WFOE requirements | Things you should know about WFOE

GEI > News > WFOE requirements | Things you should know about WFOE

If you want to set a new WFOE in China, you must read this article carefully. It’s all about WFOE requirements setting in China. Among them, Shanghai, Shenzhen,  Guangzhou and other regions first-tier cities are often the frontiers of the policy first, while smaller cities such as Zhongshan, Foshan and Zhuhai implement the same policies at a later stage. Many policies are implemented in large cities, providing foreign companies with a very low threshold to develop the domestic market, as well as special fund subsidies,and so on.

In this article, the main discussion is wfoe requirements. First of all, we first introduce the development of WFOE in China, then involve the materials and registration process needed to develop WFOE, and finally detail the cost of opening WFOE. I hope all these WFOE requirements information can help anyone who wants to open a new WFOE in China.

According to statistics, more than half of the top 50 institutions with global asset management scale have established wholly foreign-owned enterprises in Shanghai, including BlackRock, Pilot, Fidelity, JP Morgan, and other world asset management giants. These wholly foreign-owned asset management companies will use Chinese funds, most of which will invest in Chinese targets, and a small portion will invest in overseas targets.

More and more WFOE company was set in China

Since 2016, China’s financial industry has been more open to the outside world, and overseas institutions are accelerating their deployment in the Chinese market. More and more foreign financial institutions are entering the Chinese asset management market, setting up wholly foreign-owned institutions (WFOE) to carry out asset management business, joining the competition in the Chinese capital market, and further developing business related to the Chinese market.

WFOE requirements in China

1. Original copy of WFOE establishment registration application
2. The investor's business license and certificate of opening
3. Two original bank credit certificates, indicating the investor's credit status, which need to be issued within 6 months, in both Chinese and English
4. Board resolutions of foreign investors
5. Copy of the passport of the legal representative, 2 photos, or Hong Kong identity card, admission pass
6. One original site lease contract
7. Materials of the investor company and directors
8. Letters of appointment for the chairman and board members
9. Feasibility study report and articles of association of the proposed Chinese company
10. Original copy of power of attorney for enterprise registration authorization.

Step to sign up a wfoe company

The registration process of WFOE is generally as follows:

  1.  1. Name search (provide an application for pre-approval of the name signed by the investor, the investor is an individual to provide a copy of the passport, and the investor is an enterprise to provide a copy of the opening certificate, company name, business scope, investment Proportion, registered capital)
  2.  2. Provide the approval certificate of the Commerce Commission (submit the materials in two copies, all copies)
  3.  3. Apply for the business license (three certificates in one). Apply within 30 days after receiving the approval certificate.
  4.  4. Engrave the seal (Including official seal, financial seal, and legal person seal)
  5.  5. Handling foreign exchange registration for import and export (trade-type foreign-funded enterprises apply separately according to industry requirements) Note: Each enterprise must also handle the corresponding qualifications or filing according to the actual business project.

How much does it cost to open a WFOE in China?

When you start your WFOE, there are 2 cost centres: Setup fees and Registered capital

Setup fee

There are four choices in different cost of the services as below:

Large international law firms provide high-quality company registration services.  You can expect to get the five-star service, you will know employees who speak different languages ​​and full professional dedication.

These large companies have been around for many years and are proficient in setting up companies in all regions of China, so the work will be done correctly and will help you find an office.  Unfortunately, their cost may be high. The amount you want to pay for each company incorporated in China may be as high as RMB 100,000. Although this covers everything, the high cost can worry to many small businesses.  Some people like to pay close attention to their projects, so international law firms may not be the best option. Representatives of international companies are not “practical” as employees of smaller companies. Because they are dealing with a large number of customers at any time, you may not be able to keep track of progress.

Their job is to provide the same services as an international law firm, but at a much cheaper price, which can meet all needs from small and medium-sized enterprises to global companies that wish to set up branches.  You can expect high-quality services, friendly representatives, and good local experience, which can help them talk to the right people in the right office and reduce registration time.

They can also easily help you find the office where the company is located.  This type of company provides you with services covering Shenzhen and other cities in the Pearl River Delta of Guangdong Province and Hong Kong.  Normally, the cost of establishing a WFOE with such companies in China is about RMB 10-20,000.  Unlike large international companies, these companies care about and need your business, so they are likely to do their best to please customers.

Disadvantages Due to their size, they may not provide languages ​​other than English.  The high level of professionalism provided by international law firms may not be strictly followed, but according to Chinese standards, it should be a good choice.

Employees working in a medium-sized company in China usually choose to do it themselves.  Some of these people have been in the industry for a long time, and are therefore able to provide decent services.  Usually, they will try to provide cheap basement prices. These fees may be in the range of about RMB 10,000.  Disadvantages There is no guarantee that you will get good service because relying on one person is always risky.

They may say that they can build your own company, but it may be that they have never done so before and made mistakes during the establishment of the company, which will waste your time, money, and reputation. They may not have much ability to help you find a suitable office.  They are often busy with work and may not give you the attention you need.

You can build your WFOE in China at any time. That’s not a secret.  This may be the lowest cost option, less than 10,000 yuan.  Disadvantages This process can be extremely difficult for foreign companies for the following reasons:

  1.  1. Paperwork and discussions are entirely in Chinese.
  2.  2. Dialogue with local government officials is required.
  3.  3. A lot of paperwork.
  4.  4. The authorities did not give any help, leaving a lot of speculation for those who did not take action.As multiple government departments are involved, you will be confused about where to submit various paperwork. You need to find your office and negotiate a contract with the local landlord.

Registered capital

After we finished payment of setting fee, we turn to the second cost center of foreign companies aiming to open companies in China: registered capital.

If a foreign company is not sure whether it has enough capital to keep the company running, create jobs, and pay its employees on time, it will harm the interests of the Chinese people. This is why the government usually insists on investing a certain amount of registered capital in any new WFOE company.

Depending on your industry, you may need to provide the following registered capital levels:

  1. # Wholly foreign-owned enterprise in manufacturing industry 1,000,000 RMB
  2. # Trading foreign-owned enterprises 500,000 to 1,000,000 RMB
  3. # Consult a wholly foreign-owned enterprise 100,000 to 500,000 RMB  

Usually, the authorities will set a deadline when they need to invest in China, for example within one year. This measure has enough time for the new company to establish funds in Chinese bank accounts.

In some areas of China, local governments simply do not insist on any registered capital. The move aims to calm the competitive environment between foreign companies and local counterparts who do not have to provide these capitals. The idea behind it is that by encouraging more and more foreign companies to set up businesses in China, even smaller ones, it may stimulate more job opportunities.

Summary of expenses for opening WFOE

If foreign companies use international law firms, they may have to pay up to RMB100,000 to set up WFOE, but this is too expensive for most organizations.  Usually, you can set up a WFOE by a professional institution, the cost is about 10-20,000 yuan, which will bring you speed, security, and excellent local knowledge. You will also know the exact amount of registered capital that needs to be invested because the local Chinese business service provider will understand the requirements in your area.

Never forget that setting up WFOE is not the end of the story. You still need bookkeeping, accounting, work permits for foreign employees, and maybe you need to register a trademark. After you complete this series of work, the new company can conduct legal trade and comply with the regulations.

Conclusion

Although investing huge amounts of cash when doing business in China is not a good use of funds. But relying on trusted local experts to establish WFOE in a cheap, fast, and correct manner is a good way to use funds, especially when the cost is usually affordable. This article has introduced valuable information about wfoe requirements and hopes to guide those in need.

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Founded in 2016,Global Eastern Investment Co., Ltd (GEI) is a service-based firm engaging in HK company, foreign-owned company and, Sino-foreign joint venture establishment; annual financial audit, tax declaration and, import and export tax rebates; high-tech company and work visa applications; as well as global intellectual property services. 2019.10, We merged with Guangzhou Jude Management Consulting focusing Cross-border e-commerce and set up office in Shenzhen.

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