China, with its centuries-old history and rich culture, has transformed into an economic superpower over the past decades. Starting with Deng Xiaoping's economic reforms in 1978, the country gradually opened its markets to foreign investment. Today, China represents the world's second-largest economy, offering enormous opportunities for international business.

Foreign companies began actively entering the Chinese market in the 1980s, initially through joint ventures, and then, as legislation liberalized, through wholly foreign-owned enterprises. This process accelerated significantly after China joined the World Trade Organization in 2001.

Types of companies

There are several forms of business for foreign investors in China:

• Representative Office (RO)
• Joint Venture (JV)
• Wholly Foreign-Owned Enterprise (WFOE)

WFOE has become the most popular form for foreign investors. This business form provides full control over the company, allowing 100% ownership without involving Chinese partners. WFOE offers reliable protection of intellectual property, minimizing risks of technology and know-how leakage. Flexibility in management allows for quicker responses to market changes and operational decision-making. Moreover, WFOE enables a wide range of activities, from manufacturing to services and trading, allowing maximum utilization of Chinese market opportunities.

Taxation:

• Corporate income tax: 25% (with the possibility of reduction to 15% for high-tech companies)
• VAT: varies from 6% to 16% depending on the industry
• Individual income tax for employees: progressive scale from 3% to 45%

Features of WFOE registration in China

The process of registering a WFOE in China can be complex and lengthy, typically taking 3 to 6 months. The main stages include:

• Choosing and approving the company name
• Preparing and submitting documents to the local Ministry of Commerce (MOFCOM) office
• Obtaining a business license
• Registering with tax authorities
• Opening a bank account

Successful registration and business operation in China require careful planning, understanding of local laws, and often the help of experienced consultants. With the right approach, WFOE can become an effective tool for long-term success in the Chinese market.

For the most effective registration and successful business start in China, we recommend contacting the specialists at IT-OFFSHORE.