Advantages of WFOE
The advantages of establishing a WFOE, compared with other types of enterprises, include, but not limited:
◆ Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;
◆ Ability to formally carry on business rather than just a representative office function and capable of issuing invoices to their customers in RMB and receive revenues in RMB;
◆ Capable of converting RMB profits to US dollars for remittance to their parent company outside China;
◆ Protection of intellectual know-how and technology;
◆ No requirement for Import/Export license for its own products
◆ Controllable of over human resources
◆ Greater efficiency in its operations, management and future development.
Scope of Business
One of the most important issues covered in the application documentation is the business scope of the WFOE. Business scope is narrowly defined for all businesses in China and the WFOE can only conduct business within its approved business scope, which ultimately appears on the business license. Any amendments to the business scope require further application and approval. Inevitably, there is a negotiation with the approval authorities to approve as broad a business scope as is permitted.
General business scope usually includes, investment consulting, international economic consulting, trade information consulting, marketing and promotion consulting, corporate management consulting, technology consulting, manufacturing, etc.
With China 's entry into WTO, more and more business are open to wholly foreign owned enterprises. Especially, trade, commercial and wholesale businesses are gradually granted to WFOE to enter into the markets.
Registration Procedures
Foreign companies are not allowed to directly submit the application documents to the relevant authority. They must retain a PRC entity that is authorized or permitted by relevant authorities to act as a sponsor. The sponsor will submit all documents to the examination and approval authority on behalf of the foreign enterprise. Procedures to set up the Wholly Foreign Owned Enterprise in Shanghai are as follows:
Step1: Check and Register Company Name
Step2: Apply for the Approval Certificate
Step3: Apply for Business License
Step4: Apply for the company's seals
Step5: Apply for the Organization Code License
Step6: Opening RMB bank account
Step7: Register Foreign Currency Certificate
Step8: Register in Shanghai Taxes Bureau
Documents Required
The documents required for setting up a WFOE are listed below. The authorized agency can make documents according to the below documents.
1. Brief introduction of foreign investors, includes Name, address, telephone number
2. The resumes, photocopies of the passports and 6 passport size photos of the chief
3. Purpose and economic estimation for investment
4. Total investment and registered capital, proportion of investment
5. Xerox copy of legal license of both foreign investor and Chinese investor
6. Two sets of original credit worthiness of the foreign investor (Bank issues)
7. Registered address, leasing contract, c ertificate of real estate, and certificate for leasing
8. Business scope and term
9. Company operational structure and number of employee
10. Permission for land use, environment evaluation report
11. Products, production scale, detailed list of equipment, and process scheme
12. Environmental protection measures
13. Requirement for utilities, commitment from power and water supply agent
Registered Capital and Taxation
The parent company will need to invest a minimum registered capital of USD 140,000 in cash and equipment as paid-up registered capital within the first twelve months of operation. Tax rates can vary somewhat depending on the location of the WFOE, but generally, WFOEs entering into Shanghai will be subject to business tax of about 5% on all revenues in China ; profits tax of 15-33% depending on location and in some instances withholding tax may be applicable.
How We Can Help You
We, Shanghai Excellent Investment Service Co., Ltd. provide one-stop service for foreign companies which would like to set up wholly foreign owned enterprises in Shanghai .
◆ Introduce laws & policies, application procedures on WFOE;
◆ Draft application letters, standard articles of association, standard feasibility study, and providing samples for necessary documents such as board resolution, bank reference letter;
◆ Research and obtain approval for the company name of WFOE;
◆ Obtain approval certificates from various authorities;
◆ Perform all the necessary financial, tax, labor, banking, customs and other registrations;
◆ Open the necessary bank accounts;
◆ Obtain the necessary work permits and resident permits for the legal representatives, etc.
Other than above incorporation services, we can offer other services to clients wishing to set up WFOEs in Shanghai . Through our network of local service providers, we can assist in the sourcing of suitable offices, sourcing of local staff and management, the structuring of expatriate salaries for maximum tax efficiency, legal drafting of leases and employment contracts, and the provision of accounting services. Fees will be quoted on a case-by-case basis.
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