How to Register a Wholly Foreign-Owned Enterprise (WFOE) in China

If you are a foreign investor who wants to set up a business in China, one of the options you have is to register a wholly foreign-owned enterprise (WFOE). A WFOE is a legal entity that is fully owned and controlled by foreign investors, without the need for a Chinese partner. WFOEs can operate in various sectors, such as manufacturing, consulting, services, wholesale, retail and trading. WFOEs can also enjoy some benefits, such as being able to invoice and get paid in CNY, convert profits to foreign currencies and remit them abroad, and protect their intellectual property and human resources.

However, setting up a WFOE in China is not an easy task. It involves a complex and lengthy process that requires compliance with various laws and regulations at the national, regional and local levels. In this blog post, we will explain the main steps and requirements for registering a WFOE in China, as well as some tips and challenges you may encounter along the way.

Step 1: Select Your Chinese Business Name

The first step in the application process is to file for your official Chinese business name. You need to choose a name that follows the standard format: administrative division + trade name + industry + organizational form. For example, Shanghai ABC Consulting Co., Ltd. You also need to make sure that your name does not conflict with any existing registered names or trademarks in China. You can check the availability of your name online at the State Administration for Industry and Commerce (SAIC) website or through a local agent.

Step 2: Prepare Your Legal Documentation

The next step is to prepare your legal documentation for the WFOE registration. This includes:

- Articles of association: This document defines the basic structure and rules of your WFOE, such as its name, address, business scope, registered capital, shareholders, board of directors, legal representative, etc.

- Feasibility study report: This document describes the background, objectives, market analysis, financial projections, risk assessment and operational plan of your WFOE.

- Certificate of incorporation and business license of the parent company: These documents prove the existence and legitimacy of your foreign investor.

- Passport copy and resume of the legal representative: The legal representative is the person who has the authority to sign contracts and represent your WFOE in legal matters.

- Bank reference letter of the parent company: This document shows that your foreign investor has a good financial standing and credit history.

- Lease contract or property ownership certificate of the office premises: This document shows that you have secured a physical location for your WFOE in China.

All these documents need to be translated into Chinese by a certified translation agency and notarized by a public notary or a Chinese embassy or consulate.

Step 3: Apply For Your WFOE Business License

The third step is to apply for your WFOE business license from the SAIC. You need to submit your legal documentation online through the National Enterprise Credit Information Publicity System (NECIPS) and report to the Ministry of Commerce (MOFCOM) through its online platform. After you submit your application, you will receive an approval notice from MOFCOM within three working days. Then you need to visit the SAIC office in person to complete the onsite registration and obtain your new business license within five working days. The new business license combines the business license, the organization code certificate and the tax registration certificate into one document.

Step 4: Register For Taxes

The fourth step is to register for taxes with the local tax bureau. You need to present your new business license and other relevant documents to apply for a tax registration certificate and a tax identification number. You also need to apply for an electronic tax filing system account and purchase an electronic tax filing device. Depending on your industry and business scope, you may also need to apply for the general taxpayer status (VAT taxpayer) and/or a tax refund permit.

Step 5: Register With Other Authorities

The fifth step is to register with other authorities that are related to your WFOE's operation. These include:

- The local public security bureau: You need to register with them to obtain a public security registration certificate and fabricate your company stamps.

- The local administration of foreign exchange: You need to register with them to open a foreign exchange account and obtain a foreign exchange registration certificate.

- The local customs bureau: You need to register with them if you are engaged in import or export activities and obtain an import/export license.

- The local social security bureau: You need to register with them if you have employees in China and enroll them in the mandatory social insurance scheme.

- The local statistics bureau: You need to register with them to obtain a statistics registration certificate and report your business data regularly.

Step 6: Open Your Bank Account

The final step is to open your bank account for your WFOE in China. You need to choose a bank that can handle both domestic and foreign currency transactions and provide online banking services. You need to present your new business license, tax registration certificate, foreign exchange registration certificate and other documents to open your basic account, which is used for daily operations, such as paying salaries, taxes and suppliers. You also need to open a capital account, which is used for receiving the registered capital from your foreign investor and converting it into CNY.

Tips and Challenges

As you can see, registering a WFOE in China is a complicated and time-consuming process that can take several months to complete. Here are some tips and challenges that you should be aware of:

- Choose your business scope carefully: Your business scope defines the activities that your WFOE can legally conduct in China. It must be aligned with the Catalogue of Industries for Guiding Foreign Investment, which classifies industries into encouraged, restricted and prohibited categories for foreign investment. You need to make sure that your business scope is clear, specific and consistent with your feasibility study report and articles of association. You also need to avoid any sensitive or regulated industries that may require additional approvals or licenses from other authorities.

- Determine your registered capital wisely: Your registered capital is the amount of money that your foreign investor pledges to invest in your WFOE. It must be sufficient to cover your WFOE's operational expenses for at least one year. The minimum registered capital requirement varies by industry and location, but it is generally between RMB 100,000 and RMB 1 million. You need to pay at least 20% of your registered capital within three months of obtaining your business license, and the remaining balance within two years. You also need to hire a certified public accountant to verify your capital injection and issue a capital verification report.

- Hire a local agent or consultant: Given the complexity and diversity of the WFOE registration process in China, it is highly recommended that you hire a local agent or consultant who can guide you through the process and handle the paperwork on your behalf. A local agent or consultant can help you save time, money and hassle by providing you with professional advice, market research, legal support, translation services, government liaison, bank account opening assistance and more.