Business type:

WOFE:  Wholly Owned Foreign Enterprise is a company established within China in a certain industry without the need of a Chinese partner. Registering a foreign company in China is complex as it involves approval from multiple local authorities and bureaus. Our extensive network of local government bureaus contacts, knowledge of local regulations and experience with hundreds of projects already executed can help you accelerate your entry and growth in China.

  • the ability to uphold a company's global strategy free from interference by Chinese partners (as may occur in the case of JV)
  • total management control within the limitations of the laws of the PRC
  • the ability to both receive and remit RMB to the parent company overseas
  • increased protection of trademarks and intellectual property, in accordance with international law
  • shareholder liability limited to original investment

 

JV: A Joint venture is a company set up and invested by Sino and foreign investors. It effectively uses the advantages of local enterprises. Depending on the nature of the operations of the proposed joint venture company, certain additional government approvals, permits or licenses may be required, e.g., sanitation certificates, environmental permits, production approvals, export licenses, value-added telecom services operating licenses, etc. Certain other legal and practical considerations relating to the establishment of a Sino-foreign joint venture company are set out in the notes at the end of the template Joint Venture Contract.

 

RO:Representative Office(RO) is established by foreign companies to engage in operation of business liaising, quality control, product promotion, market research, exchange of technology and other permitted activities in China. ROs are not allowed to directly engage in operational activities, RO can't issue official invoices, nor receiving payments from it's clients. State Administration of Industry and Commerce (SAIC) usually specifies in scope of business, as it shown in the Registration Certificate of ROs, that ROs can not engage in direct operational activities. Therefore, it's not a form of foreign direct investment (FDI) in China. However, some ROs are engaged in operations in a lawful or tacitly permitted way and constitute one of the direct foreign Investment forms in China, for instance: ROs of foreign law firms, ROs of foreign airlines etc.

A Representative Office in China may only engage in non-profit making activities, it can carry out the following functions:

  • Conduct research and survey for its parent enterprise in the local market;
  • Liaise with local and foreign contacts in China on behalf of the parent enterprise;
  • Conduct research and provide data and promotional materials to potential clients or trading partners;
  • Act as a coordinator for the parent enterprise's activities in China;
  • Make travel arrangements for parent enterprise representatives and potential Chinese clients.

Offshore structure (Hong Kong Company Formation): Registering a company in Hong Kong gives the company many tax advantages. Tax rates are comparably much lower than Canada, UK, USA, China by OECD standards. It is largely a tax-free harbor for international businesses. Hong Kong remains one of the top twenty trading economies, the world's third largest financial center. Hong Kong has a role of being a major trading gateway into China mainland and Asia, generally some companies are formed in Hong Kong are for trading purposes, while some use is as a headquarters for it's operations in China mainland.

Hong Kong was a dependent territory of the United Kingdom from 1842 until July 1, 1997. Under the policy of "one country, two systems", the Central Government is responsible for the territory's defence and foreign affairs, while the Government of Hong Kong is responsible for its own legal system, police force, monetary system, customs policy, immigration policy etc.

Business Comparison:

WFOE/ JOINT VENTURE REPRESENTATIVE OFFICE HONG KONG COMPANY
Minimum Capital Starting from 100K RMB depending on location and business type Not register capital 1 HKD
Business Scope Specific Industry: Trading WFOE; Consulting WFOE, Manufacturing WFOE & etc. (Please refer to the diagram above) Liaision; Quality Control; Factory Visits All business activities offshore; General Trading
Office In an office building which can register business Shanghai: Grade A building; Beijing: office building Virtual address in HK
Working Visa 1 year multi-entry Visa. ( Note: number of foreign visa could be limited depend on start- up capital) 1 year multi-entry Visa Couldn't have work visa in China and HK
Recruiting Staff recruits staff directly (contact us to get more information on type of tax in related to business) Through Local HR agency Can't recruit staff in China
Taxation Turnover tax; Income tax, Dividend tax approx. 10-15% on expenses; individual income tax Corporate income tax: 16.5%. No dividend tax
Bank Account Access & receive money; pay bills; issue cheques; withdraw cash in China; RMB account and foreign currency Can only receive money from parent company; Can only pay for expenses; Can't pay for products Online banking; withdraw cash in HK; withdraw cash with debit card in China if applicable
Invoicing Official invoice in China Can't issue invoice or receipt Customized A4 size receipt
Liability of equity participants Limited to amount of registered capital Parent Company must be established for over 2 years Limited to amount of equity participation