When starting or expanding a business, registering a company in China is often a necessary step on the path of entrepreneurs. Is it difficult to open a company in China? How to register a company in China? Is it even possible to open a company in China? These questions arise before entrepreneurs who have decided to create or expand their business in this region.
Now the registration of a company with foreign investment in China is completely realistic and possible. To do this, it is mainly necessary to fulfill the following two conditions:
Company registration terms
It is necessary to provide documents of the foreign founder legalized at the PRC consulate. Or, if the founder is an individual who is located in China at the time of registration of the company, only the original passport is required, without legalization.
It is necessary to rent office space (with a small area, from 30-50 sq.m.) in China. The purpose of the premises (which is indicated in the certificate of ownership of the premises) must coincide with the nature of the company’s activities. For example, for a trading company – the purpose of the premises is usually “office”, for a company that organizes courses – “commercial”, etc.
With China joining the ranks of the World Trade Organization countries, it is time for businesses and foreign investors to make significant changes. The Chinese government was finally allowed to enter its market through the formation of WFOE (enterprises where the capital is 100% foreign), whereas previously, in many industries, only representative offices and joint ventures were allowed to register. Today, China is the country with the fastest-growing economy in the world, therefore, the registration of companies in China is becoming more relevant and profitable.
China company registration procedure
The registration procedure begins with the approval of the name of the organization. The name should not be the same as the names of other companies in China already present in the register.
After that, the registration of companies in China goes through the Office of the Commerce and Industry Administration. When you already have a “Certificate of the right to conduct business”, the registration of a company in China goes to the next stage – the production of seals, registration with the tax authorities, the Foreign Exchange Office, customs, opening bank accounts, etc.
It should be noted that in the statutory documents of a company in China, the scope of the company’s activities in China is mandatory. If an organization intends to carry out export and import activities, then it must apply for registration at customs and registration of an electronic port, even if it has already been granted such a right at the time of registration of documents at the establishment of the company.
After the registration of the enterprise, it will be necessary to pay the authorized capital, which must come from the account of the founder and precisely to the account of the authorized capital of the Chinese company. The size of the authorized capital depends on the field of activity, place of registration, and the planned scale of activity. Usually, the authorized capital can be paid in installments during the entire life of the company (within 30 years). However, since, in general, strict payment deadlines have been canceled, this requirement has ceased to be a stumbling block for aspiring entrepreneurs.
Pros and Cons of the company in China
See below for more detailed information on the conditions of registration and maintenance of a company with 100% foreign capital in China:
- The ability to legally conduct independent economic activities in the PRC.
- The ability to conduct import and export activities, conduct customs procedures, and issue import and export documents on the territory of the PRC on behalf of your Chinese company.
- The ability to conduct trade operations (purchase, promotion of products, sale, resale of goods) in the domestic market of China, or engage in production and other commercial activities in China.
- The ability to conduct international currency transactions using the account of a Chinese company, the ability to accept payments to an account with a Chinese bank in yuan, and convertible currency.
- The ability to return the “input” VAT when exporting goods (after completing certain procedures).
- Possibility of obtaining loans from Chinese banks (if banking requirements are met).
- The possibility of hiring employees (Chinese and foreign persons) and issuing visa documents for foreign employees (and their family members) for work and permanent residence in China.
- Normal conditions for working in China, which are manifested in the absence of strict supervision over the activities of enterprises by the Chinese administrative authorities, relative safety.
- Developed transport, financial, and industrial infrastructure in the PRC.
- Financial, economic, political stability in China, etc.
Availability of taxation: income tax, etc.
The need to maintain accounting records and undergo an annual audit.
The presence of currency, and customs control.
The need for the actual transfer of the amount of the authorized capital to the account of the authorized capital of the company from the account of the founder. However, it is possible to pay the authorized capital of a Chinese company in installments over many years. These funds are used to pay expenses in the course of the company’s economic activities (purchase of goods, etc.).