Wholly Foreign-Owned Enterprise in China (WFOE / WOFE)
Many foreign companies and investors are looking to expand their business abroad in China, because of the growing market that provides a lot of opportunities.
Despite the recent simplified regulations changes over the years, the WFOE setup remains as a complicated and time-consuming procedure. Dutch Sino Business Promotions offers you a turnkey service for setting up your daughter company (or WFOE) in China, our experiences and professionality will ensure you a smooth entry to the Chinese market.
What is a WFOE?
A wholly foreign-owned enterprise, also known as a WFOE, is a 100% foreign-owned limited liability company in China created with foreign capital. It is the most popular entity for foreign investors to enter the Chinese market due to its flexibility and high degree of control.
According to Chinese laws, a WFOE can act the same as any other Chinese company. All companies in China are only allowed to conduct business activities such as trading, manufacturing, and servicing within their approved business scope.
Why should you choose for a WFOE in China?
A WFOE can be set up without a Chinese business partner. Therefore full control can be retained by foreign investors. There is no need to take the interest, needs, and schedule of a domestic partner into consideration which makes the decision making more efficient and streamlined.
A WFOE is allowed to directly employ both Chinese and foreign workers without any limitation of the number of employees employed by the company.
The company can entirely conduct their business activities in China and generate revenue in RMB/Foreign Currency.
Possibility to issue official invoices (‘Fapiao’) to customers in RMB with VAT available for a tax deduction.
Better protection of intellectual property rights and technology.
For businesses with long term plans in China, setting up a WFOE is the beset option since it is possible to obtain extensions of the WFOE duration for up to 30 years.
To speed up the process for establishing a WFOE in China, it is recommended to take the following key points into consideration prior to the application process to be able to run through the process as smoothly as possible.
A WFOE in China is restricted to only conduct their business activities within its registered business scope. This will be approved by the business license authorities and should include a specific description of what the company is planning to do within a specific industry.
The investors should consider in which city or province the WFOE will be located. The operating location, chosen name, industry, and incorporation form will be included in the company name to be able to get approval from the Chinese authorities.
In recent years, there have been regulation changes regarding the minimum capital requirement. Officially, there is no defined minimal capital requirement. However, in reality, a certain capital is still needed to be approved to set up a WFOE in China and will be reviewed by the Ministry of Commerce and Administration for Industry and Commerce.
How to apply for a business license?
We at DSBP can guide you through this setup process step by step.
Despite the recent simplified regulations changes over the years, the WFOE setup remains as a complicated and time-consuming procedure.
Currently, the Chinese government is supportive to attract more market experience and foreign investment into the country. This makes it more than likely that regulations will be adjusted towards more favourable conditions in the coming years.
There are many steps that need to be completed, mostly with Chinese authorities. Whilst the Chinese government have digitalized a few steps, the entire process is time-consuming along with many administrative and legal paperwork.
It is very important to understand the whole process of how to set up a foreign enterprise in China to avoid any delays, misunderstandings, or problems. Therefore, to ensure a smooth and efficient process, it is highly recommended to seek professional assistance to support your business setup in China.
Please kindly send us your request and questions below about setting up a WFOE in China, we hope to connect with you and help you further.
T: +31 (0)10 310 0829
F: +31 (0)87 784 2561
Unit 208, Powerlong T2, No.399 Xin Long Rd.
Minhang District, , Shanghai,
201101, P.R. China
T: +86 21 6010 0500 *625