Previously, in our article ‘Opening a WFOE in China’, we have detailed the initial steps to incorporate a Wholly Foreign Owned Enterprise (“WFOE”). However, although successfully obtaining a business license will grant a WFOE its full rights to operate as a business, there are incorporation steps to address in the post-registration stage.
Company chops are essential to the proper management of a Chinese company as every contract which involves a Chinese company must include a company chop. This is because Company Chops are used in lieu of signatures to legally authorize documents on behalf of the company. Company chop’s have legal authority over the signature of a WFOE’s legal representative and has the power to validate documents and contracts regardless of who uses it.
A WFOE is able to establish a bank account with both Chinese and international banks. To facilitate their business operations, a WFOE will typically utilize a minimum of two bank accounts; an RMB bank account and a foreign currency bank account.
RMB bank accounts are absolutely mandatory when conducting daily business operations in China. Given that the majority of local Chinese firms prefer to conduct business in RMB, a local bank account is imperative for WFOE’s. This account is the only bank account whereby a WFOE is able to withdraw RMB cash. As such, this account will be necessary for settling payments and tax invoices to other parties.
Given that WFOE’s are entirely foreign-owned, profit repatriation is often a key consideration when planning a company’s business operations. The Chinese government allows WFOE’s to repatriate their profits out of China to the extent that prior approval of such actions has been granted by the Chinese State Administration of Foreign Exchange. In addition, a foreign exchange account is necessary for a WFOE to receive a capital injection from overseas entities.
FastLane can help assist you with opening a local company bank account with your preferred bank. A business license is required when opening a bank account.
Upon successful incorporation, a WFOE will be immediately required to comply with the various monthly, quarterly and annual filing and reporting requirements.
Such filing requirements include monthly and annual tax filings to be submitted to the State Administration of Taxation (“SAT”) and annual reports to the relevant government authorities. For completeness, submitted annual reports must be issued and signed off by a local CPA firm.
In addition to reporting requirements, it is important for WFOE’s to register their VAT taxpayer status with the SAT. General taxpayer status will permit a WFOE to issue VAT Fapiao to its clients and customers, an important aspect to Chinese business whereby Fapiao receipts can be utilized for tax deduction purposes.
As a licensed Hong Kong company secretary, the FastLane Group has extensive experience incorporating companies in Hong Kong. For assistance in the WFOE incorporation process, please do not hesitate to contact the FastLane Group!
This blog originated on https://fastlanepro.hk/company-incorporation-how-to-start-a-business-in-china-as-a-foreigner/