How do I form a company or representative office?
We will examine your proposed business activities in China and advise you of the options available to you under Chinese investment regulations and WTO market access commitments made by China. Other than financial institutions, a foreign company cannot set up a branch office in China. We can also advise on the tax-effectiveness of your shareholding structure and your funding arrangements.
How do I form the entity that I need?
We can assist you with the establishment of a representative office or a wholly foreign owned enterprise ("WFOE") in China. The documentation may differ depending on local requirements. Not all situations will qualify for the establishment of a wholly foreign owned enterprise, but this may change gradually under China's commitments to join the WTO. After a business license is issued for the representative office or wholly foreign owned enterprise, we can assist you to register with the local tax bureaus and confirm its taxation basis or tax preferences. We can also help you to register domain names in China.
What is a WFOE?
For some foreign investors, the prospect of having to partner with a Chinese investor presents too great a hurdle to investing in a China enterprise. Others hesitate to share technology or business strategies. Still others simply lack the necessary contacts.
The Wholly Owned Enterprise (WFOE) Law of the People's Republic of China was adopted at the Fourth Session of the Sixth National People's Congress, effective April 12, 1986. Rules regulating the WFOE were not implemented until December 12, 1990. The WFOE rules require businesses to satisfy certain requirements before being allowed to operate a 100% foreign owned enterprise in China. These original regulations required that the WFOE:
* Be a manufacturing business
* Be in a business area conducive to the development of China's national economy
* Be capable of gaining remarkable economic results
* Meet at least one of the following conditions:
. Use advanced technology and equipment, engage in the development of new products, conserve energy and raw materials, and cause the upgrading of products and the replacement of formerly imported products; or
. Export more than 50% of annual output value of all products.
On 12th April 2001, in order to eliminate legal barriers that would impede China's joining the WTO, China announced significant changes to the WFOE regulations, including the repeal of the restrictions to WFOEs described above. As a result, the WFOE has become even more popular. Additional changes allowing the establishment of WFOEs for sales or trading companies located in special economic zones, such as certain trade zones around Shanghai, have further enhanced the standing of the WFOE among foreign investors.
The WFOE limited liability company is a separate legal person and offers limited liability protection to the investor. Requirements include:
* Only one member/owner
* Only one director, unless the company forms a Board of Directors, for which three directors are required, none of whom need be Chinese citizens or residents
* A general manager/president, who is not required to be a Chinese citizen or resident
* A minimum capitalization of approximately US$ 200,000 (this requirement may vary depending upon local regulations).
The process of applying for approval of a WFOE can be complicated. Preparing the WFOE application, leasing space in one of the free trade zones and laying other groundwork can take several months. Once the WFOE application and the Articles of Association of the WFOE are filed with the appropriate Chinese authorities, the authorities will respond to the WFOE application with an approval, denial or a request for additional information.
What are the employer and employee issues?
A foreign assignee in China is required to apply for a Z visa and a residence permit. If the assignee is attached to a representative office, a resident representative card is also required. We can assist your assignees to obtain these documents. Since the top rates of Chinese income taxes are rather high, planning an assignee's remuneration package is very important. Representative offices are required to hire their local staff through a government agency. We can arrange for the recruitment of local staff and payroll administration.
When can my foreign investment enterprise apply to set up a branch?
Your wholly foreign owned enterprise or joint venture can normally apply to set up a branch in another locality in China after it has fully paid up its registered capital. The prerequisites for a branch may be different in different locations. Under current policies, foreign investment enterprises in certain industries or locations will not be approved to establish branches outside of its location. We can assist you in assessing the viability of a branch and applying for the registration of a branch.
Can Acorn Business Services Consultancy help me set up a joint venture?
Yes. Historically, the establishment of a Joint Venture has been the most common form of foreign investment in China. We are able to assist our clients in finding their local joint venture partners through our network of contacts.
What other China business services does Acorn Business Services Consultancy offer?
Bespoke services relating to the identification of suitable tax advisers, lawyers, local partners, premises, factories, management, staff and expatriate housing.
Professional corporate administration. We have the capacity to deliver a turn-key back office function for an operation in China. This service encompasses communication services, accounting and handling a broad range of commercial work including documentary credit services and managing an import or export operation.