Every investor is headed to China! For about 20-30 years, China has emerged as the first choice for investors and multinationals because it provides them with the perfect launching pad to success. The jurisdiction adopted economic reforms in 1979, and its relentless efforts to support businesses are now bearing fruits.
The country’s GDP has grown at supersonic speed to hit US$17.96 trillion (2021estimates) and is showing no sign of slowing down. If you want to see your company grow into that dream brand, it is time to register it in China.
Despite the multiple benefits, such as large population and strategic location, many are entrepreneurs who are unsure about making the big move of expanding into China. This post will take a closer look at company formation in China to answer the common questions.
What Option Do You Have when Registering a Company in China?
China offers a long list of company types that you can use to enter and do business there. However, three of them are the most common, and we are going to list them:
- WFOE (Wholly foreign-owned enterprise): As the name suggests, this type of company allows 100% foreign shareholding in your company. It is the most preferred form of business structure in China because it gives investors autonomy in decision-making.
- Joint Ventures (JVs): Unlike WFOEs, JVs require you to enter into a partnership with local Chinese. The law also requires the Chinese partner to hold majority shareholding.
- Representative Office (RO): This company is considered an extension of your parent company registered back home. The main challenge of using an RO is that it is not allowed to undertake profit-making deals. Remember that China requires that only parent companies that take the form of limited liability companies and that are more than two years old can form a representative office.
Is It a Must to Have China-Based Company Directors and an Office in China?
When forming a company in China, there are no restrictions on the nationality or residency of directors. However, you will be required to have a legal representative based in China to help the company with compliance.
When it comes to address, the Chinese company law requires that every company must have an office. Remember that this is not a virtual office but a physical one that the authorities can visit to check the progress of the company. They can make unannounced office visits to check for compliance with different company laws, such as the register of controlling shareholders and tax-related records.
What Tax Obligations Does Your Company in China Have?
When it comes to matters of taxes, China takes them very seriously. Noncompliance can attract serious penalties from the Chinese authorities and even cancellation of the business license. Here are the main tax obligations you need to know about:
- Corporate tax of 25%.
- Turnover tax of 3-5%.
- Value-added tax of 3-9% depending on the industry.
- Custom duties on products exported or imported to China.
What is the Best Way to Register a Company in China?
The best method of registering a company in China is working with an agency of experts. These agencies have professionals with a lot of experience about company registration in China, and you can count on them to complete the process fast. They can help you to prepare all the required documents and work with different departments. This means that instead of following up with the registration process, which can be pretty complex, you can focus on sourcing funds for company operations in China.
When you bring on board the best agency of experts, they do not just help you register the company, but will also be there during entry into the new market. One of the top-rated agencies of experts is Hawksford, and you can count on it for company registration, entry into the new Chinese market, and other executive functions. No matter what you want to make your company thrive in China, Hawksford can help.
