Doing Business in China
You need people who've been in the market and understand bit by bit dynamics of doing business in China. China - the world's second-largest economy is now an attractive destination of many global giants tapping the fast-growing economy. When setting up business in China there are different considerations; below are the first legal teething issues you need to resolve. Of course, ACSK Solicitors LLP will walk with you through the process pointing out areas that will create success, particularly with the subtle cultural nuances which can make a big difference and impact.
First-timer? consider the following legal issues:
Incorporating a Company
Under People’s Republic of China (PRC) law, it is general requirement to establish a legal entity with a proper Business License in order to carry out import and export business in China. The “export tax rebates” in China apply to qualified Chinese trading companies engaged in export business when certain thresholds have been met. Offshore companies are not allowed to directly engage in business activities in China simply through hiring local employees without a legal presence in China. Therefore, from a legal perspective, it is necessary for you to establish a legal entity in China for carrying out import and export business there.
Incorporating a company in China or subsidiary of a foreign company requires no minimum or maximum share capital and foreign companies can own 100% of its share capital without local participation. Incorporating Wholly Foreign Owned Entity (“WFOE”) gives greater flexibility to a foreign company to control its financial affairs.
Establishing WOFE or foreign company for instances in Shanghai involves the following steps:
Post-establishment procedures for a trading WFOE include filing with the MFOCOM as a foreign trade operator, custom registration, foreign exchange registration, etc. To enjoy the export tax rebates, the WFOE also needs to apply for the recognition of qualification for such purposes. Generally, it takes 2-3 months to complete all the above establishment and post-establishment procedures, without considering the time for preparing documentations for filing.
Free Trade Zone (“FTZ”)
A foreign company whether WFOE or not may establish in FTZ. In Shanghai Free Trade Zone (“FTZ”) for instance has the following advantage:
Although such advantages are not directly related to the issue of “export tax rebates”, they do bring more convenience to foreign investors for their direct investments in China and therefore, has become a very popular investment destination.
Export Tax Refund
There is an official catalogue of specific products entitled to export tax rebates. The catalogue is updated from time to time by the Chinese relevant tax authorities. The refund is on export products on domestic production which include VAT, business tax and special consumption tax. It is advisable to search the catalogue for relevant Export Tax Refund for your product.
ACSK Solicitors LLP has expertise in doing business in China. Contact us for further inquiry.