Setting up a business in a foreign country can be intimidating as there can be so much that you don’t know. Read this article to understand all the basic things you need to know to register a company in China.
China, beyond doubt, is a global economic hub and an investors’ paradise. It provides an ideal launching pad for businesses looking to invest globally. Moreover, by having a registered company in China, you can enter into an extended marketplace, assisted by a supportive government. But, before floating your business in China, you should first know about the procedure to register a company in China.
What Are the Options in China for Business Formation by Foreigners?
As a foreigner, you can use any of these business formations for starting a company in China:
- WFOEs (wholly foreign-owned enterprise) – This is the most popular and probably the best company formation option for foreign investors, from the legal point of view.
- Joint Venture Companies
- Representative Offices
- Sole Proprietorships
- Private Enterprises
What Is the Procedure to Register a Company in China?
Here is the step-by-step procedure to register a company in China:
1. Pick an Agency to Initiate the Registration Process on Your Behalf
Proper interpretation of company laws in China can be a difficult task. Therefore, you should choose a professional agency to take care of the entire procedure to register a company. Also, these professionals will help you with audits, tax consultation, bookkeeping, annual financial compliances, and so on.
2. Choose Your Preferred Company Category
The Chinese government has categorised its industry sectors to ensure faster economic growth. Further, you should refer to the ‘Catalog for the Guidance of Foreign Investment Industries’ which is updated periodically by the government.
3. Apply for Company Name Approval
This is a very important step in the company incorporation process. Further, this is to make sure that your company name does not come into conflict with any other company in operation. Therefore, you must seek approval of your company name from the Administration of Industry and Commerce. Further, the entire approval process may take between two to fifteen days to complete.
4. Prepare the Documents Required
Before initiating the procedure to register a company, you need to prepare the following documents-
- The list of controlling partners – You need to submit the list of controlling partners to the authorities. Moreover, these are the shareholders who have a majority of the shares in the company registration.
- The managerial structure – Moreover, you need to submit the managerial structure of the company incorporated. This would include information regarding the board of directors, general managers, supervisors, and legal representatives. Additionally, copies of the passports of all the directors should include in this document.
- Proof of official address – You should provide valid address proof of the official headquarters of the company. Similarly, the authorities will communicate with the company at this address if they have any queries about the company operations.
- Articles of Association (AoA) – The AoA includes important information related to the company such as the business description, the scope the company intends to operate within, the methods to be applied for gaining profits, the managerial structure, etc.
- Details of total investment and registered capital – The details of the registered capital should mention the resources dedicated to cover the running expenses of the company. Likewise, the total investment will be the sum of capital and the loans to be obtained in the future from investors, banks, and other third parties.
- Feasibility study – You should submit a feasibility study report along with a comprehensive business plan to the authorities. Further, it is to convince them that the business is feasible and your registered capital is enough to support the company operations. Additionally, the authorities will not approve the registration if they aren’t convinced about the feasibility of the company.
5. Apply for Approval Certificate
In this step, you should apply for the approval certificate and operating license from the State Administration of Industry and Commerce (SAIC) and the Ministry of Commerce (MOFCOM). Further, after obtaining the business certificate, you need additional license/s if you are operating in food & beverages, manufacturing, telecom, and construction.
6. Register With the PSB (Public Security Bureau)
The PSB registration will make you eligible to get the company chops. In absence of a chop, you cannot validate a contract in China.
7. Register at the Tax Bureau
All companies in China should register with the Tax Bureau and comply with its regulations. Likewise, Different kinds of taxes applicable in this country include:
- Corporate Income Tax: This is charged @ 25% on profits. However, the rate will reduce if you operate in certain ‘encouraging sectors’.
- Transaction Tax or Turnover Tax: This is usually charged in the range of 3%-5% of the total sales.
- Custom Duties
- VAT (Value Added Tax): Currently these are charged in slabs of 3%, 6%, 9%, and 13%.
- China Company Registration Check
- Cost of Company Registration in China
- Online China Company Registration System