Set up The Wholly Foreign Owned Enterprise (WFOEs) in Shanghai China, Process of Setup WFOE in Shanghai

Shanghai is located in the Yangtze River Delta. The municipality sits on the southern edge of the estuary of the Yangtze River in the middle portion of the East China coast. It borders the provinces of Jiangsu and Zhejiang to the north, south and west, and is bounded to the east by the East China Sea.

Shanghai is the commercial and financial center of China, and ranks 5th in the 2018 edition of the Global Financial Centres Index (and third most competitive in Asia after Singapore and Hong Kong) published by the Z/Yen Group and Qatar Financial Centre Authority. It also ranks the most expensive city to live in Mainland China, according to the study of Economist Intelligence Unit in 2017. It was the largest and most prosperous city in East Asia during the 1930s, and rapid re-development began in the 1990s. This is exemplified by the Pudong District, a former swampland reclaimed to serve as a pilot area for integrated economic reforms

There are 16 districts under Shanghai's administration: Songjiang, Changning, Fengxian, Jingan, Jiading, Jinshan, Baoshan, Yangpu, Xuhui, Qingpu, Huangpu, Hongkou, Minhang, Putuo, Pudong New Area, and Chongming.

The Wholly Foreign Owned Enterprise (WFOE) is a Limited liability company wholly owned by the foreign investor. The foreign company has sole responsibility for its profits and losses. Limited liability is recognized by the amount of registered capital injected into the business. It is required to register as a legal person who is restricted to certain businesses. The enterprise is able to implement strategies that effectively conform to the interests of the parent company abroad. Moreover, technology and know-how are given better protection.

To establish a WFOE in Shanghai China, the project shall be examined and approved by the district authorities where the project is to be located. The foreign investor is required to entrust the authorized consultative bodies or agencies with the tasks of application and documents submission for approval..

Capital Contribution:

There is a minimum capital contribution required, known as registered capital, which varies according to the nature of business. The registered capital shall be matched with the actual business activities. There is NO real capital requirements since 2014.

Investor

The foreign investor may be a foreign company, enterprise, other economic organization, or a natural person.

(1) For a company/enterprise, the Certificate of Incorporation and Bank Reference Letter are required.

(2) For a natural person, the Identity Certificate and Bank Reference Letter are required.

-- the Certificate of Incorporation/Identity Certificate

--certified by the notary organ and the Chinese Embassy in your country

-- the Bank Reference Letter

-- issued by the bank in which foreign investor has a working or trading account and signed by an authorized bank officer

Process of Setup WFOE in China:

1. Reservation and Application of Company Name:

Prior to any of the following applications, the investor(s) should reserve a name for its prospective WFOE with Shanghai Administration of Industry and Commerce (SAIC). SAIC requires that a proposed name and three other names be provided.

2. The Chinese name should be formatted as follows:

First word - company name; Second word - activity; Third word - location/name of town; Fourth word - company structure. The use of 'China' 'Sino' and 'International' are not permitted in the Chinese name unless very special permission is given, although they are permitted in the non-Chinese name.

3. Registration of Approval Certificate:

After the completion of Name Approval Notification, Approval letter and Approval Certificate are the next to register. At the time of application, Article of Association, Feasibility Study Report, Lease Agreement, etc. should be submitted to Shanghai Municipal Commission of Commerce. The local Approval Authority will review all documentation and give instructions in accordance with the Company Law and local regulations. If all is up to standard, the authority is able to give its approval and issue the certificate within 10 to 15 working days upon receiving all the required documentation.

4. Business License and Organization Code Certificate:

Within 30 days after obtaining the approval certificate, the foreign investor will need to register and apply for a business license for the WFOE from the local SAIC. As part of this step, the foreign investor should submit similar documentation to the authority for approval and filing.

5. Once the business license is issued, the WFOE is deemed to be a legal person duly organized and existing under PRC laws and will have full operational rights to operate a business in China within the scope of its Business License. The organization code refer to the statutory code, the only and constant code identity given to every single organization, according to the compiling rules of national organization code. Application for Organization Code Certificate is purely a procedural step.

6 .Registration of Tax Registration Certificate:

Once your Organization Code registration Certificate is approved then you may proceed with applications to the local tax authority. At the same time, you should also apply for the company seal and legal representative seal from Shanghai Municipal Police Bureau with the assistance of the authorized Carving Seal Agent. Together with Approval Certificate, Business License and other documents, the formal application form affixed with seals should be submitted to the authority for their examination and approval. Start from the second month after obtaining the Tax Registration Certificate, the WFOE is required to apply tax filling monthly / quarterly and inspection annually.

7. Other Certificates of WFOE:

-- Statistics Registration Certificate issued by Statistics Bureau;

-- Foreign Exchange Registration Certificate issued by State Administration of Foreign Exchange;

-- Financial Registration Certificate issued by Finance Bureau;

 -- Customs Registration Certificate issued by Customs Bureau.

8. Post Incorporation:

Having obtained approval from the tax and foreign exchange authorities, you are legally entitled to open Foreign Currency Capital Account and RMB Basic Account. Then you may proceed with capital injection, capital verification and certificates renewal.

9. Information and Documents Required:

--name and address of WFOE;

-- WFOE's office rental contract;

-- a written application for the establishment of the WFOE;

 -- the Feasibility Study Report covering items such as technological process, equipments, raw material supply, market survey, economic results, infrastructure facilities, expected profitability, etc;

-- the Articles of Association of the proposed WFOE;

-- a list containing the proposed chairman and the members of the WFOE board of directors and appointment letters;

 --- the Certificate of Incorporation of the WFOE investor;

-- the Bank Reference Letter of the WFOE investor;

-- other documents as may be required by the Approval Authority

After China's entry to WTO, most industries in China welcome foreign investment, WFOE setting up in China becomes the first option of foreign investment's entity structures instead of Rep Office setting up in China At the mean time, for tax purpose, effective licensing system etc more and more investors use Hong Kong as the holding company to invest China mainland, using this offshore company to hold their operations in China.

From 1st October 2016, China Ministry of Commerce has changed the foreign investment approval system into filing system. It means WFOE whose industry is not restricted type or prohibited type can directly start the business registration first and then complete the filling system on website of Ministry of Commerce. This change has greatly reduce the policy risk when foreign investor plans to start a WFOE in China.

Business set-up in China is a big project by itself, which requires financial and time commitments, business management knowledge and China expertise. Identifying a competent agent to manage the complex process will be a cost and time effective way to avoid potential pitfalls

Since 2006, Tommy China Business Consulting has been focusing on consultingservices for our clients to invest in Shanghai China. We are specialized in establishment of wholly foreign owned enterprises (WFOEs), setting up of offshore companies, trading services, tax minimization Assist in obtaining government approvals and certificates for running business, negotiate and draft various legal documents provide legal advice, negotiate government officer for Land acquisition

Advising on formation of WOFE and business structures ,managing and controlling WOFE in Shanghai China, drafting privacy policies and structuring commercial transactions, TCBC will manage all aspects of incorporation to get you a business license in Shanghai China.

 

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