The Startup Magazine How To Set Up A WFOE in China: An Informative Guide

Are you considering setting up a WFOE in China? Well, that sounds like a great start! But what next? Starting a business, especially in China, can be very tedious and confusing. Hence, as a budding entrepreneur, you must know the aspects and cornerstones of the rules related to doing business in the country. And to do that, you have to do extensive research in this regard on WFOEs!

Yes, we know how time consuming the whole process is. It is precisely for this reason that we have curated this comprehensive guide for you. Without further ado, let’s jump right into it!

Opening a Company in China – Step by Step Guide

Before we start our guide, let’s answer the most obvious question – What are WFOEs?

WFOE (Wholely Foreign Owned Enterprise) is a privately owned organization in China where all the shareholders are from a foreign country. Independent entrepreneurs usually consider it the most preferred option as they can have complete control and independence in their company.

Usually, WFOEs can come in three different forms –

  • WFOE Manufacturing (You are allowed to manufacture your products in China)
  • WFOE Consulting (easier to set up and operate)
  • WFOE trading (their licenses can be exported or imported and traded locally)

The opening of a WFOE in China can be categorized into two parts – the pre-licensing process and the post-licensing process. But, before we begin, remember; These procedures may vary depending on your type of business. Thus, here we have outlined the essential aspects that will be common to all!

Pre-licensing procedures

The pre-licensing procedure to start a business in China usually entails the following steps –

Step – 1: Choose a Chinese name

Apart from the English term, you have to choose a Chinese name for your business. And while you are at it, make sure you follow the format mentioned below –

Your company name + (the location where you trade) + the purpose of your organization + type of business

Here is an example of what your organization name should look like –

Your Company Name (Shanghai) Trading Co., Ltd.

Everything will appear on your trading license. Hence, before applying, be sure to check the name carefully.

Step – 2: Fill out the legal documents

After choosing the name of your organization, you should start preparing the legal documents for the company registration procedure. It may include the following –

  • FSR (Feasibility Study Report)
  • Reference letter from the bank
  • Your office building lease عقد

Step – 3: Apply for a business license

The final step of the pre-licensing procedure is to submit your documents and apply for a license. You must send the application to the local government authorities, including –

  • Administration for Industry and Commerce (AIC)
  • Ministry of Commerce (MOFCOM)

Post-licensing procedures

Here are some of the steps you need to follow after receiving your license –

Step – 4: Complete the tax registration procedure

After obtaining your business license, you must register your organization for taxes at your local and state tax office. During the COVID-19 period, several tax relief policies were incorporated to relieve the many operational burdens of WFOEs. So, make sure you know all about it before working on these tax-related documents.

Step – 5: Register your organization with other authorities

Before you start your organization, you need to register the same with a dozen different Chinese bodies. Some of the related ones may include –

  • Technology Supervision Office
  • State administration and foreign exchange
  • Statistical office
  • Financial office, etc.

Step – 6: Start your own bank account

Once everything else is done, you will need to create a bank account that will be traded in RMB. In addition, you must add another foreign provident fund in order to “verify and contribute” to the capital invested abroad for your organization.

Wrap it all!

The overall process of setting up an organization in China can be time-consuming and partly bureaucratic. Hence, if you want to focus more on your business, it is best for you to hire a consultant for this reason. The same is true for someone who previously worked in the Chinese business environment. So, if you think the task of creating WFOEs is too much effort for you, feel free to reach out to an expert!

Leave a Comment