🇨🇳Company in China

Lawyer, Family Office

Author:Dana Berzegova

Lawyer, Family Office

Concept

The ChineseWholly Foreign-Owned Enterprise (WFOE)— is the form in which a foreign owner holds100%of a company in mainland China. In the register this is a Foreign-Invested Limited Liability Company under theForeign Investment Law of the PRC(effective from January 1, 2020).

WFOE is used when you need to:

• enter into contracts with Chinese counterparties on behalf of a Chinese legal entity
• issue fapiao (official tax invoices)
• hire employees in the PRC
• receive payments in RMB to a Chinese bank account
• repatriate profits as dividends after taxes and SAFE procedures

Structure and requirements

To register a WFOE you need at least onedirector(Legal Representative), who signs contracts, manages the account and represents the company before government authorities. Since the 2024 revision of theCompany Law of the PRC2024, limited liability companies may not appoint a supervisor (Art. 83), which simplifies the WFOE structure for a sole shareholder.

Minimum registered capital has been formally abolished for most industries, but in practice banks and counterparties look at this figure. For a trading company, a reasonable minimum is ¥500,000 (≈ €63,000). For consulting — ¥100,000 (≈ €12,600). Capital can be contributed within the period specified in the Articles of Association — typically 20-30 years under the new Company Law (the 2024 revision sets a maximum of 5 years from the registration date for new companies).

Registration process

1. Name approval— you submit an application to the Administration for Market Regulation (AMR). The name must be in Chinese and include: region + name + industry + organizational form. Example: 上海XX贸易有限公司 (Shanghai XX Trading Co., Ltd). 1-3 business days.
2. Document preparation— Articles of Association, Feasibility Study Report, office lease agreement (or virtual address in zones where permitted), notarized and legalized shareholder documents through the Chinese consulate.
3. Obtaining Business License— AMR issues a license with a Unified Social Credit Code (which also serves as the tax number). 5-10 business days.
4. Making seals— company seal (official seal), financial seal, Legal Representative seal. Without seals you cannot open an account or sign contracts.
5. Tax registration and fapiao— registration with the tax bureau, activation of the fapiao issuance system (Chinese tax invoices).
6. Opening a bank account— a separate stage, takes 25-30 business days.
7. Foreign exchange registration (SAFE)— if you plan to receive foreign currency or contribute registered capital from abroad.
8. Customs registration— if the company conducts import/export.

Total time from document submission to operational company with account:45-60 business days.

Taxes

China applies aresident taxation system: a company registered in the PRC or managed from the PRC pays tax onworldwide income. This is a fundamental difference fromHong KongandSingaporewith their territorial principle.

How VAT works

VAT in China is fully refundable for general VAT taxpayers (standard category for WFOE). You charge output VAT on sales and deduct input VAT on purchases. The difference is paid monthly. Export of goods is taxed at 0% with input VAT refund — this is one of the main reasons to register a trading company in mainland China rather than Hong Kong.

Tax on dividends

10% withholding tax when paying dividends to a foreign shareholder. If there is a double taxation treaty (DTT) between China and the shareholder's country of residence, the rate can be reduced to 5% (Hong Kong, Singapore when holding ≥25% of capital).

Since 2025, a new incentive applies: when reinvesting profits in companies from the Encouraged Catalogue, the foreign investor receives a10% tax crediton the amount of reinvestment (provided the investment is held for at least 5 years). The policy is effective until December 31, 2028.

Reporting and accounting

China hasmonthlyaccounting reporting. Each month the company files:

• VAT declaration (by the 15th of the following month)
• CIT declaration (quarterly advance, by the 15th of the month following the quarter)
• Payroll and social contribution reports

Annual declaration — €2,400.

Domicile for registration

The choice of region and city for domicile determines access to banks, maintenance costs, tax incentives and speed of government agencies.

Opening a bank account

Opening an account in mainland China is a separate project. Banks conduct due diligence, and the process takes 25-30 business days after obtaining the Business License.

Documents for the bank:

• Business License (original)
• All company seals
• Articles of Association
• Passport and biometric data of Legal Representative
• Office lease agreement
• Business description (business plan / narrative pack)

We work as partners with the following banks and support account opening from document preparation to online banking activation:

Bank selection depends on registration city, business profile and payment direction. For trade with Russia — Everbright and Harbin Bank provide the shortest payment processing times. For international operations in Shanghai and Shenzhen — ICBC and Bank of China.

Currency control

China applies strict currency control through the State Administration of Foreign Exchange (SAFE). Key rules:

• Registered capital is contributed in foreign currency to a special capital account and converted to RMB as needed
• Profit repatriation — after payment of CIT and withholding tax, provision of audited statements and tax certificate
• Payment for services abroad — requires contract, invoice and tax confirmation (withholding tax certificate)
• Dividend transfer — 1-5 business days after submitting documents to the bank

Launch costs

Annual maintenance (accounting + annual filing with minimal transactions): from€11,400/year(€750 × 12 + €2,400).