Contribution methods of WFOE registered capital
First of all, Before planning the registered capital, foreign businessmen should understand the amount and regulations of it from the WFOE registered capital requirements.
Second, the registered capital can be cash. Meanwhile, it can also be a physical object. And for the physical object, it can be a device or an IP. Moreover, the investment needs to occupy 20% of the total registered capital.
Besides, there are strict procedures in China for making capital contributions in kind.
Therefore, cash contributions require less time and procedures.
When remitting registered capital, there are the following WFOE capital requirements you need to know:
- First of all, foreign businessmen must inject funds into WFOE registered capital account from overseas accounts.
- Moreover, according to the WFOE capital requirements, foreign investors need to obtain a business license first. After that, they transfer the funds to the registered capital account.
- Besides, when injecting funds, the State Administration of Foreign Exchange needs to approve this transaction first.
In addition to the methods mentioned above, the funds transferred in other ways are not effective capital contributions.
For example, before establishing WFOE, transfer funds through RMB accounts or Chinese partner companies. According to the WFOE capital requirements, this way is not valid.
The previously registered capital requirements
According to the previous WFOE capital requirements, we used to obey the standards below：
The amount of WFOE registered capital depends on factors such as business scope and location.
In fact, the local government will review the feasibility study report for each case.
Meanwhile, the government also checks the lease contract of the house. In this way, the government can approve the investment.
In addition, there have WFOE minimum capital requirements.
According to different industries, the registered minimum capital they need is different.
According to the previous WFOE capital requirements, foreign investors can pay 20% of the registered capital within 90 days of registration.
Moreover, foreign business can pay the remaining part within two years.
The present registered capital requirements
In recent years, the Chinese government has been committed to simplifying the WFOE registration process. Therefore, China implemented a new foreign investment law in January 2020.
Meanwhile, China has abolished three old related laws.
In the new regulations, there are also many changes in registered capital.
In the past, many foreigners want to start business in China. But the capital requirements for WFOE in China confuse them a lot.
For now, with the new law implementing, this restriction has now become much looser, because the new law no longer has a minimum capital requirement. However, foreign investors still need registered capital to open a company in China. So, how much-registered capital should they set now?
How to set a register capital
Regarding the registered capital, foreign businessmen set up the capital level. Moreover, they hand over it to the Ministry of Commerce and the Administration for Industry and Commerce. And then they review the level of funding, according to the expected operating costs of the company within two years of its establishment. That is to ensure the company has enough capital to accomplish its goals.
Besides, the registration amount is different among different cities. And it also is different among different industries. For example, the minimum registered capital of the basic consulting WFOE is 200,000-500,000 RMB. Nevertheless, the company set up is much more flexible than before.
Be careful, a properly registered capital is important, and the reasons are below:
First, if the registered fund is too low, the government will refuse company registration. Therefore, the registered capital should be enough to run the company for two years.
Second, foreign businessmen can use the registered capital for company operations. In this way, foreign businessmen have many tax advantages.
Third, Sometimes, investment capital does not conform to the situation of the company. So, foreign businessmen need to modify it later. In this situation, they will have to pay an additional fee to apply for permission for the additional capital.
Fourth, it must also have enough capital to pay salaries, rent, utilities, taxes, and other expenses. And if foreign businessmen are unable to pay for these expenses, the business is owned by foreigners in China is illegal.
So, we suggest that set up the registered capital carefully according to the expected operations.
Fortunately, there is no strict time limit for paying off the registered capital. The WFOE need to pay off the registered capital within 20 years.
That is the news for WFOE minimum capital requirements. Let’s have a look at a time limit of WFOE capital requirements.