Company Registration in China
Asia’s main hub is China, which is followed by Japan and India. Because of this, China attracts a lot of foreign investment. With a GDP of roughly USD 14 trillion, China is regarded as having the second largest economy in the world. In addition to this, China contributes because it is the world’s largest exporter. Due of China’s high population density and affordable labour, firms are looking to develop there. The procedure for registering a company in China is drawn out but simple.
- Procedure for Company Registration in China
- Documentation required for Company Registration in China
- China Company Registration end to end process
- Liaising with the concerned regulatory authorities for Company registration
Company Registration in China- An Overview
When it comes to exports of goods like electronics and other items, China is the world’s exporting powerhouse. It has the best facilities in the world for product manufacturing because to its seamless manufacturing capabilities. Until now, multinational corporations like Apple and Microsoft have looked to China for their manufacturing resources. Another reason why businesses favour investing in China is the availability of cheap labour. As a result, businesspeople and investors register their companies in China.
With a GDP of roughly USD 14 trillion, China is regarded as having the second largest economy in the world. In addition, with 1.34 billion people, China has the greatest population in the world. The nation is situated adjacent to other developing nations, including Indonesia and India.
Due to China’s affordable labour, many businesses desire to establish local manufacturing facilities there. In addition, purchasing various types of raw materials and supplies is affordable when compared to other nations. Thus, businesses favour investing in China. In terms of global infrastructure and chances for research and development, China’s resources are quite competitive. Investors who want to open a business in China can take advantage of all the aforementioned perks.
Benefits of Company Registration in China
After America, China has the second-largest economy in the world. This makes it a suitable location for entrepreneurs and venture capitalists to conduct all types of investment activity.
Low-cost Labor Security In China, labour is inexpensive. When compared to other nations, China offers a daily wage that is somewhat lower. Thus, businesses can operate more quickly while investing less in labour. In addition, professionals give services around-the-clock, making it simple to perform various tasks.
Asia’s largest markets
Asia’s greatest economy is that of China. Due to many incentives provided by the government, it has grown to become the greatest economy in Asia.
There are many incentives connected to import levies on goods that are brought into the nation when Chinese companies import equipment. Chinese businesses now have greater options to gain from their investments in terms of added value. Without any tax repercussions in the US, American businesses can invest in China.
Large-scale Resource Availability
China’s manufacturing industries have access to energy and water for a variety of tasks.
Types of Business Structures used for Company Registration in China
Even if there are numerous advantages to starting a business in China, it is not simple to register a corporation there. This is because businesses must adapt to a fast-paced, constantly changing business environment. In addition, there are a number of industries with prohibitions on international investment. So, it’s crucial to pick a suitable structure before registering your company in China.
The varieties of business structures for registering a corporation in China are as follows:
100% foreign-owned business
The owners of this Chinese limited liability business are foreigners. The concept of limited liability is one of the key advantages of creating this kind of corporation. The directors’ and shareholders’ liability is only capped at a certain level.
Business for China Free Zone
The foreign investor may choose to invest in special economic zones while establishing a China Free Zone Business (SEZ). Typically, if a foreign investor needed to establish an export-oriented unit, they would think about founding this company (EoU).
Equity Venture Corporation of China
Typically, this business is also referred to as an equity joint venture company, or EJV. Typically, a foreign investor would establish this type of business. Together with a foreign investor, the company would also have a Chinese shareholder who would own a set amount of the company’s stock.
Typically, corporations that are reregistered outside of China are not permitted to open branch offices. Establishing a branch office in China is only permitted for businesses that are organised as wholly foreign owned enterprises (WFOE) or China Equity Venture companies.
The Chinese government permits foreign businesses to establish many kinds of representative offices there. Typically, commencing requires prior clearance from the State Agency for Market Regulation (SAMR).
A company incorporated in Hong Kong SAR is an offshore firm. This firm may be established because Hong Kong is still a part of China. The tax imposed in Hong Kong, however, is distinct from the tax imposed in China.
Eligibility Criteria for Company Registration in China
A potential applicant must meet the following requirements in order to be eligible for the company registration process in China:
- Directors Required: The company needs a minimum of 3 to 13 directors
- Chairman and Deputy Chairman: There must be a chairman and a deputy chairman for the company.
- Business location must have a registered address for the company in order to conduct operations in China.
- Legal Representative: In order to complete the steps involved in registering a company in China, a legal representative must be designated there.
- Reserved Name: In addition to this, the company’s name needs to be protected.
Procedure for Company Registration in China
China has a variety of business models. So, a suitable corporate structure must be chosen in accordance with the applicant’s needs in order to complete the China company registration process. It typically takes two to four months to complete the registration process.
The following steps must be taken in order to register a company in China:
Registration of a Chinese company name in advance
First and foremost, the applicant needs to reserve the company’s business name. This is the initial action that the applicant must take. Thus, the Administration of Industry and Commerce (AIC) permission would be necessary to ensure that the name does not clash with any existing names. The State Administration for Market Regulation is another avenue via which the name approval process can be conducted (SAMR). Once the applicant has reserved the name, the applicant may then submit an application for a business licence. Normally, it would take about 15 business days to complete the name approval procedure.
When the first stage is finished, there are compliances that need to be completed. The compliances that must be fulfilled are as follows:
- A local government authority must first pre-approve the lease agreement for the office in China. Municipal officials will also be a part in this.
- Minimum Paid Up Capital- There is no minimum paid up capital requirement for applicants for company registration in China. To register a corporation in China, it is usually advantageous to have a particular amount of paid-up capital. The paid up capital would typically be greater than USD 20,000 depending on the sort of business conducted in China. However, depending on the type of business, different Chinese businesses may require different minimum paid-up capitals. The paid up capital would typically be more if the business involves manufacturing. Typically, RMB 1,000,000 or USD 150,000 would be appropriate for this type of organisation.
- In accordance with the criteria of the People’s Republic of China’s Companies Law, the capital of the company must be approved by a public accountant.
- The Board of Supervisors, one shareholder, one director, and one legal representative must all be chosen by the Company.
- If a foreign investor intends to register the business as a Wholly Foreign Owned Business, they must register. The foreign investor enterprise filing might be used for this. The website of the Ministry of Trade would be used for this.
- To ensure that the firm complies with all regulations, a legal representative must be designated per Article 38 of the Chinese Companies Act. To manage the business of the company, a board of supervisors must also be chosen. The company’s directors are accountable to the board of supervisors.
A certificate of approval must be requested once the business name has been registered in China for company registration. The following documents are required in order to obtain the certificate of approval:
- The company’s name (As Approved)
- The business’s registered office address
- The legal representative’s ID
- The company supervisor’s ID
- Details about Directors and Shareholders
- Shareholders’ Notarial Papers
- The Memorandum of Agreement and the Articles of Association
- Company’s Registered Capital
- A budget-based feasibility study.
After receiving the aforementioned documents, the Ministry of Commerce (MOFCOM) will review them.
The applicant would then need to acquire the necessary business permits. The “five in one filing” approach, which enables the applicant to receive all business permits, is a commendable endeavour by the Chinese government.
The applicant would be granted the following licences:
- Business Permit
- Organization Registration Certificate/Organization Code
- Certificate of Tax Registration
- Certificate of Social Security Registration
- Certificate of Statistical Registration.
The business would next need to design an official stamp specifically for the business. All official documents would bear this company’s stamp.
Business Bank Account
After completing all of the aforementioned requirements, the business must open a corporate bank account.
Compliances for Company Registration in China
How is the process of company registration in China?
To ensure a smooth process, the applicant requesting registration must first select a suitable agent. The applicant would then need to maintain the firm name after this was done. An permission certificate is necessary, and all the paperwork must be ready.
Is it mandatory to carry out the compliances after registering the company?
Certainly, it is necessary to comply with regulations like filing information. This is a necessary step that the candidate must complete.
What is the difference between a wholly owned foreign subsidiary and a Chinese Equity Sharing Subsidiary?
An entity held entirely by foreign investors is referred to as a wholly owned foreign subsidiary. But, a Chinese stock-sharing subsidiary would also include a portion of equity from foreign investors.
Which regions would have the 15% tax?
There would be a 15% tax in places like Hainan, Guangdong, and Fujian.
Is there any form of withholding tax on China?
On dividends, interest, and royalties, there is a withholding tax that is applied. The rate of this tax is 15%.
Are there any form of foreign investment restrictions in China?
Absolutely, there are limitations on foreign investment in China imposed by the government.
Is there any form of minimum capital requirements for companies incorporated in China?
No, Chinese enterprises do not have to have a minimum amount of capital. But it is essential to have the bare minimum of capital. For instance, a consulting company can operate in China with capital of USD 20,000.