There are varying types of companies that can be incorporated and registered in China, which only forms part of the registration process.
Azure Group China will make sure that all aspects of the incorporation and relevant registration processes are followed to enable your business to operate appropriately in China.
In China, only a company’s registered name in Chinese is legally binding. When applying for registration, the brand name, industrial selection, and registration area should be listed.
The typical format for a company name is Registered Area Name + Brand Name + Industry Type + Co., Ltd. Or Brand Name + (Registered Area Name) + Industry Type + Co., Ltd. It is important to note that in most cases, if any proposed name is similar to any existing company name, name preapproval is likely to fail.
Therefore, investors are required to prepare 5-10 Chinese names. Names in English or other languages may be used for marketing and production of company seals but are not legally binding and not relevant for registration.
Before starting a business in China you should decide the location where your company is going to be registered. China is a vast country with large gaps in economic levels between the east and the west, where each region has different economic policies, cultures and key industries.
For most foreign investors, it may be sensible to register the company in prosperous business central cities, such as Shanghai, Beijing and Shenzhen, or free trade zones (FTZ) around China.
Shanghai in particular has its own unique advantages in that the local government encourages foreign investment and business operation, implements competitive tax preferential policies in the Shanghai FTZ, releases industry restrictions for foreign enterprises, and gives them fewer administrative restrictions and higher trade freedom.
A Director has a wide range of powers including, but not limited to the development of the company’s operation agenda, the formulation of investment plan and strategy, and the formulation of company annual budgets.
The director is accountable to the company’s shareholders and holds the power to appoint or dismiss the general manager, deputy manager(s) and the financial personnel upon the recommendation of the internal management body or managers of the company.
According to the PRC Company Law, directors have the responsibility to abide by the laws, administrative regulations, and the articles of association of the company. Directors also have duty of loyalty and duty of diligence to the company.
In China, the legal representative must be the Board Chairman or Executive Director or the General Manager of the company. It is the main person in charge of a company and is the person who represents a company. Key responsibilities and duties of legal representatives in China include:
As a foreign investor, you can either appoint a foreigner from the head office or your China General Manager to be the legal representative of your WFOE.
During the set up process, the appointed legal representative is required to provide relevant support.
A Supervisor (or a board of supervisors) have duties to supervise the execution of the company to ensure full compliance with company rules and regulations.
Supervisors have the right to supervise the duties and conduct of directors and senior management in case any of their acts is prejudicial to the benefit of the company. If the employee has actions which violate the law, administrative regulations or the company’s articles of association, causing loss to the company, the supervisor can investigate the staff, or file a lawsuit.
To ensure no conflict of interest, the supervisor cannot concurrently hold any other legal roles within the company.
As a foreign investor, you can appoint someone from the head office to be the supervisor of your China business or you can engage a third party (a law firm or an accounting firm) to fulfil your supervisor’s responsibilities and duties. Please visit our Supervisor Service for more information.
According to the PRC Company Law, setting up registration capital is a mandatory provision for anyone who wants to establish a company in China. The amount of registered capital will be listed on the company’s business license and made available to the public.
The relationship between Registered Capital and Total Investment is:
Total investment (TI) | Registered Capital/ TotalInvestment(TI) | Registered Capital Requirement |
≤ US$3M | 70%(Minimum) | At least 70% of TI |
US$3M<TI≤US$4.2M | 50%(Minimum) | At least US$2.1M |
US$4.2M<TI≤US$10M | 50%(Minimum) | At least 50% of TI |
US$10M<TI≤US$12.5M | 40%(Minimum) | At least US$5M |
US$12.5M<TI≤US$30M | 40%(Minimum) | At least 40% of TI |
US$30M<TI≤US$36M | 33%(Minimum) | At least US$12M |
> US$36M | 33%(Minimum) | At least 33% of TI |
Assuming that the total investment of a company is about $2 million, then the company should set up at least $1.4 million of the total investment as registered capital, and only $600,000 as debt financing at most.
You can find detailed key information about your company on the Chinese Business license, including:
The digital business license is an electronic document that has the same legal effect as a paper business license.
The digital business license can be used to:
Having company chops are mandatory if you want to start a business in China. According to the PRC Company Law, the company chops (seals/stamps) can be used as legal evidence and represent business activities. Your firm will be bound by the validity of a contract or other documents when these documents are affixed with company chops.
A company may need to hold different types of company chops according to different utilize purposes (these depend on your business scope). In most cases, companies can choose to hold the following five main types of seals:
Other chops: The company may need some special types and forms of chops to meet the specific industry or regulatory requirements, such as:
Foreign Bank:
Some recommendations of Foreign Banks:
Chinese Local Bank:
Some recommendations of Local Banks:
Estimated time for opening a bank account in Foreign Banks: 2-6 months
Estimated time for opening a bank account in a local Chinese Bank: 2-4 weeks
A fapiao is an official receipt that serves as proof of purchase for goods and services in China, it can be used to track the tax payment.
The special value-added tax (VAT) fapiao is one of the main types of Chinese fapiao used for businesses to claim input tax credits, which contains a company’s information including the company’s name, the tax code, address, contact number, bank account number, etc.
Special VAT fapiao
The special VAT fapiao allows general VAT payers to claim input tax credits against their VAT on sales.
VAT fapiao
The VAT fapiao cannot be used for claiming input tax credits. This type of fapiaos can be purchased and used by all kinds of VAT payers who are engaged in business activities. The general VAT fapiao have 3 forms:
In order to issue customers the VAT fapiao, companies need to have the following information from their customers and confirm with them the type of the VAT fapiao required (a special VAT fapiao or a normal VAT fapiao):
According to the China Social Insurance Law, social insurance contribution is mandatory. The Chinese social insurance contribution rates and caps are changing annually and varied from city to city. Foreign employees might be exempted for certain types of insurance if your home countries have entered into bilateral exemption agreements with China.
Types of social insurance: Pension, Medical Insurance, Unemployment Insurance, Work Injury Insurance, Maternity Insurance.
Please contact us for more information and obtain the latest social insurance contribution rates and caps for the city you are interested in.
Housing fund is a type of long term saving that can be accessed by Chinese residents to buy residential properties. The housing fund contribution is mandatory for local Chinese staff but is not mandatory for foreign staff. Company and employees can choose to contribute between 5% -12% to the housing fund. In principle, the employer’s contribution rate should equal to the employee’s contribution rate.
Some Foreign workers in China may get social insurance exemptions if they come from the following countries that have signed social insurance exemption agreements with China:
Country | Exemption range | Is it implemented? |
Canada | Pension | Yes |
Finland | Pension, Unemployment insurance |
Yes |
Germany | Pension, Unemployment insurance |
Yes |
Japan | Pension | Yes |
Luxembourg | Pension | Yes |
The Netherlands | Pension, Unemployment insurance |
Yes |
Serbia | Pension, Unemployment insurance |
Yes |
South Korea | Pension for urban employees, Rural and urban endowment insurance Unemployment insurance |
Yes |
Spain | Pension, Unemployment insurance |
Yes |
Switzerland | The basic old-age insurance, Pension for rural and urban residents, Unemployment insurance | Yes |
France | TBC |
With the exposure to food safety problems, Chinese food operation license requirements are becoming more and more strict. Companies that want to enter the Chinese food industry need to pay more attention to this area.
Here are the requirements to obtain a Chinese Food Operation License:
Companies that have business interests in wine, spirits, beer, and other types of liquor in China are required to obtain the Liquor Retail Permit (酒类商品零售许可证) and Liquor Wholesale Permit (酒类商品批发许可证).
Application for New Liquor Wholesale Permit or Liquor Retail Permit requires the following materials: