Navigating the complexities of international business can be daunting, especially when considering expanding into markets like China. Whether you’re weighing the pros and cons of Mainland China versus Hong Kong, curious about Free Zones, or pondering tax implications, our comprehensive guide answers all your pressing questions. From initial costs and ongoing maintenance to the speed of the registration process, we’ve got you covered. Read on to demystify the process of opening a company in China and learn how services like those offered by JR & Firm can streamline your business journey.
For Brazilian businesses and entrepreneurs eyeing the Chinese market, the opportunity has never been more ripe. Establishing a Wholly Foreign-Owned Enterprise (WFOE) in China offers a strategic foothold in one of the world’s most dynamic economies. Not only does it provide greater control and flexibility in operations, but it also opens doors to favorable tax conditions compared to Brazil. Whether you’re in retail, technology, or any other sector, owning your company in China can be a game-changer. Don’t let the complexities deter you; with expert guidance from firms like JR & Firm, navigating the Chinese business landscape can be a smooth and rewarding experience.
In response to the growing interest from our Brazilian audience, we’ve decided to address some of the most pressing questions we recently received on our YouTube channel. These eight questions delve into the essentials of establishing and operating a business in China, covering topics from Mainland China and Hong Kong distinctions to Free Zones and tax considerations. Whether you’re a seasoned entrepreneur or a newcomer to the Chinese market, our upcoming blog post aims to provide you with the answers you need to navigate your business journey in China successfully.
1. Question: What are the benefits of opening a company in mainland China?
Answer: There are numerous advantages to setting up a business in China, which are comprehensively discussed in our articles. You can delve deeper into these benefits by visiting the following links:
- Exploring the Benefits of Company Registration in China
- Is Starting a Business in China in 2024 a Good Idea?
- Additional Articles
2. Question: Are there Free Zones in China?
Answer: China does offer Free Zones, but these are generally more advantageous for manufacturing companies. The tax benefits in Free Zones are tailored to manufacturing, assembly, and high-tech industries. For trading companies, I recommend economic zones located within cities to avoid the extra expenses and inconveniences associated with Free Zones. (Note: Free Zones are typically located far from city centers and necessitate maintaining both an office and a bank account within the zone. This arrangement can lead to additional expenses and logistical challenges for running the company.)
3. Question: How do taxes in China compare to those in Brazil?
Answer: China generally has more favorable tax rates compared to Brazil:
- Corporate Tax: In China, the rate ranges from 0% to 25%, depending on your total revenue and net profit. In Brazil, the rate is 34%.
- Personal Income Tax: In China, the rate is up to 25% for personal annual income between 300K – 420K RMB (US$41,700 – US$58,400), and 30% for income between 420K and 660K RMB (US$58,400 – US$91,700). In Brazil, the rate is 27.50%.
- Sales Tax: The Sales Tax Rate in Brazil is 17%, while in China it ranges from 6% to 13%. This variation depends on the taxpayer status of the company and the type of product being sold. Note that companies with a “small taxpayer” status are exempt from sales tax on products sold within China.
4. Question: Is it better to open a company in Mainland China or Hong Kong?
Answer: For insights into whether to open a company in Hong Kong or Mainland China, our video series can provide valuable perspectives:
- Importance of Registering a Company in Hong Kong
- Using Your Hong Kong Company in Mainland China
- Difference Between a Hong Kong Company and Mainland China Company
- Can a Hong Kong Company Do Business in China
5. Question: What are the requirements for opening a company in China? / What is the initial cost of opening a company in China?
Answer: For a comprehensive guide on the registration process in China, please refer to our article. The starting cost for registering a trading company is currently 17,000 RMB (approximately US$2,362). However, this price can vary based on the type of company, required licenses, and any additional services purchased by our clients.
6. Question: What are the ongoing maintenance costs for a company in China?
Annual Maintenance Costs:
Accountant: The fee is 7,000 RMB (US$973) per year for companies with “small scale taxpayer” status. If you choose this status, your company will not pay sales tax on products sold within China and cannot claim VAT refunds on exports. Alternatively, the fee is 1,500 RMB (US$209) per month (paid annually) for companies with “General Taxpayer” status. Companies with this status do pay sales taxes in China and can claim VAT refunds (up to 13% of the total value) on exports. These fees are paid to our company for providing accounting services.
Registered Address: The fee is 3,000 RMB (US$417) per year. Note that this is not an office space; it’s a physical address that we provide for the purpose of company registration and opening a bank account. It cannot be used by clients as a workspace or for applying for work visas. This fee is paid to our company for providing the registered address.
Corporate Bank Account: The maintenance fee is around 600 RMB (US$84) per year for each account. If you have multiple corporate accounts in different currencies, this fee applies to each account and is paid directly to the bank. The fees are automatically deducted by the bank from your main corporate account annually.
NOTE: We choose not to list fixed prices on our website, as they are subject to change due to inflation. Nonetheless, you can use the above-mentioned price as a reference point for informational purposes.
7. Question: Is the process of opening a company in China as simple and quick as it is in Brazil?
Answer: The process of registering a company in China is quite straightforward and is detailed in our article: How to Register a Company in China as a Foreigner.
In terms of speed, registering a company in China is generally faster than in Brazil, especially for foreigners. The entire process takes approximately 4 weeks from start to finish. For comparison, our partners in Brazil have indicated that it takes around 10 weeks to complete the registration process there for foreigners.
One of the significant advantages of registering a company in China is the ease with which foreigners can open a bank account. Chinese banks currently do not require an initial deposit, and the account opening process typically takes just 1-2 business days. This is considerably faster and more efficient compared to many other countries.
8. Question: What is the cost of consultancy services for opening a company in China?
Answer: We charge a fee of US$233 per session, which can be purchased through the following link: Consultancy Appointments.
JR & Firm LLC: Your Trusted Partner for Corporate Services in China
Navigating the business landscape in China can be challenging, but JR & Firm LLC is here to simplify the process for you. With over 15 years of experience in corporate consultancy, we specialize in a range of services tailored to meet your business needs. Whether you’re looking to form a company, draft contracts, structure your organization, or set up offshore accounts, we’ve got you covered.
Our Services in China Include:
- Company Formation: From selecting the right business structure to handling all the legal formalities, we make the process of setting up a company in China seamless and hassle-free.
- Contract Drafting: Our team of legal experts will draft contracts that are not only compliant with Chinese laws but also protect your interests.
- Company Structuring: We help you design an efficient organizational structure that aligns with your business goals and complies with local regulations.
- Offshore Accounts and Company Formation Globally: Looking to expand beyond China? We can assist you in setting up offshore accounts and forming companies worldwide.
- Consultancy Services: Benefit from our in-depth market insights and strategic advice to make informed business decisions.
For more information on how JR & Firm LLC can assist you in China, feel free to reach out to us at:
Trust JR & Firm LLC to be your reliable partner in China, offering comprehensive solutions for all your corporate needs.
JR & Firm LLC is also the proud owner of an international logistics company, JR International Logistics LLC. If you’re seeking a reliable logistics partner to transport your goods from any location worldwide to any desired destination, we invite you to explore our services. Please click here for more information.
1. What is the first step if I want to register a WFOE?
The first step towards registering a WFOE in China involves contacting a professional consultancy firm, such as JR & Firm, and signing a service agreement. In theory, the founders could handle the process themselves. However, since it requires an in-depth understanding of the company registration system and proficiency in Mandarin Chinese, it is generally more practical to hire a professional company to prevent potential mistakes during the process.
2. I have signed a service agreement with JR & Firm to register my WFOE, what's next?
After signing an agreement with our clients for WFOE registration in China, we issue a formal invoice. At this stage, we anticipate that our clients will make a payment for the service, allowing us to commence the process.
3. I have paid JR & Firm for the WFOE registration service, what should I do next?
Upon receiving full payment for the WFOE registration, we provide our clients with a detailed questionnaire. This document requests all the necessary information about the company, business activity, founders (shareholders), and executives (including the company director and supervisor). We request that our clients complete the questionnaire and return it to us via email.
4. What should I prepare for the WFOE registration questionnaire?
1. Company Name Choices: In China, WFOE names should follow this structure: [Place of Registration] + [Chosen Name] + [Business Direction] + Co., LTD. For example, Shanghai Silk Road International Trading Co., LTD, or for a consultancy company: Shanghai Silk Road Consulting Co., LTD. An alternative structure is: [Chosen Name] + [(Place of Registration)] + [Business Direction] + Co., LTD. For example: Silk Road (Shanghai) International Trading Co., LTD. Please note, in China, a company’s Chinese name is considered its main name. If our clients know Chinese, we ask for name choices in both Chinese and English, following the above structure. If not, English name choices will suffice, and we will select a corresponding Chinese name based on similar sounds. Avoid city, country, and historical names, as they’re typically disallowed. Also, we discourage direct translations of the English name due to high likelihood of them being taken. We recommend selecting similar-sounding Chinese characters to avoid delays. The Chinese name does not need to have a specific meaning, as meaningful characters are often taken.
2. Company’s Legal Person (Company Director): The legal person is an individual and cannot be a corporate entity. Please prepare their full name (as on the passport), a copy of their passport (not ID), along with their address, phone number, and email address.
3. Company’s Supervisor: The company supervisor is a separate individual from the company director, meaning they cannot be the same person. Please provide their full name (as on the passport), a copy of their passport (not ID), and their address, phone number, and email address.
4. Company’s Shareholder(s): Shareholders are the owners of the company and can be both individuals or corporate entities. Both the company director and supervisor can be shareholders. There can be up to 50 shareholders. Whether an individual or corporate shareholder, full information is required: full names, contact details, address, and either passport copies (for individual shareholders) or a full set of company documents (for corporate shareholders).
5. Company’s Business Activity: What products and/or services does the company plan to sell? Please prepare a detailed list.
6. Company’s Registered Capital: The registered capital is the amount the founders plan to invest in the company over a span of 30 years or more. The amount varies depending on the activity and place of registration. We recommend $300,000 for international trading companies and $100,000 for consultancy companies, as examples. The registered capital amount is usually suggested by the local government.
7. Full Contact Details for All Involved Executives and Shareholders: We need the complete contact details for all executives and shareholders. This includes addresses, emails, and phone numbers.
5. I submitted the WFOE registration questionnaire to JR & Firm via email, what's next?
Once we receive the completed WFOE registration questionnaire, we review it carefully and follow up with our clients accordingly. If there’s any missing information, or if the company requires additional permits or licenses based on its planned products or services, we will inform the client. If everything is in order, we prepare the application documents, attach our clients’ documentation, and submit the WFOE registration application. The estimated waiting period for feedback from the government on the registration application is approximately 10 business days. Please note that timeframes in China are approximate due to government bureaucracy.
6. How long does it take to get my WFOE license after the registration application is submitted?
Once the WFOE registration application is submitted, the government generally responds within 10 business days. If approved, they will issue the company’s structural documents, which the founders (shareholders) and executives (director and supervisor) are required to sign with a black gel pen and mail back to us (Note: In China, only black gel pens are acceptable for signing legal documents; other colors and ballpoint pens are not accepted). We then submit the signed documents to the company registrar and await the business license. The waiting period for the business license is roughly 10 business days unless expedited service was purchased. With expedited service, a business license can be obtained within 2-5 business days. Contact us for more details about the expedited service.
7. Great, I have obtained my WFOE business license, what is the next step?
Once we secure the WFOE business license, we will contact our clients and the bank to schedule an appointment to open a corporate bank account for the company. Please note, the company director must be present in China to open a corporate bank account and their citizenship should not be among the countries sanctioned in the bank’s system. Alongside being present, the director needs to provide a Chinese phone number linked to their passport and a second person’s passport and phone number linked to this second person’s passport. This second person can be anyone in China (provided their citizenship isn’t among the sanctioned countries) with a Chinese phone number. This requirement is due to the banks’ need to issue online banking devices that require two people’s information. Legally speaking, this second person doesn’t have any rights or obligations regarding the company’s finances or bank account. While this might seem unusual, it remains a requirement, so we advise clients to identify such an individual in China before opening a bank account. The bank account opening process takes around 5-6 hours, and we recommend our clients exercise patience during this process.
8. I have my WFOE bank account opened, what is the next step?
After your WFOE bank account is opened, we’ll proceed to contact the customs department to initiate the process for the e-port device (if you’re registering an international trading WFOE focused on import/export. Note that e-port isn’t required for consultancy or other types of companies). This process typically takes about 5 business days, and we’ll mail the e-port device to our clients once it’s secured.
9. I have obtained my e-port device, are there any other steps to be completed before I start my company’s operations?
Yes, following the acquisition of the e-port for the WFOE, we’ll register the company with the tax department. This process generally takes around 14 business days, and it requires the company director to visit the tax office in person for ID verification.
10. After the WFOE tax registration, are there any other steps involved before the company becomes active?
Indeed, the final step in the WFOE registration is the foreign currency permission application. This process typically takes around 7 business days and necessitates a visit to the relevant government department. After securing the foreign currency permission, the WFOE can commence its operations.
On the whole, the complete process for WFOE registration can span anywhere between 4 and 8 weeks. As we mentioned earlier, all timeframes are approximations due to the inherent unpredictability of government bureaucracy. Although these factors are beyond our control, we will do our absolute best to expedite the process.
Jasur Mavlyanov, an experienced entrepreneur and legal expert, has built a notable career in international business, with a focus on China. With over 13 years of experience living and working in China, Mavlyanov has acquired valuable insights into the Chinese legal system and business environment.
As an entrepreneur, Jasur founded JR & Firm LLC, a company dedicated to providing legal services to global clients entering the Chinese market. His leadership has helped the firm become a reliable partner for businesses navigating the complexities of Chinese regulations and laws. READ MORE about Jasur.