The establishment of foreign investment enterprises consists of three phases: (1) approval of the project proposal, feasibility study report, Joint Venture Contract and Articles of Association; (2) registration with the AIC; and (3) post-establishment procedures.
After an FIE is registered with the AIC and obtains the Business License or the Enterprise Legal Person Business License, the FIE should handle the following procedures;
(1) Enterprise Code
Each enterprise is assigned a fixed enterprise code, which is unique nationwide. The technology supervision authorities are in charge of the enterprise code registration. After the business license of an FIE is issued, the FIE should apply for enterprise code registration as soon as possible. All the other registrations and procedures, such as tax registration and opening bank accounts, must use the enterprise code certificate of the FIE. For an FIE possessing legal person status, the technology supervision bureau will issue an Enterprise Legal Person Code Certificate of the PRC. For an FIE that does not possess legal person status, the technology supervision authority will issue an Enterprise Code Certificate of the PRC. An FIE must handle the enterprise code; registration with the technology supervision authorities immediately after its business license is issued in order to handle tax, foreign exchange and other registrations and procedures.
(2) Foreign Exchange Registration and Opening Bank Accounts
Within thirty days after the business license of an FIE is issued, the FIE should apply for foreign exchange registration with the local foreign exchange authorities. If an FIE has already registered with the foreign exchange authority, its branches or rep offices in other locations do not need to be registered separately with the foreign exchange authorities.
The foreign exchange authority should review the application documents submitted by an FIE. In the event that the foreign exchange authority determines that the applicant meets all the conditions, it will issue a Foreign Exchange Registration Certificate for Foreign Investment Enterprise, which is usually referred to as the Foreign Exchange Registration Certificate. In addition, the foreign exchange authority will issue a Notice of Opening Bank Accounts. The form of the Foreign Exchange Registration Certificate is enacted by State Administration of Foreign Exchange (“SAFE”). After the FIE obtains a Foreign Exchange Registration Certificate, it may open bank accounts with banks permitted to engage in foreign exchange business. After the bank opens foreign exchange accounts, a note should be added to the Foreign Exchange Certificate indicating the name of the bank, currency, account number, nature of the account and the date on which the bank accounts are opened, and the bank’s chop should be affixed to the Foreign Exchange Registration Certificate.
(3) Tax Registration
According to the Income Tax Law for Foreign Investment Enterprises and Foreign Enterprises, the Implementing Detailed Rules for the Income Tax Law for Foreign Investment Enterprises and Foreign Enterprises and the Administrative Law of the Taxation Collection, entities and establishments engaged in operation and manufacturing activities must register with the tax authorities. In order to strengthen the foreign related tax administration, Chinese tax authorities issue tax registration certificates to FIEs and foreign companies.
The tax registration certificate consists of the following three categories:
(i) The Tax Registration Certificate for Foreign Investment Enterprises, which is issued to an EJV, a CJV or a WFOE;
(ii) The Tax Registration Certificate for Foreign Enterprises, which is issued to a foreign enterprise that has an establishment in China;
(iii) The last one is the Tax Registration Certificate for Branches of Foreign Investment Enterprises, which are issued to branches of FIEs.
If an FIE establishes two or more branches in one area, these branches should apply for tax registration separately. The Tax Registration Certificate consists of originals and duplicates, both of which are affixed with the chop of the tax authorities in charge. The Tax Registration Certificate should not be loaned, altered, damaged, destroyed, traded or forged.
If an FIE undergoes relocation, restructure, merger, division, termination or change in capital amount or business license, the FIE should handle tax registration alteration or cancellation procedures with the local tax authorities within thirty days after the AIC procedures have been completed or before the termination registration.
(4) Financial Registration
The major purpose of the financial registration is to regulate financial management and exercise financial supervision. Chinese law requires that every FIE should apply for financial registration within thirty days after the AIC issues its business license. The financial authorities in charge vary depending on the status of the Chinese investor. If the FIE is established by enterprises and institutional entities belonging to the central government agencies, the FIE should apply for financial registration with the Financial Supervisor’s Office seconded by the Ministry of Finance. WFOEs and FIEs that are established by local level enterprises or institutional entities must apply for financial registration with the local financial bureaus or their designated authorities.
After the Financial Supervisor’s Office or local financial authorities review and approve the financial registration application, a Foreign Investment Enterprise Financial Registration Certificate will be issued.
The Financial Registration Certificates consist of originals and duplicates. The Ministry of Finance prints the form for such Certificates. After an FIE obtains a Financial Registration Certificate, the FIE should place the original Financial Registration Certificate in a conspicuous location in the office of the FIE.
If the Joint Venture Contract, Articles of Association, name, address, responsible official, business scope and other issues of an FIE are changed, the FIE should alter its AIC registration. Within thirty days after the AIC registration is completed, the FIE should handle procedures to change its financial registration.
If an FIE fails to make any financial registration, no accounting or auditing firm may verify its capital or audit its accounting books. Should this verification or audit occur, the Financial Supervisor’s Offices and the local financial authorities will impose a penalty pursuant to the Supplementary Provisions for Foreign Investment Companies Implementing New Financial System and other relevant laws and regulations.
(5) Customs Registration
Chinese law provides that after an FIE is established, it must register with the local customs office. The major purpose of customs registration is to strengthen the supervision of the goods imported and exported by FIEs and implement the preferential customs policies applicable to FIEs.
After an FIE is established, the investors will contribute their subscribed capital to the FIEs according to the provisions of the Joint Venture Contract and Articles of Association. An accounting firm should verity such capital contributions. Within one month after the verification of the capital contribution, the FIE should submit a copy of the capital verification report to the customs office.
For an FIE that is eligible for exemption of import duty within the total amount of investment, the FIE should also submit the import equipment list, as approved by the original approval authority, to the customs office. The customs office will review this list when the equipment is imported by the FIE.
(6) Company Chops
After the business license for an FIE is issued, the FIE may apply with the local public security bureau for approval of making chops. The FIE should retain a chop making firm in the same city or county in which the FIE is registered. If the FIE needs to make chops in a city or county other than its registered location, the FIE should apply for an approval from the public security bureau where the FIE is registered. The FIE should then apply for another approval from the public security bureau where the chops will be made. The chop making firms must review the approval issued by the public security bureau.