Viewpoints

Introduction Shanghai is the financial hub of China. It is estimated that over 30% of commercial activities in China go through Shanghai and its adjacent areas. At the end of year 2005, over half of the Fortune 500 firms had set up their presences in Shanghai, either in the form of Permanent Representative Office (RO), Wholly Foreign Owned Enterprises (WFOE, also known as Wholly Owned Foreign Enterprises) or Equity Joint Ventures (EJV). With more than 200 years’ history for the financial industry, Shanghai was the biggest financial center in China and Far East’s major commercial center in 1920s and 1930s. Since 1990s, Shanghai has regained much of its vitality and is gradually emerging as a financial center for the region once again. Location Surrounded by the Yangtze River in the north, the East China Sea in the east, the Hangzhou Gulf in the south and Jiangsu and Zhejiang provinces in […]

Expatriates on extended business trips to China If you are sent by your organization to China and your salary is paid off-shore (probably in your home country) and you spend more than 183 days in China in a calendar year, than you have to pay IIT in China based on the days you effectively spend in the country. This means that if you spend in China, let’s say, 184 days within a calendar year, than you would have to pay taxes on all income sourced from China (meaning income related to your work performed in China). Foreigners working for legal enterprises in China Without going into too many complicated calculations and theories, if you hold positions such as the Chief Representative (CR) of a Representative Office (RO) or the General Manager of a Chinese Limited Company, Wholly Foreign Owned Enterprise or a Joint Venture anywhere in China, then you are […]

Introduction to China Wholly Foreign Owned Enterprise (WFOE) The Wholly Foreign Owned Enterprise (WFOE) in general refers to a Limited liability company wholly owned by one of more foreign investor(s). Company limited by shares, if all shares are held by foreign nationals, then it is alos referred to as WFOE. In China, WFOEs were originally conceived for encouraged manufacturing activities that were either export orientated or introduced advanced technology. However, with China’s entry into the WTO, these conditions were gradually abolished and the WFOE is increasingly being used for service providers such as a variety of consulting and management services, software development and trading as well. The registered capital of a Wholly Foreign Owned Enterprise (WFOE) should be subscribed and contributed solely by foreign investor(s). A WFOE does not include branches established in China by foreign enterprises and other foreign economic organizations. The Chinese Laws on WFOE do not have […]

A technology type Wholly Foreign Owned Enterprise (WFOE) refers to limited liability company registered in China by foreign individuals or corporations and that the company is to be engaged in the business of the research and development of information technology, electronics, biological engineering, new materials, new energy and other high and new technology. 1. Procedures for Establishing a WFOE in Beijing China 1.1 Preliminary (a) Lease of Office Space Firstly, the investor will have to enter into a tenancy agreement in relation to the office space to be used by the WFOE for a term of not less than 12 months. The office must be located in a commercial building. (b) Legalization of Identity Documents of Shareholder/Member The investor is also required to arrange to have the identity documents of the shareholder legalized by the Chinese Embassy or Consulate in the country where the shareholder is registered/resided. (c) Other Documentation […]

1. Features of Permanent Representative Offices 1.1 Legal Status of a Permanent Representative Office The Permanent Representative Office (also known as Resident Representative Office) is a non-legal entity operating representing its parent company foreign companies registered outside China, including those registered in Hong Kong, Macau and Taiwan). A Permanent representative office is not allowed to engage itself in business activities, issue invoices on its own, remitting outward, signing sales or purchase contracts, or receiving income from services performed but may act as a liaison and promotion office for its parent company. 1.2 Name of a Permanent Representative Office The name of the Permanent Representative Office should be in the form of ¡§Name of the Foreign Enterprise + Beijing + Representative Office (or Office)¡¨. For example, USA New York LLC Beijing Representative Office. 1.3 Business Address (Registered Office) Before submitting the documents for application for registration to the Beijing Administration for […]

According to the rules of the State Council on revenue sharing system, the tax revenue in China may divided into Central tax revenue, local tax revenue and the tax revenue shared between the Central and local governments. (1) Central tax revenue: domestic Consumption Tax; Customs Duties; VAT and Consumption Tax collected by the Customs on behalf. (2) Local tax revenue: Individual Income Tax; City and Township Land Use Tax; Farmland Occupation Tax; Fixed Assets Investment Orientation Regulation Tax; Land Appreciation Tax; House Property Tax; Urban Real Estate Tax; Inheritance Tax (not yet legislated); Vehicle and Vessel Usage Tax; Vehicle and Vessel Usage License Plate Tax; Deed Tax; Slaughter Tax; Banquet Tax; Agriculture Tax and Animal Husbandry Tax and their local surtaxes. Tax revenue shared between the Central and local governments: a. Domestic VAT: 75% for Central Government and 25% for Local Governments; b. Business Tax: the part consolidated paid by […]

GongShangQiZi [1995] No.107 May 9, 1995 Shenzhen Administration for Industry and Commerce: Your request for instruction, ShenGongShangZhu [1995] No.6, has been received, upon deliberation, the reply is given as follows: 1. The approval of the writing off registration by enterprises is a conduct of administrative enforcement of law by the administration for industry and commerce and a concrete measure to maintain normal economic order and protect lawful business operation. Enterprises that end business shall apply to the former registration authority to write off registration in accordance with Article 20 of the Regulations of the People¡¦s Republic of China on Administration of Registration of Corporate Legal Persons (hereinafter referred to as the Regulations). 2. Under normal circumstances, enterprises shall write off registration in accordance with procedures prescribed in Article 21 of the Regulations upon the approval of the registration authority, which captures their business license and cachet and notifies the deposit […]

GongShangQiZi [2000] No.166 August 3, 2000 Yunnan Administration for Industry and Commerce: We have studied your request for instructions on your reply to the Letter of the Intermediate People¡¦s Court of Kunming, Yunnan Province (YunGongShangZi[2000] No.35) and now reply as follows: I. In accordance with related business registration administration provisions stipulated in the Regulations on Company Registration Administration, the Regulations for Controlling the Registration of Enterprises as Legal Persons, and the Implementing Opinions on Related Issues of Business Registration Administration of the State Administration of Industry and Commerce (GongShangQiZi[1999]No.173), the corporate capacity or operation qualifications of enterprises should be terminated as of the approval of registration cancellation or suspension of the business license. Enterprises failing to pass the annual examination are deprived of the qualifications for continuance of operation prior to the approval of registration cancellation or suspension of the business license; however, their corporate capacity or qualifications as operating […]

Decree of the State Council of the People’s Republic of China No. 584 The Regulations on Administration of Registration of Resident Offices of Foreign Enterprises, which was adopted at the 132nd executive meeting of the State Council on November 10, 2010, is hereby promulgated and shall enter into effect as of March 1, 2011. Premier Wen Jiabao November 19, 2010 Regulations on Administration of Registration of Resident Offices of Foreign Enterprises Chapter I General Provisions Article 1 The regulations shall be formulated for the purpose of regulating the establishment and business activities of resident offices of foreign enterprises. Article 2 Resident offices of foreign enterprise in the regulations (hereinafter referred to as representative office) refers to the working bodies established by foreign enterprises in accordance with the Regulations within China engaging in non-profit programs related to their own business and does not possess the status of a legal person. Article […]

(Effective Date: G1986.09.01) Article 1. In accordance with the Interim Regulations of the People’s Republic of China Concerning the Control of Resident Representative Offices of Foreign Enterprises and in the light of the actual situation in Shanghai, the regulations are formulated with a view to facilitating the development of international economic and trade contacts and technical exchange and controlling the resident representative offices in Shanghai of foreign companies, enterprises and other economic organizations (hereafter referred to as foreign enterprises). Article 2. Resident representative offices of foreign enterprises (hereafter referred to as resident representative offices) shall be understood as those engaged in business-contact, service and non-direct-profit-making operations. But, for those provided for by inter-government agreements, they shall be treated in accordance with those agreements. Article 3. Any foreign enterprise desiring to establish its resident office in Shanghai should entrust a Shanghai enterprise or company that deals with foreign business to submit […]