Doing business in Shenzhen, China is one of the best choices to open a WFOE(Wholly Foreign Owned Enterprise). Shenzhen being the first Special Economic Zone in China and a population of over 10 million, the city offers a haven for startups and foreign business opportunists.
Shenzhen is known for its excellent infrastructure and expert level of manufacturing and trading. With Shenzhen bordering on Hong Kong, the value of investment for foreign businesses is rising just as fast as the city itself.
The WFOE can do business within the appropriate business activities approved by the China business license.
The Special Policies In QianHai, Shenzhen
A number of special policies were approved by the State Council in June 2012 to make the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone an attractive area for foreign investment. Most of the policies fall under the Mainland and Hong Kong Closer Economic Partnership Agreement (CEPA) with the most notable policies being:
- 15% preferential corporate income tax rate.
- Eligible professionals who are employed in Qianhai are exempt from personal income tax.
- Qianhai shall be supported in its efforts to establish an equity investment parent fund.
- Relevant policies and measures shall be formulated to attract a professional, international workforce.
Benefits of QianHai company setup
- If your company is a service, technology, science, finance, IT, or logistics business, then QianHai may well be ideal!
- The zone has been ear-marked to become a major hub of these business types by 2020, and therefore must attract them quickly in order to justify the Chinese government’s mammoth 65 Billion dollar investment.
- In order to attract businesses like yours, QianHai offers:
- A corporate income tax rate of just 15% (lower than Hong Kong’s 16.5%)
- The Shenzhen-Hong Kong Youth Innovation and Entrepreneur Hub (a large startup incubator)
- Free housing and office space for 1 year for entrepreneurs (dependent on age and industry) who open companies there
- A fund to offer low-cost loans to startups
- Easy access to VC firms due to them being given preferential policies
- Individual tax for foreign experts lowered to 15% in comparison to China’s usual 25% rate
- High tech and animation industries are exempt from business tax for 2 years from when they become profitable, and then it is charged at 50% for the following 3 years
- Development of certain green technologies, such as water-saving, is tax deductible
- Loans in foreign currency, such as HK$
It is then clear that for foreign service industry businesses QianHai could be a very good option for their China companies due to its financial benefits.
Advantages of WFOE in Shenzhen
- Formally carry out business rather than just function as a representative office
- Shenzhen Special Economic Zone
- Capability of converting RMB profits to US dollars for parent company
- Protection of intellectual Property
- Efficient in operations
- Other than for a Representative Office, the Parent company of a WFOE does not have to be established for more than 2 years
WFOE registered capital and Annual Audit Report
The registered capital in Shenzhen is subject to the different business sectors requirements. The registered capital should be equal to the paid-up capital. A required amount of RMB 500,000 or above is required for a trading enterprise. Whereas for a manufacturing enterprise the registered capital should be RMB 1 million or above. If the registered capital is paid before the period of 6 months after registration the fee of paid-up capital verification can be reduced.
Any limited companies in China should submit the annual audit report to the government. Any company will be subject be to a fine if the Annual Audit Report is not submitted by the deadline. For more information on the annual audit report in China click here.
Process for registering a WFOE in Shenzhen
- The first thing to do in the registration process is to file for your official Chinese business name. There are fixed guidelines that needs to be followed to ensure compliance with the government.
- The second step requires preparation of all the necessary legal documents for the company registration.
- The next step is to actually submit the documentation and apply for a business license at the local authorities. These include the Administration for Industry and Commerce (AIC).
- After your WFOE business license have been granted, registration for taxes should be done at the local Tax Bureau. The documents are only deemed valid once all the required documents has been stamped with a company stamp, and submitted.
- Register company with relevant authorities in order to get established. These authorities include the Technology Supervision Bureau which issues the enterprise code, the registration at the State Administration and Foreign Exchange, the financial registration at the Financial Bureau and the statistic registration at the Statistical Bureau.
- The final step is to open a bank account that operates in RMB. In addition, a foreign currency bank account must be opened for the contribution and verification of the foreign invested capital. The process of setting up a Wholly Foreign Owned Enterprise in China can be overwhelming for people and organisations who are unfamiliar with the process. It is really important to understand how it all works before you start to avoid mistakes that could increase costs and cause delays. It is always a good idea to consult experts in the matter to ensure your application is handled quickly and efficiently.
Working Procedures of WFOE
- Complete application form
- Company name registration
- Payments for services
- Submit applicable documents
- Acquire investor signatures for the statutory documents, then submit
- Finish processing in 30-50 working days depending on location
- Sign the receipt.
If you have any questions about registering your WFOE in Shenzhen, China? Let us know or download our free checklist down below.