Establish a Chinese Company

Hong Kong companies can conduct business in mainland China, but the methods and restrictions depend on the nature of the business.

Main methods include:

• Establish a Wholly Foreign-Owned Enterprise (WFOE) - This is the most common method, where a Hong Kong company acts as a foreign shareholder to establish a wholly-owned or joint venture enterprise in mainland China
• Establish a representative office - Can only engage in non-profit activities such as liaison and market research, cannot directly conduct business
• Cross-border e-commerce - Trade through cross-border e-commerce platforms without registering an entity in mainland China
• Appoint agents - Commission mainland Chinese companies to act as sales or procurement agents

Whether a Chinese company registration is needed depends on: If you need to directly operate in mainland China, issue invoices, employ staff, sign contracts, etc., you usually need to register a Chinese company (WFOE). If you are only conducting trade or market research, you may not need to register a physical company.

We recommend choosing the most suitable method to enter the mainland market based on your specific business needs, and we can assist you in completing the relevant registration procedures.

The basic requirements for registering a company (WFOE) in China are as follows:

Shareholder requirements:

• At least 1 shareholder (can be individual or company)
• Foreign shareholders can be Hong Kong companies, overseas companies or foreign individuals
• No nationality restrictions for shareholders

Director requirements:

• At least 1 director (can be one of the shareholders)
• Directors can be foreign nationals or Chinese citizens
• No residency restrictions

Legal representative:

• Must appoint 1 legal representative
• Legal representative needs to provide contact information within China
• Usually held by director or general manager

Registered capital:

• No minimum registered capital requirement (most industries)
• Registered capital can be paid in installments
• Certain special industries (such as finance, construction) have minimum capital requirements

Registered address:

• Must have an actual business address in China
• Need to provide lease contract and property ownership certificate
• Address must be for commercial use (cannot be residential)

Business scope:

• Need to clearly list the company's business scope
• Some industries require special approvals or licenses
• Business scope will affect tax and regulatory requirements

We can assist you in assessing whether you meet the registration requirements and provide supporting services such as registered address and bookkeeping agency.

Chinese companies are mainly subject to the following taxes:

Corporate income tax:

• Standard rate - 25%
• Preferential rate for small low-profit enterprises - For annual taxable income not exceeding RMB 1 million, 12.5% is included in taxable income and taxed at 20% (effective rate 2.5%); for the portion exceeding RMB 1 million but not exceeding RMB 3 million, 50% is included and taxed at 20% (effective rate 10%)
• High-tech enterprises - 15% preferential rate

Value-added tax (VAT):

• General taxpayers - Tax rates of 6%, 9% or 13% (depending on industry)
• Small-scale taxpayers - Levy rate of 3% (can be reduced to 1% in some cases)
• Can deduct input VAT

Other taxes:

• Individual income tax - Employee wages require withholding, progressive rates of 3%-45%
• Urban maintenance and construction tax - 7% of VAT (urban areas) or 5% (counties, towns)
• Education surcharge - 3% of VAT
• Local education surcharge - 2% of VAT
• Stamp duty - 0.03%-0.1% of contract amount

Tax filing:

• VAT - Monthly or quarterly filing
• Corporate income tax - Quarterly prepayment, annual final settlement
• Individual income tax - Monthly filing

Tax incentives:

• Additional deduction for R&D expenses - 75%-100%
• Accelerated depreciation of fixed assets
• Preferential policies in specific regions (such as free trade zones, special economic zones)

We provide professional tax planning and agency filing services to help you legally save taxes and ensure compliance.

Employing staff in China requires compliance with strict labor laws and regulations. Main considerations are as follows:

Employment contract:

• Must sign - Must sign written employment contracts when hiring employees
• Contract term - Fixed term, non-fixed term, or term based on completion of specific work tasks
• Probation period - Maximum 6 months, depending on contract term
• Contract content - Must include job content, work location, working hours, remuneration, social security, etc.

Social insurance and housing fund:

• Five insurances and one fund - Pension insurance, medical insurance, unemployment insurance, work injury insurance, maternity insurance, housing provident fund
• Mandatory contribution - Enterprises must contribute social security and housing fund for employees
• Contribution ratio - Enterprises bear approximately 30-40%, individuals bear approximately 10-20% (ratios vary slightly by region)
• Contribution base - Determined based on employee's average monthly salary in previous year

Wages and benefits:

• Minimum wage - Cannot be lower than local minimum wage standard
• Overtime pay - 1.5 times for weekday overtime, 2 times for weekends, 3 times for statutory holidays
• Annual leave - Entitled to 5-15 days paid annual leave after working for 1 year
• Statutory holidays - Approximately 11 statutory holidays per year, wages must be paid

Working hours:

• Standard hours - 8 hours per day, 40 hours per week
• Overtime limits - Daily overtime not exceeding 3 hours, monthly not exceeding 36 hours
• Rest days - At least 1 rest day per week

Dismissal regulations:

• Legal grounds - Need legal grounds for dismissal (such as serious misconduct, incompetence, etc.)
• Economic compensation - No-fault dismissal requires payment of economic compensation (1 month's salary for each full year worked)
• Advance notice - Usually requires 30 days written notice or additional payment of 1 month's salary

Foreign employees:

• Work permit - Foreign employees need to apply for work permit and work-type residence permit
• Application requirements - Need to meet education, work experience and other requirements
• Processing time - Approximately 1-2 months

We provide human resources consultation, social security payment agency, work permit application and other services to assist you in compliant employment and staff management.

China implements "negative list" management for foreign investment, with certain industries restricted or prohibited for foreign capital entry.

Prohibited industries (foreign capital cannot invest):

• Rare earth smelting
• Production and wholesale of tobacco products
• Social surveys
• Chinese legal affairs consulting (excluding provision of international law and foreign law information consulting)

Restricted industries (require special approvals or have shareholding ratio restrictions):

• Telecommunications services - Foreign capital ratio not exceeding 50%
• Internet information services - Foreign capital ratio not exceeding 50%, requires special approval
• Education services - Compulsory education, military education, etc. prohibit foreign capital, other education services require Chinese controlling stake
• Medical services - Requires health department approval
• Publishing, news, broadcasting - Prohibited or strictly restricted for foreign capital
• Financial services - Banking, insurance, securities, etc. require special licenses and approvals

Industries requiring special licenses:

• Food production and sales - Requires food business license
• Pharmaceuticals and medical devices - Requires pharmaceutical business license or medical device business license
• Import and export trade - Requires import and export rights filing
• Road transportation - Requires road transportation business license
• Labor dispatch - Requires labor dispatch business license
• Human resources services - Requires human resources service license

Encouraged industries (enjoy preferential policies):

• High-tech industries
• Advanced manufacturing
• Modern service industries
• Energy conservation and environmental protection industries
• R&D centers

Free trade zone benefits: In free trade pilot zones (such as Shanghai Free Trade Zone, Shenzhen Qianhai, etc.), entry barriers for some restricted industries are lower and enjoy more preferential policies.

Recommendation: Before determining business scope, it is recommended to consult professional advisors to confirm whether your industry is restricted and what special approvals or licenses are needed. We can assist you in assessing industry entry conditions and handling relevant licenses.

A WFOE (Wholly Foreign-Owned Enterprise) refers to an enterprise established in China by foreign investors with all capital invested by foreign investors.

Main features of WFOE:

• 100% foreign ownership - No need for Chinese partners, completely controlled by foreign capital
• Independent legal person - Has independent legal person status in China and can operate independently
• Limited liability - Shareholders' liability is limited to their capital contribution
• Autonomous operation - Can make decisions, manage and operate independently
• Can issue invoices - Can issue Chinese VAT invoices and conduct normal business activities

Comparison with other types:

• Sino-foreign joint venture (JV) - Requires Chinese partners, shared equity, decisions need bilateral consultation
• Representative office - Cannot directly operate, can only engage in non-profit activities such as liaison and market research, cannot issue invoices or employ staff (except chief representative)
• Individual business - Suitable for small businesses operated by individuals, unlimited liability

Advantages of WFOE: Complete control, intellectual property protection, independent decision-making, ability to repatriate profits overseas.

WFOE is suitable for foreign enterprises hoping to develop long-term in China and requiring complete control and independent operation.

The processing time for registering a Chinese company (WFOE) is as follows:

Processing time:

• Name pre-approval - Approximately 3-5 working days
• Commerce department filing - Approximately 10-15 working days
• Business registration - Approximately 5-7 working days
• Seal engraving - Approximately 2-3 working days
• Bank account opening - Approximately 10-15 working days
• Tax registration - Approximately 3-5 working days

Total time: The entire process generally takes 1.5-2 months to complete, depending on the region and industry. Some special industries require additional approvals and will take longer.

Service fees: We offer WFOE registration in Shenzhen, Qianhai and Guangzhou, covering name approval, business registration, seal engraving (company seal, financial seal, legal representative seal, invoice seal), first-year bookkeeping and tax filing, bank account opening assistance and tax registration. Actual fees depend on the location, industry complexity and address arrangements — there is no flat rate, and we provide a detailed quotation once we understand your case.

Subsequent costs: Bookkeeping, annual audit, and employee social security and housing fund contributions (if you hire staff), which vary with company size and headcount. Social insurance is often underestimated, so plan for it early.

Contact us for a detailed quotation.

Yes, Chinese companies need to conduct audits and annual reports. Specific requirements are as follows:

Annual audit:

• Statutory audit - All enterprises must conduct financial statement audits annually
• Audit report - Must be issued by Chinese certified public accountants
• Audit timing - Usually conducted in March-May each year for the previous year
• Audit content - Includes balance sheet, income statement, cash flow statement, etc.

Annual business report:

• Report period - January 1 to June 30 each year
• Report content - Basic enterprise information, shareholder information, asset status, social security information, etc.
• Publicity requirement - Annual report information will be published on the National Enterprise Credit Information Publicity System
• Consequences of late reporting - Will be listed in the abnormal operation directory, affecting enterprise reputation and business development

Annual corporate income tax settlement:

• Filing deadline - Complete previous year's corporate income tax final settlement by May 31 each year
• Filing content - Adjust annual taxable income, calculate tax payable or refundable
• Documents to submit - Annual financial statements, audit report, final settlement return

Other annual work:

• Social security and housing fund annual inspection - Need to report and adjust contribution base annually
• Statistical annual report - Some enterprises need to submit annual statistical data to statistics departments
• Foreign exchange annual inspection - Enterprises with foreign exchange business need to conduct foreign exchange annual inspection

Consequences of non-compliance: Failure to conduct audits or annual reports on time may result in: fines, listing in abnormal directory, affecting bank loans, inability to issue invoices normally, etc.

We provide one-stop audit, annual report and tax filing services to ensure your company operates in compliance.

Yes, but must comply with China's foreign exchange management regulations and tax requirements.

Conditions for profit repatriation:

• Complete tax filing - Must complete annual corporate income tax final settlement
• Provide audit report - Need to provide audited financial statements
• Board resolution - Pass board resolution for profit distribution
• Taxes paid - Have paid all corporate income tax due

Profit repatriation process:

1. Board resolution - Pass profit distribution resolution, determine distribution amount
2. Tax filing - Report profit distribution to tax bureau, pay withholding income tax
3. Bank application - Submit profit repatriation application and related documents to bank
4. Foreign exchange registration - Complete foreign exchange registration procedures
5. Remittance - Bank remits to overseas account after approval

Withholding income tax:

• Standard rate - 10%
• Hong Kong company preferential rate - According to the "Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income", can enjoy 5% preferential rate if conditions are met
• Application requirements - Need Hong Kong tax resident certificate issued by Hong Kong Inland Revenue Department

Required documents:

• Board resolution
• Audit report
• Tax payment certificate
• Hong Kong company business registration certificate
• Hong Kong tax resident certificate (if applying for preferential rate)
• Other documents required by bank

Notes:

• Can only remit after-tax profits, cannot remit registered capital
• Need to retain sufficient statutory reserve fund (10% of after-tax profits)
• Remittance amount must be consistent with audit report and tax filing
• Recommend advance planning to ensure all documents are complete

We provide full assistance for profit repatriation, including tax filing, document preparation, bank communication, etc., to ensure smooth remittance.

Yes. Chinese companies can be legally deregistered, but the procedure is relatively complex and time-consuming.

Common reasons for deregistration:

• Business termination or transfer
• Shareholders decide to dissolve company
• Company merger or division
• Business term expires
• Business license revoked or ordered to close by law

Deregistration procedure:

Step 1: Establish liquidation group (approximately 5-7 working days)

1. Shareholders' meeting resolution to dissolve company
2. Establish liquidation group and file with business administration department
3. Publish liquidation announcement in newspaper or National Enterprise Credit Information Publicity System

Step 2: Liquidation work (approximately 45-60 days)

1. Clear company assets, prepare balance sheet and asset inventory
2. Notify and announce to creditors
3. Handle company's unfinished business related to liquidation
4. Pay off owed taxes and taxes generated during liquidation
5. Clear creditor's rights and debts
6. Handle remaining assets after company settles debts
7. Represent company in civil litigation

Step 3: Tax deregistration (approximately 15-30 working days)

1. Apply to tax bureau for tax deregistration
2. Submit liquidation report and tax liquidation statement
3. Pay all taxes and penalties
4. Surrender invoices and tax control equipment
5. Obtain tax deregistration certificate

Step 4: Business deregistration (approximately 5-10 working days)

1. Submit deregistration application to business administration department
2. Submit liquidation report, tax deregistration certificate and other documents
3. Surrender business license
4. Obtain deregistration notice

Step 5: Other deregistrations (approximately 10-20 working days)

1. Bank account deregistration
2. Social security account deregistration
3. Housing fund account deregistration
4. Customs deregistration (if have import/export rights)
5. Seal destruction

Total time: The entire deregistration process generally takes 3-6 months, depending on company situation and region.

Deregistration costs: Including liquidation audit fees, publication fees, professional service fees, etc., which vary by case — contact us for a quotation.

Notes:

• Must settle all debts and taxes
• Employees need proper placement and payment of economic compensation
• Companies that have not filed annual reports on time or have other violation records need to first remove abnormal status before deregistration
• If company has pending litigation, need to wait until litigation ends before deregistration

Simplified deregistration: Enterprises meeting conditions (such as not yet operating or no creditor's rights and debts) can apply for simplified deregistration, with faster process, approximately 20-30 working days.

We provide full company deregistration services, including liquidation, tax deregistration, business deregistration, etc., to assist you in smoothly completing the deregistration procedure.