applicable to payments of China-derived income. Before remittance, a tax will be held at 10%.

• This largely applies to dividends or other equity investment proceeds, interests, royalties as well as rent.

Value-Added Tax

• Based on the reported sale amount for goods and services, a value-added tax may apply.

• Whether this applies to your company will be dependent on your total sales made per month.

Is China a good place to start business?

Political

• Chinese President Xi Jinping’s anti-corruption campaign launched recently was the biggest organized effort in China to combat corruption issues in the country.

• According to Transparency International’s Corruption Perceptions Index, China is ranked 78th among 180 countries when it comes to corruption.

• Hong Kong’s recent protest for independence against China has led to much unhappiness sparked between the bilateral relations of China and Hong Kong.

Economic

• According to the World Bank, ever since China opened up and reformed its economy in 1978, its Gross Domestic Product growth has averaged around 10% annually. With such a swiftly expanding economy and large import and export processes, the nation is a good place to do business in.

• It has a large and diverse domestic economy, with many opportunities. It also has a strategic location in Asia, enabling access to many Asian markets.

• The recent US-China trade war has taken a toll and negatively impacted both countries’ competitiveness and economies.

• According to Statista, in 2018, manufacturing labour costs were estimated to be at US $5.51 per hour. The low labour costs, as such, makes it an ideal place to set up your company especially if you are operating a labour-intensive business.

Social

• The official language appointed by China is Mandarin. There is only an estimated less than 1% of Mainland Chinese who are fluent in conversational English. This may result in potential inconvenience when communicating and transacting with the local government and banks. If needed, Tetra Consultants can provide translation services for you.

• According to the International Monetary Fund, China’s income inequality has increased greatly over the years and left China to achieve a position as one of the most unequal countries in the world.

• China’s Social Credit System also means that there is too much governmental regulation and oversight into its citizens’ day-to-day lives and behaviours. 

Technological

• According to the Harvard Business Review, the Chinese government is on its way to increase China’s Research and Development expenditures from 1.7% previously to 2.5% of its Gross Domestic Product by 2020.

• China’s technological expertise has led to the introduction of big tech giants such as Alibaba and Tencent, boosting its economy greatly.

• The great firewall of China also means that your business operations in China will not be able to utilise social media platforms such as Facebook and Instagram to conduct social media promotion and generate sales.

• Registering for Intellectual Property rights in the country is also a relatively costly and tedious process.

Legal

• In March 2019, the Chinese legislature introduced several new laws that are to positively affect foreign businesses. This includes greater intellectual property and investment protection laws.

• In 2017, Chinese top judge, Zhou Qiang denounced the country’s judicial system and highlighted the intertwined relations between the Communist Party and the judiciary.

Environmental

• China is said to be increasing its green efforts. This is achieved as mentioned by the Ministry of Finance who is to permit an increased allocation of funds of 407.3 billion yuan to ecology and environmental protection in 2020.

• According to China’s Ministry of Ecology and Environment, the number of sources of pollution has nearly doubled since 2010.

• With severe air pollution issues, the choking smog in China leaves its residents with great difficulty in breathing.

Find out more about how to register company in China

Contact us to know more about how to start a business in China. Our dedicated and experienced team will revert within the next 24 hours and answer all your queries.

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