A Railway of Opportunities for the World
China’s vast geographical expanse and population of 1.4 billion provide a unique, dynamic investment landscape abounding with opportunities of all sorts. Beckoning investors from all corners of the globe and all walks of life, China boasts tremendous market potential, technological prowess, and a supportive investment climate conducive to foreign investment.
Doing Business in China
Steps to Set Up a Company in China
The information provided below is intended for general reference purposes only. Please be aware that the actual process of establishing a company in China may involve additional steps not covered here. Each step in the company formation process requires careful planning and consideration of the specific business model and needs of each client. Therefore, this information should not be construed as our formal egal, financial, or professional advice.
Market Entry Assessment
Step 1 - Review Market Access Restrictions
As the first step, it is vital to check whether your proposed business activities in China are classified as prohibited or restricted to foreign & private investment and whether additional industry permits are required.
Market Entry Assessment
Company Registration Application
Step 2 – Deliver application
Prepare and submit your application materials at the service counter in the local Administration for Market Regulation and obtain the business license.
Company Registration Application
Obtain Official Seals
Step 3 - Official Seals/Chops
In China, a company's "chop" isn't just a stamp; it's a binding legal signature. Affixing it to a document makes the company officially accountable and committed.
Company Seals/Chops Application
Step 4 - Opening Bank Accounts
As a foreign-invested enterprise operating in China, you will be required to open, at the very least, two types of corporate bank accounts, namely the Basic Deposit Account and Capital Account.
Step 5 - Complete the Post-Registration Formalities
Post-registration formalities include tax registration, social security registration and other industry required permits and licenses.
Frequently Asked Questions
The provided questions and answers below are not meant to encompass all possible inquiries and should not be considered as personalized professional advice for your specific questions, issues, or concerns. These responses do not establish any obligation on our part to provide assistance. We invite you to reach out to us for a more comprehensive discussion about your individual matters or areas of focus.
What are the available organization forms for foreign-invested enterprises in China, and what are the key characteristics of each?
What should you consider before setting up a Foreign-Invested Enterprise (FIE) in China?
Setting up an FIE in China requires careful planning. Firstly, ensure your business isn't restricted by the "Negative List," as some industries require approval or partnership. Next, consider your financial commitment - while a minimum capital isn't mandated anymore, authorities will scrutinize if it covers your initial operational needs.
Defining your FIE's business scope precisely is crucial. This dictates what activities you can officially perform and bill for. Striking a balance between overly limiting and overly ambitious scopes is key.
Location plays a critical role. Consider proximity to key players, access to talent, and government incentives. China's diverse markets, from bustling Tier 1 cities to up-and-coming lower-tier locales, each offer unique advantages. Free Trade Zones can provide benefits like tax breaks but limit business expansion outside their perimeters.Finally, secure a proper office lease and conduct due diligence on the landlord. Don't forget - navigating Chinese regulations can be complex, so consider seeking professional assistance.
What are my annual obligations to maintain a China company?
In China, companies must adhere to stringent annual compliance requirements to avoid severe penalties, including fines, blacklisting, and potential revocation of business licenses. These requirements include conducting an annual audit and filing corporate income tax (CIT).
The audit, conducted by a mainland Chinese-registered Certified Public Accountant (CPA), involves a detailed examination of financial statements like cash-flow, profit and loss, and balance sheets. The tax year aligns with the calendar year, and companies should ideally complete their annual audit by April's end.The CIT filing, due by May 31, involves reconciling accounting records with tax laws and addressing discrepancies. Furthermore, companies must submit an Annual Related-Party Transaction Report for transactions with affiliated parties, adhering to the arm's length principle.
Finally, combined annual reporting, to be completed by June 30, consolidates all relevant information for various government departments, including financial data and shareholder contributions. Non-compliance can hinder profit repatriation and adversely impact future business prospects in China.
What are the major tax categories in China and how are they applied to different types of enterprises and individuals?
In China, major tax categories include Corporate Income Tax, Individual Income Tax, Value-Added Tax (VAT), Tariffs, and Consumption Tax.
Corporate Income Tax is levied at 25% for resident enterprises (those set up in China or managed from China) on their global income and for non-resident enterprises with establishments in China. Non-resident enterprises without establishments in China, or with non-China related income, pay a reduced rate of 10%.
Individual Income Tax follows a progressive rate system, with a special regime for resident and non-resident individuals. VAT, replaced from business tax since 2016, varies (0%, 3%, 6%, 9%, 13%) based on the type of goods or services.
Tariffs are imposed on imported and exported goods, with China actively reducing import tariffs in recent years. Lastly, Consumption Tax applies to specific consumer goods like cigarettes, alcohol, and luxury items, calculated using ad valorem, specific tax, or a composite method.
Explore More Topics
Annual Compliances and Taxation
Are you ready to start a business?