Establishing a Joint Venture in China

While the Chinese government is continuously opening various categories of industries for foreign investors, there are still limitations and restrictions in specific areas for foreign companies without a Joint Venture partner.

However, the Chinese government encourages local corporations to join together with foreign investors to integrate technics, investment, and management experience, while foreign companies obtain easier access to the market and expand their market share.

Thinking of opening a JV?

Quicker Process

Open a bank account in China within 1-2 months, which is 50% faster than our competitors' timeline

No Success
No Charges

With a success rate of 99.9%, Hongda promises No Success No Charges.

Life-long Service

Our highly qualified specialists will help address any issues that could arise even after the bank account opening

Online Process

Hongda helps you to open a Chinese bank account 100% remotely without ever having to leave your home or office.

Types Of Joint Ventures In China

There are two forms of Joint Venture partnerships between foreign and Chinese corporations recognized by the Chinese government: equity joint venture and Cooperative joint venture, depending on investment method and liability.

Equity Joint Venture

An equity joint venture (EJV) is formed by the contribution of equity from both foreign and Chinese partners on the principle of mutual benefits and limited liability. The foreign investors need to contribute at least 25% of the equity of the company. This ratio is subject to increase to a maximum of 70% (up to USD 3 million) depending on the total registered capital of the joint venture. Investment can be in the forms of cash, real estate, industrial property, equipment, or technology, whose “market value” needs to be assessed by an independent third party. Failure to land the investment capital within a certain time window may lead to a penalty of fines.

Cooperative Joint Venture

Cooperative Joint Venture (CVJ), so known as a contractual joint venture, comes into two forms: limited liability or unlimited liability. The requirement and regulations of forming a limited liability CJV are very similar to that of an EJV. The foreign entity should provide the majority of the funds and technology, whilst the Chinese partner contributes land, facilities, natural resources, manpower, and a limited amount of money. Compared to EJV, the major difference is that there is no minimum capital requirement for foreign investors.

The unlimited liability CJV is starkly different from EJC and limited liability CJV. Unlike the former, an unlimited CJV provides a means by which a negotiated partnership can be affected by two partners. In this way, a foreign partner can provide capital or expertise that is not directly tied to equity in the partnership. What this means, is that the partner can take a minority stake in the partnership. What‘s more, the partners do not need to establish a new entity to represent them; both partners in the joint venture provide funds, assets, and technology directly in line with the articles of the joint venture, including levels of management. As control of the partnership is not dependent on equity stakes, the foreign partner may also recover their investment in the event that the joint venture ends and reverts to the Chinese partner, so long as those terms are written in the articles at the start of the venture.

Are Joint Ventures Even Necessary Today?

There remain many industries that are closed to foreign companies in China, often on the grounds of heritage or national security. For instance, hospitality, chemical, and automotive companies. If you are planning to operate in those limited areas, you still need to cooperate with a Chinese partner to form a joint venture.

Rent office space

Registered address

Online registration via

MOFCOM

Company Seals

Seal engraving for the company

VAT

Registration

Done

Issue contracts and hire employees

Apply for name

Approval and registration

Business license

Apply for a "5 in 1" business license from AIC

Bank account

Opening of bank account

Special Licenses

Customs and import-export Registration - Only Trading WFOE

Who is the income taxpayer of the partnership enterprise?

Each of the partners of a JV is an income taxpayer. If the partners of a JV are natural persons, they shall pay individual income tax; if the partners are legal entities or other organizations, they shall pay enterprise income tax.

Where should a JV pay its taxes?

For the production and operation income obtained by the natural person partner from a JV, the partnership enterprise shall declare and pay the individual income tax payable by the investor to the competent tax authority at the place where the enterprise actually operates and manages.

The income distributed by a legal person partner from a JV shall be included in the total annual income of the partner, and shall be reported and paid to the competent tax authority at the place where the legal person partner is registered.

How should the partners of a JV decide the distribution ratio of tax payment?

There are some principles when deciding the amount and ratio of tax payment of each partner:

The partners of a JV shall use the production and operation income and other income of the partnership enterprise to determine the taxable income according to the distribution ratio stipulated in the partnership agreement.
If the partnership agreement does not stipulate or the agreement is not clear, the taxable income shall be determined according to the distribution ratio determined by the partners through negotiation based on all production and operation income and other income.
If the negotiation fails, the taxable income shall be determined according to the proportion of the actual capital contribution of the partners based on all production and operation income and other income.
If the proportion of capital contribution cannot be determined, the taxable income of each partner shall be calculated on average based on the total number of partners based on all production and operation income and other income. "

Is a JV an independent legal entity?

No. A JV does not have an independent legal personality and is an unincorporated organization.

Who is qualified to form a JV with other partners?

A JV can be established by natural persons, legal persons, and other organizations. A partnership enterprise shall have at least two partners. A limited liability JV shall have at least 50 partners and at least one general partner. Solely state-owned companies, state-owned enterprises, listed companies, public welfare institutions, and social organizations are not allowed to be the general partner of a JV.

How are responsibilities and decision-making handled in a JV?

Responsibilities and decision-making structures are outlined in the JV agreement. Partners may share management experience, or one partner might be responsible for certain aspects while the other handles different aspects.

Can a JV be converted into a different business structure later on?

Yes, it's possible to convert a JV into a different structure, such as a wholly-owned subsidiary or merger, depending on the partners' agreement and legal requirements.

What are the methods of paying the registered capital of a JV?

For general partners, they can contribute money, physical objects, intellectual property rights, land use rights, or other property rights, or use labor services (natural talents can make labor service contributions).

Limited partners may make capital contributions in currency, physical objects, intellectual property rights, land use rights, or other property rights, and limited partners may not use labor services to make capital contributions.

Sound United

Jack Peng
Sound United Vice President > Asia Pacific

Sound United is the leading designer and manufacturer of consumer audio products in the US. Sound United has been using Hongda since 2013. Moving one’s operation to China is not a small task, But Hongda’s expert services helped us set up a company and deal with tax issues so we could get on with growing our business in no time at all, and that’s why we continue to use them today.

Business Service Guidance

Hongda Business Services helps foreign businesses looking to establish in the PRD (Pearl River Delta, Guangdong), Shanghai and Hong Kong take advantage of everything that China has to offer. We typically work with companies in Shenzhen, Guangzhou, Zhuhai, Zhongshan, Shanghai, and Hong Kong.

JV Registration in China

What is a Joint Venture (JV) in China?

OUR PROMISES

Quicker Process

No Success No Charges

Life-long Service

Online Process

Types Of Joint Ventures In China

Equity Joint Venture

Cooperative Joint Venture

Are Joint Ventures Even Necessary Today?

Everything You Need To Do

01.

Consult and confirm proposal

02.

Contract Signing and make payment

03.

Preparing Documents

04.

Wait for the good news

OUR WORKING PROCESS

Rent office space

Online registration via

Company Seals

VAT

Done

Apply for name

Business license

Bank account

Special Licenses

FAQS

Who is the income taxpayer of the partnership enterprise?

Where should a JV pay its taxes?

How should the partners of a JV decide the distribution ratio of tax payment?

Is a JV an independent legal entity?

Who is qualified to form a JV with other partners?

How are responsibilities and decision-making handled in a JV?

Can a JV be converted into a different business structure later on?

What are the methods of paying the registered capital of a JV?

TYPES OF COMPANIES IN CHINA

Representative Office

WFOE

Joint Venture (JV)

WHAT CLIENTS ARE SAYING

Sound United

Business Service Guidance

GET IN TOUCH WITH OUR TEAM

HOW CAN WE HELP?

Don't hesitate to contact

We will contact you shortly

JV Registration
in China

No Success
No Charges