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General Introduction |
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Are you a keen investor looking to set up a Wholly Foreign Owned Enterprise (WFOE) in Ningbo or in China? Or are you an interested businessman/woman interested in business or investment opportunities in Ningbo or China? The below is a general introduction and some key details of what you need to know about setting up a Wholly Foreign Owned Enterprise (WFOE) in Ningbo, China - of which may be of interest to you as foreign investors.
The Wholly Foreign Owned Enterprise (WFOE) is a limited liability company wholly owned by foreign investor(s).
The registered capital of a Wholly Foreign Owned Enterprise (WFOE) should be subscribed and contributed solely by foreign investor(s).
To make sure that the process of setting up a WFOE runs smoothly, our team at Reindeer Station is able to provide you with the most comprehensive knowledge and professional service in guiding you with the set-up of your enterprise. We are equipped with strong local knowledge regarding the legalities and the governmental procedures that needs to be adhered to, to complete the process of the WFOE set-up. We also have a strong network of affiliates who equally provide expert advice and consultation that enables us to acquire updated information about the legal and economic situation here.
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Key Features |
 Types |
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- Consulting
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- Service WFOE
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- Trading WFOE (Wholesale, Retail or Franchise in China)/FICE (Foreign Invested Commercial Enterprise)
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- Manufacture WFOE
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- Food & Beverage
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Investor Requirements |
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WFOE refers to a company funded only by foreigners without any investor from Mainland China. Foreign enterprise or individual(s) investor is/are allowed for setting up WFOE in China. |
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Location |
Office serves mostly for the purpose of business operation and it is one of the preconditions in business registration.
To set up a WFOE in Ningbo, you will need to fulfill the following requirements concerning the office renting:
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- On the Ningbo Certificate of Real-Estate Ownership of the office building, the noted usage of the building needs to be “Commercial purpose or Residential and Commercial purpose”.
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- You need to sign an official leasing contract with a term of more than 1 year with the leaser.
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Business Scope |
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One of the most important issues in WFOE application is business scope. Business scope needs to be defined and the WFOE can only conduct business within its approved business scope, which ultimately appears on the business license. Any amendments to the business scope require further application and approval.
The classification of business scope will further define the minimum required capital, type of invoices, type of applicable taxes and etc.
We will not submit an application until we are assured that the application information follows the pertinent rules and regulations and that it will allow our clients to achieve the maximum benefits of running their businesses in China
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Registered and Paid-Up Capital |
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Registered capital is the amount that is required to run the business until it can break even. The 'minimum registered capital' is a guideline only. If you do looking for a minimum registered capital, for instance RMB 30,000 (which is impossible to establish a WFOE in China) this means you will run out of money pretty soon, which leads to increased costs in reapplying for permission to increase capital, additional licensing fees and renewals of business licenses and so on. The WFOE needs funding via it's registered capital until it's able to support itself from its own cash flow. The workable and suggested capital as below is for reference only. Please discuss with our consultant for your specific case. |
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Consulting/Service WFOE |
RMB 100,000 ~ RMB 500,000 |
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Trading WFOE / FICE |
RMB 500,000 ~ RMB 1 million |
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Food & Beverage WFOE |
RMB 500,000 ~ RMB 1 million |
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Manufacturing WFOE |
RMB 1 million or USD 140,000 |
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If you will register foreign staff under this WFOE and apply the work permit in Ningbo as well, then capital RMB 1 million is suggested at least.
Initial Paid-up could be 15% of the registered capital (over RMB10, 000 at least), with the balance being remitted within 2 years. A capital verification shall be conducted by an accounting company or auditing company after each payment. The report of the capital verification is an essential material, which needs to be submitted for legal registration with the governmental department.
The registered capital is only a guarantee from the investor required by the Chinese government to show that the new company can be normally operated within its registered business scale in China. It cannot be withdrawn without reason and repatriated to home countries by the investor; however, it can be used in any business-related activity for the operation of the new company. |
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Profit Repatriation |
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China Government allows Foreign Invested Enterprises remit their profits out of the country and such remittances do not require the prior approval of the State Administration of Foreign Exchange (SAFE). Dividends cannot be distributed and repatriated overseas if the losses of previous years have not been covered while dividends not distributed in previous years may be distributed together with those of the current year. Repatriating the registered capital to home countries is forbidden during the term of business operation. |
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Corporate Structure of a China Limited Company |
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The corporate structure of such an entity is as follows:
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- Shareholder – Can be an individual or a company
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- Shareholder appoints a Board of Directors (min. 3 people) or an Executive Director
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- Shareholder appoints a Legal Representative – usually a member of the Board or the Executive Director
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- Board of Directors / Executive Director appoints a General Manager
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- Shareholder appoints a Supervisor – cannot be a Board Member, Executive Director, Legal Representative or General Manager
These individuals do not need to be residents of the PRC. They can be residing in their home country.
- The Legal Representative is the “legal face” to the company and is automatically liable to pay personal income tax in China whether they are residing in China or not.
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TERMS AND TERMINATION |
In China, terms of 15 to 30 years are typical. It is also possible to obtain extensions of the WFOE's duration.
The WFOE may be terminated under certain conditions. For example, WFOE undergo heavy losses or in the occurrence of an event of force majeure and etc. |
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Taxes |
Since Jan. 2008, China's new corporate tax rates range from15% to 25%. The rate depends on the places where the company is registered and the industry that a company engaged. All enterprises are required to report to the Tax Administration Department monthly, quarterly and annually.
A Limited Company is liable for a variety of taxes. The main taxes imposed are as follows:
- Enterprise Income Tax Rate (EIT = profits tax) is 25% and is calculated on a quarterly basis.
- Business Tax Rate (BT = service tax) is 5% and is calculated on a monthly basis.
- Surtaxes applicable on Business Tax Payable is variable depending on location.
- Value Added Tax Rate (VAT = trade tax) is 17% for general tax payer and is calculated on a monthly basis.
- Surtaxes applicable on the VAT Payable is variable depending on location.
- Individual Income Tax Rate (IIT = personal tax on salary) is variable depending on the salary level. |
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Advantages |
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WFOE are among the most popular corporate models for non-PRC investors due to their versatility and unique advantages.
Such advantages include:
The ability to uphold a company's global strategy free from interference by Chinese partners
Total management control within the limitations of the laws of the PRC
The ability to both receive and remit RMB to the parent company overseas
Increased protection of trademarks and intellectual property, in accordance with international law
Shareholder liability limited to original investment
Full control of human resources
Protection of intellectual know-how and technology;
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Employment of Staff |
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A new rule on foreign employees’ social security in effect started on October 15, 2011. It is said that if a company hires a foreign employee, the company shall register this employee with the local social security authority within 30 days of the employee receiving their work permit.
WFOE can manage the human resources fully without FESCO agency and has own social security account for social insurance
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In Future Job |
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ANNUAL AUDIT and INSPECTION |
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In accordance with China law, any limited companies in China should summit annual audit report and finish annual inspection between 1st March and 30th June every year. Any company will be subjected to a fine if the Annual Audit Report is not submitted in a timely manner |
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General Registration/De-registration Process & Time Line & Set up Costs |
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NEW REGISTRATION |
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New Set up |
Process |
Time Line
(working days) |
Cost of Gov.
(RMB) |
Service Charge of R.S.(RMB) |
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STAGE 1 |
Registration for company legal license and documents |
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Step1 |
Preparation of required documents
(Some of them need to be notarized by the local authority and identified by the Chinese Embassy in your country ) |
Unfixed |
Unfixed |
No |
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Step 2 |
Translation of required documents into Chinese |
2-3 |
No |
140/1000 words in Chinese (EN to CN) |
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Step 3 |
Company Name Registration with Ningbo Administration of Industry and Commerce |
3-5 |
100 |
10000 |
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Manufacturing WFOE only |
Registration in City Development and Reform Bureau |
3 |
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1500 |
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The environmental assessment for establishment of enterprises examination and approval department |
About 7-15 |
About 4000-5000 |
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Get the approval in City Development and Reform Bureau |
7 |
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Step 4 |
Opinion inquiry letter by Ministry of Commerce or Foreign Economical Cooperation |
1-2 |
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Food & Beverage WFOE
Only |
Get the food sanitation license in State Food and Drug Administration |
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1500 |
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Get the pollutant discharge permit in State Environment and pollutant bureau |
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Step 5 |
Business License with Ningbo Administration of Industry and Commerce |
7 |
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Step 6 |
Data recording and report at Ministry of Commerce or Foreign Economical Cooperation |
3-5 |
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Step 7 |
The chops of company with public security bureau and chop shop |
1 |
About 500 |
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Step 8 |
Enterprise organization code with National Bureau of Quality Inspection |
1 |
148 |
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Step 9 |
Tax registration certificate with State Tax Bureau and Land Tax Bureau |
1 |
0 |
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STAGE 2 |
Open bank account (RMB & Foreign Currency) |
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Step 1 |
Foreign exchange registration and approval (Bank account IC card for foreign currency) with State Administration of foreign Exchange |
1 |
0 |
1000 |
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Step 2 |
Foreign currency and RMB Bank Account Open with any bank you appointed |
3 |
0 |
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STAGE 3 |
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Step 9 |
Financial registration. |
1 |
0 |
Including in Stage 1 |
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Step 10 |
Statistics registration |
1 |
0 |
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STAGE 4 |
Change to Permanent Business License |
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Step 11 |
Inject capital from investors’ overseas bank account |
Client control |
0 |
/ |
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Step 12 |
Capital verification by certificated public accountant |
7 |
1000-3000 |
500 |
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Step 13 |
Exchange Business License after capital paid up. |
7 |
0 |
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STAGE 5 |
Registration of Import and Export License (Trade / Manufacturing only) |
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Step 1 |
Obtain the Import/Export registration license in Ministry of Commerce or Foreign Economical Cooperation. |
1 |
0 |
1500 |
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Step 2 |
Get foreign currency registration certificate for import/export purpose in State Administration of foreign Exchange |
1 |
0 |
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Step 3 |
Obtain the Custom registration certificate (E-port card) in China Custom. |
5 |
50 |
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DE-REGISTRATION |
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To closing down or de-registration a WFOE in China would be much more complicated than establish a New WFOE. It could be stuck there if local tax authority can’t approve the liquidation report, thereafter; investor has to spend a great amount of time on the closure of a WFOE. Find it here about required documents, procedures and cost to deregistration a WFOE in China. Contact our offices below to get a free review of your WFOE. |
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De-registration |
Process |
Time Line
(working days) |
Cost of Gov.
(RMB) |
Service Charge of R.S.(RMB) |
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Step 1 |
Clear the tax and submit Tax Clearance Declaration Report (an audit report prepared by CPA firm) to get the "notice of cancellation of tax registration" from tax bureau. |
Unfixed, about 1-2 months |
0 |
Own accountant in charge of this step. |
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Step 2 |
Online application and Submit to Foreign Trade & Economic Cooperation Bureau for cancellation of WFOE to get Cancellation of Letter of approval and Certificate of approval |
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RMB 5000 |
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Step 3 |
Announcement on appointed local newspaper & Cancellation of Company Business Licenses |
1 |
RMB200-500 |
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Step 4 |
Dissolution of Organizational Code Certificate (original and copy) |
1 |
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Step 5 |
Get Cancellation Letter of Alien Employment Permitfrom labor bureau |
1 |
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Step 6 |
Dissolution registration with customs (applicable to trading, manufacturing WFOE only) |
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Step 7 |
Bank accounts closure and capital repatriation |
1 |
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Step 8 |
Cancellation of Company stamps |
1 |
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Step 9 |
After all these procedures are finished, State Administration of Industry & Commerce will send a "notice of the approval of cancellation for WFOE." |
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