# Company in China > Guide to forming a WFOE in mainland China: foreign ownership, tax, fapiao, SAFE currency control, bank account setup, and regional choice. Author: Дана Берзег — юрист, Family Office (https://wiki.private.law/authors/berzegova) Last modified: 2026-06-04T06:09:00.000Z Canonical: https://wiki.private.law/en/company-china Topics: structures Jurisdictions: china Functional tags: audit Semantic tags: audit --- 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 > 💡 China operates under aNegative List: industries on the list are closed or restricted to foreign capital, everything else is open to WFOE without special approvals. The current version isNegative List 2024. ## 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. > 💡 Prior to the 2024 revision, two individuals were required — a director and a supervisor. Now with a single shareholder, one director without a separate supervisor is sufficient. 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). > 💡 Since July 1, 2024, the new revision of the Company Law of the PRC limits the term for payment of registered capital to5 yearsfrom the registration date. For companies registered before this date, there is a transition period until June 30, 2027. ## 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. | Tax | Rate | Basis | | --- | --- | --- | | Corporate Income Tax (CIT) | 25% | Enterprise Income Tax Law, art. 4 | | CIT for High & New Technology Enterprise (HNTE) | 15% | Enterprise Income Tax Law, art. 28 | | CIT for small low-profit companies | Effective ~5% on first ¥3,000,000 of profit | Caishui [2023] No. 12, extended to 2027 | | VAT — goods | 13% | Provisional Regulations on VAT | | VAT — services | 6% | Ibid. | | VAT — transport, logistics | 9% | Ibid. | | Withholding Tax on dividends | 10% (may be reduced under DTT) | Enterprise Income Tax Law, art. 3, 27 | ### 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. > 💡 Export VAT refund — is an actual cash refund from the state. The refund rate depends on product category: from 0% to 13%. For electronics — typically 13%, for textiles — 10-13%. The process takes 1-3 months. Without your own company in China with an export license, this refund cannot be obtained. ### 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 CIT declaration — byMay 31of the following year. Annual audit is not mandatory for small companies, but the tax bureau may request audited statements during an inspection. | Number of transactions / month | Monthly accounting | | --- | --- | | Up to 25 | €750 | | 26-50 | €900 | | 51-100 | €1,200 | | More than 100 | €1,200 + €4 per each additional entry | 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. ### Shanghai— financial and trading hub Shanghai — the first city to launch a pilot Free Trade Zone (2013). Shanghai FTZ includes zones Pudong, Lingang, Waigaoqiao and others. For whom:international trade, logistics, consulting, financial activities, technology. Main advantage:ease of opening a bank account in mainland China. All major banks (ICBC, Bank of China, China Merchants Bank) have specialized branches for foreign companies. Taxes:standard CIT rate 25%. IT companies with HNTE status — 15%. Small low-profit companies — effective rate ~5%. Virtual address:permitted in FTZ. Cost — €1,850/year. Registration:15-20 business days. Export-import license — another 5-10 business days. Account opening:25-30 business days. Cost — €3,000-15,000 (depends on bank and structure complexity). Registration cost:€4,000. > 💡 Shanghai — optimal choice for companies that need a working bank account in China and export-import operations. Banks here are accustomed to foreign structures and process KYC faster than in other cities. ### Shenzhen (Guangdong)— manufacturing and cross-border trade with Hong Kong Shenzhen borders Hong Kong and is the center of electronics industry, hardware and cross-border e-commerce. Qianhai FTZ — special zone for service companies with simplified registration procedure. For whom:electronics, hardware, cross-border e-commerce, "Hong Kong + mainland China" linkage. Main advantage:proximity to Hong Kong (40 minutes by metro). You can manage a Chinese company while living in Hong Kong. Developed ecosystem of suppliers and manufacturing. Taxes:CIT 25%, but in Qianhai FTZ companies from the Encouraged Catalogue pay15%(extended until 2025, further extension expected). HNTE — 15% city-wide. Virtual address:available in Qianhai FTZ. Registration:15 business days. Features:Shenzhen is the only city where cross-border RMB settlement with Hong Kong can be arranged directly via simplified procedure. > 💡 If you already have a company in Hong Kong and need access to manufacturing or direct contracts with Chinese factories — Shenzhen offers the shortest chain. HK↔Shenzhen payments clear in 1-2 days. ### Hainan (Hainan FTP)— minimal taxes and zero customs duties Hainan is China's only full-fledged Free Trade Port. Since 18 December 2025, the island has transitioned to an island-wide customs closure regime: imports of ~6,600 product categories (74% of all imports) are exempt from customs duties, VAT and excise taxes. For whom:technology companies, tourism, modern services, zero-duty goods trade, international funds. Taxes: - CIT15%for companies in Encouraged Industries (extended until end of 2027 — Caishui [2025] No. 4) - Personal income tax for qualified professionals — maximum15%(standard top rate in China — 45%) - Zero customs duties on raw materials, equipment and most goods - CIT exemption on income fromnewforeign branches and dividends from foreign subsidiaries (effective from 2025) Limitation:to qualify for CIT 15%, at least 60% of revenue must come from encouraged industries, and the company must conductsubstantive operationsin Hainan. Registration:10-15 business days. Procedure simplified compared to mainland cities. > 💡 Hainan is the most aggressive tax jurisdiction in China. CIT 15%, personal income tax 15%, zero duties, exemption from tax on foreign income — this is closer to Hong Kong and Singapore than to mainland China. But there's a caveat: banking infrastructure on the island is weaker than in Shanghai or Shenzhen, and banks scrutinize substance more carefully. ### Hangzhou (Zhejiang)— e-commerce and technology Hangzhou is the headquarters of Alibaba Group and China's largest e-commerce hub. Hangzhou Cross-Border E-Commerce Comprehensive Pilot Zone is the country's first zone for cross-border e-commerce (launched in 2015). For whom:e-commerce (Tmall, Taobao, 1688, Pinduoduo), SaaS, digital marketing, software development. Main advantage:Alibaba ecosystem + developed infrastructure for cross-border e-commerce. Simplified customs procedure for online sales (models 9610 and 1210). Local subsidies for technology companies. Taxes:CIT 25%. HNTE — 15%. Zhejiang has local subsidies: partial refund of paid CIT at district level (up to 40% of tax amount in first 3 years — depends on district and investment volume). Virtual address:available in select zones. Registration:15-20 business days. > 💡 If business involves sales on Chinese marketplaces — Hangzhou provides access to the country's largest pool of e-commerce specialists and simplified customs procedure for parcel trade. ### Chengdu (Sichuan)— low cost and western China Chengdu is the largest economic center in western China. Chengdu Hi-Tech Industrial Development Zone and Tianfu New Area attract foreign investment with aggressive subsidies. The city is part of the Western Development Strategy (西部大开发), which provides additional tax incentives. For whom:low-cost manufacturing, back-office operations, IT outsourcing, companies working with the domestic market in western and central China. Main advantage:rental and salary costs 40-50% lower than in Shanghai and Shenzhen. At the same time, developed logistics — Chengdu-Europe freight rail route (12-16 days). Taxes:CIT 25%. Companies from the Encouraged Catalogue under the Western Development Strategy pay15%CIT (extended until 2030 — Caishui [2020] No. 23). HNTE — 15%. Registration:15-20 business days. Subsidies:Chengdu Hi-Tech Zone offers rental grants (up to 50% reimbursement in first 3 years), hiring subsidies, R&D expense reimbursement. > 💡 Chengdu is the best option for companies that need a physical operational base in China with minimal expenses. CIT 15% under Western Development Strategy, low rent and salaries, direct rail to Europe. ### Harbin (Heilongjiang)— gateway to Russia and Northeast Asia Harbin is the largest industrial center in Northeast China (Heilongjiang), historically connected with Russia. Convenient for Trans-Siberian logistics and trade with CIS countries. | Parameter | Shanghai | Shenzhen | Hainan | Hangzhou | Chengdu | Harbin | | --- | --- | --- | --- | --- | --- | --- | | CIT | 25% (HNTE 15%) | 25% (Qianhai / HNTE 15%) | 15% | 25% (HNTE 15%) | 25% (WDS / HNTE 15%) | 25% (HNTE 15%) | | Customs duties | 0% in FTZ (on imports into the zone) | 0% in FTZ | 0% on 74% of goods | Standard | Standard | 0% in Bonded Zone | | Banking | 🍓🍓🍓 | 🍓🍓🍓 | 🍓🍓 | 🍓🍓 | 🍓🍓 | 🍓🍓 | | Virtual address | Yes (FTZ) | Yes (Qianhai) | Yes | Limited | Limited | Limited | | Office rental cost | High | Medium-high | Medium | Medium | Low | Low | | Registration | 15-20 days | 15 days | 10-15 days | 15-20 days | 15–20 days | 15–20 days | | Profile | Trade, finance, consulting | Electronics, hardware, Hong Kong linkage | Tax optimization, free import | E-commerce, IT | Manufacturing, back-office, logistics to Europe | Trade with Russia, agriculture, Russia–China logistics | ## 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) > 💡 Personal presence of Legal Representative in Chinamandatoryfor account opening. The bank conducts face-to-face verification, but for particularly interesting projects it may be possible to arrange sending a passport or apostilled copy. We work as partners with the following banks and support account opening from document preparation to online banking activation: | Bank | Specialization | | --- | --- | | China Everbright Bank | Trade finance, cross-border settlements, work with non-residents | | Harbin Bank | Settlements with Russia and CIS, RMB/RUB operations, border trade | | ICBC | World's largest bank by assets, full range of corporate services | | Bank of China | International operations, currency control, correspondent network | | China Merchants Bank | Online banking with English interface, convenient for foreign companies | | Agricultural Bank of China | Work with agricultural sector and regional operations | | CZCB — Zhejiang Chouzhou Commercial Bank | RMB settlements, service for trading companies, work with non-residents of the PRC | | VTB Bank Shanghai | China corridor settlements, Russian-language service, correspondent accounts with sanctioned banks | 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 > 💡 Payments abroad exceeding $50,000 in a single transaction undergo enhanced SAFE verification. The bank will request contract, invoice, tax payment confirmation and transaction description. Prepare documents in advance — this speeds up the process from a week to 1-2 days. ## Launch costs | Stage | Cost | Timeline | | --- | --- | --- | | WFOE registration | €4,000 | 15-20 business days | | Export-import license | €1,850 | 5–10 business days | | Bank account opening | €3,000–15,000 | 25–30 business days | | Virtual office (12 months) | €1,850 | — | | Total (first year) | €10,700–20,700 | 45–60 business days | Annual maintenance (accounting + annual filing with minimal transactions): from€11,400/year(€750 × 12 + €2,400). --- --- ## Factual claims - Lawyer, Family Office - Lawyer, Family Office - The ChineseWholly Foreign-Owned Enterprise (WFOE)— is the form in which a foreign owner holds100%of a company in mainland China. - Total time from document submission to operational company with account:45-60 business days. - 10% withholding tax when paying dividends to a foreign shareholder. - 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). - Annual declaration — €2,400. - Annual maintenance (accounting + annual filing with minimal transactions): from€11,400/year(€750 × 12 + €2,400).