Incorp China

How to Set Up a WFOE in China

Wholly-foreign owned enterprises, or WFOEs (sometimes abbreviated WOFE) is a topic we have written about extensively in this blog series. Unlike most other investment vehicles , a WFOE does not require a foreign company operating in China to have Chinese investors, giving the foreign company the most autonomy over its own affairs.

WFOEs come in three basic forms:

• Consulting WFOE, which is the easiest to acquire;
• Manufacturing WFOE, which allows companies to manufacture in China. Because Incorp China is located in Shenzhen, the famed factory city of the world, we are quite familiar with these;

• Trading WFOE, also known as a Foreign-Invested Commercial Enterprise (FICE), which grants companies both import and export licenses and allows them to sell products locally.

If you would like to learn more about the different ways a business can enter China, including the available company types, you may refer to our other article where we share our five most useful tips on how to get started. Nevertheless, these are the step to be registered as a WFOE:

Step 1: Select Your Chinese Business Name

The first step in the application process is to file for your official Chinese business name. In addition to an English name, your business will be registered under a Chinese name as well. There are fixed guidelines that need to be followed in order for you to select an appropriate name. 

Step 2: Prepare Your Legal Documentation

After deciding on a name, you need to produce all necessary legal documents for the company registration with local authorities. This includes the lease contract for a rented office space and a bank reference letter. Chinese local authorities will later pay a visit to the address your business is listed under to confirm its legitimacy.

Step 3: Apply for Your Business License

The next step is to submit the prepared documents and apply for a business license at the Ministry of Commerce (MOFCOM) and the Administration for Industry and Commerce (AIC).

Step 4: Register for Taxes

Once you have been granted your business license, you have to register for taxes, both those levied at the state and city level. You will also need to create a company stamp to sign off on all documents thereafter. It is worth mentioning that the Chinese government has given out several tax holidays to offset the burdens caused by the Covid-19 pandemic.

Step 5: Register with Other Authorities

In total, there are 12 different authorities with which a company needs to get registered in order to be fully established, including the Technology Supervision Bureau, the State Administration and Foreign Exchange, the Financial Bureau and the Statistical Bureau.

Step 6: Open Bank Accounts

The final step of establishing your WFOE is to open a bank account that deals solely in Reminbi. Your WFOE will also need a foreign currency bank account to collect, transfer, and verify foreign capital coming in from overseas.

Opening bank account in China remotely

The social distancing guidelines meant to stop the spread of coronavirus has made it more difficult to open an RMB bank account in China, although Chinese banks have taken measures that would make it easier to remotely set up an account, as a this recent KPMG report shows. 

Most popular process for remote bank account registration in China follows these three steps:

1. You will need to send the bank the required information in a scripted video, which will be then analyzed for authenticity.
2. Once your video proof of identity has been approved, a representative from the bank will arrange a visit to your business location in China.
3. After your business location has been approved, the bank will allow your legal representative to come to the bank with all required documents and will be asked to perform real-time authentication via a phone call.

How to proceed…

As the entire process can be rather long and bureaucratic, you might want to save yourself the headache and opt for hiring a consultant. Even if you have dealt with Chinese business regulations before, is rather important to have someone on your side. With our expertise, our clients have found it easy to thrive in the world’s largest marketplace.

The challenges involved in setting up a WFOE can be interminable and demanding. Feel free to reach out to us for a complimentary consultation!

+1 561 729 6508 | info@incorpchina.com