China is one of the most promising areas for utilizing business efforts. To gain access to its opportunities, many business persons start their activities in this country. The registration of a company in China is more and more demanding. Prifinance provides the whole range of support services for businessmen to make you ready for local legal peculiarities. So, if you are going to establish your business presence in this jurisdiction, it is possible to accomplish the process in one of these forms.
Major Types of Legal and Business Presence
Arranging the business presence in this well-standing jurisdiction is possible through these options the local legislation suggests to investors:
- 100% Foreign Enterprises – entities with 100% foreign capital can be established in the form of a limited liability company (LLC) or public/non-public joint-stock company (JSC) – these are the most favorable formats for business. The explicit benefit for foreign investors here is that they maintain entire control over all operations of the local enterprise. Also, the liability for the results of its operation is limited for foreign entrepreneurs to the contributed amounts only. More simple requirements are applied to LLC. But, there are more severe criteria for incorporating and maintaining joint-stock companies as they can involve additional financing from the public in certain cases.
- Joint Ventures – in the case with this option a foreign entrepreneur(-s) must have a local partner who should hold at least 50% of the company’s statutory capital. Foreign investors have in this case less control but they can explore local opportunities a number of times faster and effectively.
- Representative Office is not suitable for those who want to carry out full-scale activities focused on income generation. This opportunity is not designated for trading and other commercial activities. But, it can be easily utilized for exploring local market opportunities and conducting promotional activities.
Registration Requirements and Steps
Prifinance experts can provide you comprehensive assistance during company registration in China that covers these preliminary stages to pass:
- Selecting the nature of business and specifying it later correctly in the registration documents.
- Choosing and checking a suitable business name for a future enterprise. This proposed business name should comply with numerous registration requirements.
- Arranging the business address for the future company.
- Collecting all details about founders and beneficial owners of an enterprise that are necessary to be stored according to the law.
- Drafting statutory documents and forming the required package of documents for the registration.
- Completing the state registration of a newly founded entity.
- Registration of the legal entity with the tax, statistical, currency regulation, security authorities, etc.
- Opening a corporate bank account.
- Obtaining a business license and special permits for regulated activities.
Legal and Regulatory Framework
Legislation of the country related to foreign businessmen is strict enough, and there is a high risk to face insurmountable challenges without due knowledge and skills. For instance, the process of registering a company in China is long in time but it is still straightforward if all its peculiarities are observed. A newly founded enterprise should also get a business license to start its operation.
Recently, in 2021, China has simplified the registration process a bit. Now, the pre-approval of a name is not required to proceed with the registration. This amendment has decreased the duration of the overall registration process by 5-7 days. This surely makes the registration process a bit easier. But, it is still associated with lots of legal, including bureaucratic, formalities that may be unclear for foreign investors.
The major legal acts in the area of doing business are the Company Law, the Law on Securities, and the Law on Wholly Foreign-Owned Enterprises. The principal business regulatory bodies in China are the Ministry of Commerce, the China Securities Regulatory Commission, and the State Taxation Administration of China.
Advantages of the Jurisdiction
Company registration in China may be promising in view of these potential benefits the jurisdiction offers:
- stable and strong economy
- cheap labor force
- enormous opportunities for exploring local and world markets
- well-developed infrastructure
- plenty of resources for manufacturing, including water and energy
- suitable jurisdiction for wholesale and retail businesses
- creates hubs and other opportunities for making investments
- existence of special economic zones
- absence of requirements for the compulsory payment of chartered capital at the moment of registration for LLCs; but, the amount of such registered capital should correspond to the intended types of activities an enterprise is going to conduct
- plenty of tax, including duty, incentives.
Tax System in China
Company formation in China is associated with these tax highlights for running a business there:
- Corporate income tax (CIT) rate – 25%
- Personal income tax rate – 45%
- Value-added tax rate – 3/6/9/13% (varies depending on the type of operation)
- Withholding tax rates – (i) dividends – 10% (ii) interests – 10% (iii) royalties – 10%
- Capital gains tax rates – (i) corporate – equals to the basic CIT rate (ii) personal – 20%
How Prifinance Specialists May Help You
It is easy to set up a company in China with Prifinance – we will support you in making new enterprises and help with their further maintenance. If necessary, we will also take care of the registration of employment documents too. We offer company incorporation and bank account opening services in China and worldwide.