China is one of the most appealing and competitive countries globally from an investment point of view. Because of its stability and rapid growth, especially in the last 30 years, China has become a highly attractive destination for foreign investors. To take advantage of this high-potential jurisdiction, the first step is China company formation, and we are going to tell you useful facts.
Quick Facts about China Company Formation
Before you can register a company in China and get started, it is prudent to understand related facts and here are some of them:
- Types of companies you can form in China: These include wholly foreign-owned enterprise (WFOE), representative office (RO), and Joint Venture (JV).
- Minimum registered capital: There is no minimum set capital requirement if you are opening a company in China.
- Shareholder: The minimum number of shareholders in any limited liability company is one.
- Corporate tax rate: Profit of up to 1 million RMB is taxed 2.5%, while 1-3 million RMB is taxed 10%. Anything above 3 million RMB in corporate profit is charged 25%.
- Dividend tax rate: 20%
These are only a few facts about company registration in China, and it is important to dig deeper to also understand the market dynamics. For example, China has a number of incentives that you should know and take advantage of. For example, the Chinese administration offers special tax incentives for companies that base their operations away from the coastal cities to spur growth in the hinterland.
Crucial Requirements for Company Setup in China
The first step in company formation in China is making the decision about the preferred activities. For example, do you want to run a manufacturing facility or an e-commerce enterprise? Here are the most critical requirements:
- Decide and verify the name of your business or enterprise.
- Document the details of the company owners, including their names, nationality, and country of residence.
- Develop the business structure and define the main activities.
- Select the board of managers and develop a feasibility report of the firm.
- Apply for a business license and register for tax purposes.
In addition to these particulars, it is paramount to also understand the guiding laws. In China, the Company Law of the PRC and judicial interpretations made by the Supreme Court of PRC are the primary guides for firms in China.
However, all you need to follow today is the new Foreign Investment Law that came into effect on January 1, 2020. Under the new law, foreign firms are no longer divided into WFOEs and JVs, but they are subjected to all the requirements of Company Law.
China Company Formation: Why You Need to Work with a Professional
Whether you prefer using a WFOE or Joint Venture as the preferred business formation, it is important to understand and follow all the steps required for successful registration. In the case of a JV, the process might be a little different because both you and your partner must first agree on how the company will work.
To register a company in China, the process can be pretty complex because it involves dealing with multiple offices, plus the list of required documents is very long. Also, the process can be expensive because you need to make multiple trips to the selected region for payments, search for an office, feasibility study, and document presentation.
We will be very frank here; a lot of people get exhausted midway. This is why you should work with an agency of experts to help with China company formation.
Having helped others to set up and successfully commence operations in China, you can also count on the experts for success. In addition to China company formation, these professionals can also assist with payroll management, bookkeeping and tax-related matters.
When you make the decision to form a company in China, one of the most crucial things is having a professional in your corner. With a pro holding your hand, you can only expect one thing: success!