When foreign investors set up a WFOE in China, many challenges do not arise from the question of whether a company can be registered. Instead, the real difficulties often appear during the execution stage.
Below, Hongda summarizes practical WFOE registration questions by category to help foreign investors better prepare for doing business in China.
4. Legal Representative and Bank Account Opening
Q6: Does the legal representative of a WFOE need to come to China?
During the company registration stage, the legal representative usually does not need to come to China in person. Many registration documents can be handled through signed documents, authorization, video verification or remote cooperation, depending on local registration requirements.
However, bank account opening is usually stricter. Most banks require the legal representative to be physically present for KYC review and identity verification. In some cases, certain banks may accept account opening through authorization, but the original passport of the legal representative may still need to be presented on site. If the legal representative cannot enter China but the company still needs to open a bank account, you may contact Hongda for a one-stop remote bank account opening solution.
5. Tax Status, Invoices and General VAT Taxpayer Registration
Q7: When should a WFOE apply for general VAT taxpayer status?
Whether a WFOE should apply for general VAT taxpayer status depends mainly on its customer type, invoice requirements, cost structure and business model.
For export businesses that need export tax refunds, general VAT taxpayer status is usually required. Only after becoming a general VAT taxpayer can the company apply for export tax refunds with the tax authority.
For trading companies that do not involve export tax refunds, it may not be necessary to apply for general VAT taxpayer status immediately. For consulting, service or other small-scale businesses, keeping small-scale taxpayer status may help reduce tax burden and compliance costs at the early stage.
Once a company’s annual taxable sales exceed RMB 5 million, it will be mandatorily classified as a general VAT taxpayer.
6. Foreign Shareholders, Legal Representatives and Employee Visas
Q8: Do foreign legal representatives or shareholders need a China work visa?
Whether a foreign shareholder or legal representative needs a China work visa depends on whether that person will work and reside in China on a long-term basis.
If the foreign shareholder or foreign legal representative lives outside China and only handles shareholder decisions, strategic matters, document signing or occasional business visits remotely, he or she generally does not need to apply for a China work visa simply because of being a shareholder or legal representative.
However, if the foreign individual will work in China on a long-term basis, such as acting as general manager, operations manager, technical director, sales director or another role involving daily management in a China office, then a foreigner work permit and work-type residence permit will normally be required.
Q9: Must my company hire Chinese employees before it can apply for a China work visa for foreign employees?
From a practical perspective, China’s management of foreigner work permits and work visas has become increasingly strict. When reviewing a newly established company’s application for a foreign employee’s work visa, many local authorities pay close attention to whether the company has real business operations.
In some cities, such as Shenzhen and Guangzhou, hiring at least one Chinese employee and paying social insurance has become an important practical review factor. If a newly established WFOE has no Chinese employees and no social insurance payment record, it may face difficulties when applying for a foreign employee’s work permit or work visa.
However, this does not mean all cities have the same mandatory requirement. In places such as Hainan, Shanghai, Hangzhou and Beijing, there is currently no uniform requirement that a company must first hire Chinese employees before applying for a work visa for a foreign employee.
Q10: How can I pay salaries to employees? What should I do if there is a labor dispute?
After the WFOE is registered and its RMB bank account is opened, the company can pay employees through its corporate bank account according to the employment contract and payroll arrangement. The company should also handle individual income tax declaration, social insurance and, where applicable, housing fund contributions for employees.
If a labor dispute arises, the company should first try to resolve it through communication and written negotiation. If no agreement can be reached, the dispute may be submitted to labor arbitration. If either party disagrees with the arbitration result, the case may be brought before the court according to Chinese labor law procedures.
Hongda’s legal and HR compliance team can assist foreign-invested companies with employment contract drafting, payroll and social insurance setup, employee handbook preparation, termination arrangement, labor dispute negotiation, labor arbitration support and ongoing employment compliance management in China.
Conclusion: Successful WFOE Registration Is Only the First Step
Setting up a WFOE in China is not just about obtaining a business license. For foreign investors, the more important question is whether the company can smoothly complete bank account opening, capital contribution, tax registration, invoice application, visa arrangements, foreign employee work permits and long-term compliance.
Hongda can assist foreign investors with WFOE registration, bank account opening, tax registration, visa planning, payroll setup and ongoing compliance in China. If you are planning to set up a WFOE in China, contact Hongda before you begin. Our team can help you assess the registration plan, avoid common execution risks and build a smoother setup process from the start.
