The economic situation in China is constantly improving. This is largely due to the entry of the PRC into the World Trade Organization, a decrease in bureaucratic pressure on businessmen, and the elimination of trade barriers. Given the availability of vast resources of cheap labor, China may soon become a world manufacturing base.
There are several forms for doing business in China:
- Company with 100% foreign capital (WFOE)
- Representation
- Joint venture
- Hong Kong company
1. WFOE is a company with 100% foreign capital
WFOE is a limited liability company wholly owned by foreign investors.
WFOEs were originally conceived with the aim of increasing the growth of Western companies and industries. However, with the liberalization of WFOEs, they are now being used as service providers (consulting and management services), as technology manufacturers (software development), and as traders. WFOE can make profits and pay taxes in China.
2. Representation
A representative office in China is ideal for monitoring the Chinese market. Representative offices are used for market research and networking in China.
However, ATTENTION the representative office has no right to engage in commercial activities.
The representative office has the right:
- Conduct research and provide data to clients and partners;
- Keep in touch with local companies;
- Acting as coordinator for the parent company in China
- Create travel routes.
3. Joint venture (50/50 with Chinese participants)
A joint venture company is a limited liability company formed by a foreign investor and an investor in a Chinese company. In some areas, a joint venture is the only way to start a company.
Companies choose to form a joint venture in order to experience the full benefits of the local market and understand their norms and methods.
A joint venture operates through an agreement between both parties regarding capital contributions, distribution of costs incurred, profits and company management.
3. Hong Kong company
We recommend that you pre-purchase a Hong Kong company, which you can later use as a founder of a Chinese company. (A Hong Kong enterprise must be at least 2 years old).
As a result, you get the following bonuses:
1) simplified legalization of documents for the subsequent registration of a Chinese company ($ 1,500 per package of documents. Deadline - 3 days)
2) no need to go through permissive procedures in Hong Kong for the transfer of funds to pay the authorized capital of a subsidiary (Chinese) company (there is no currency control in Hong Kong -!)
3) no need to translate documents into Chinese, since the originals are already presented in hieroglyphs
4) the possibility of using a company in Hong Kong as an "offshore buffer" in order to preserve the confidentiality of business ownership and conceal the affiliation between Chinese and Russian legal entities
5) the existence of an Agreement for the avoidance of double taxation between the PRC and Hong Kong allows you to withdraw dividends from Mainland China at a minimum percentage
6) Payment for Chinese goods by transfer to the account of a Hong Kong company allows the Chinese counterparty to avoid the rigors of foreign exchange controls and income tax.
You can read all about the registration of a company in Hong Kong here Additional services for the registration of legal entities in the PRC
Company registration - 2300 EUR
Registration of a joint venture - from 6000 EUR
Registration of a company with 100% foreign capital (WOFE) - from 3700 EUR
Company with 100% Chinese capital - from 5900 EUR
Nominal legal address (1 year) - 1500 EUR
Annual maintenance of the company (1 year) - 1500 EUR
Delivery of financial statements (for 1 year) - from 3600 EUR
Nominee service (optional, for 1 year) - from 1500 EUR
You can always get professional advice on the registration and acquisition of companies in China, Hong Kong and Singapore by calling us.