August 13, 2019

How to register foreign companies in China?

How to register foreign companies in China?

With the development of globalization and China’s opening policy, more and more foreign capital and foreign businesses enter the Chinese market. When foreign enterprises are ready to obtain business licenses and register in China, they are mainly divided into three types based on their input costs in China and their dominant position in business activities, they are respectively the foreign-funded enterprise, the Chinese-foreign cooperative enterprise and the Sino-foreign joint venture.


Registration requirements for these three types of enterprises are different. When a foreign-funded enterprise is trying to register in China, there exist barely no block. All overseas legal persons or natural persons (more than one shareholder) can be registered.


Then comes to the Chinese-foreign cooperative enterprise. A Chinese-foreign cooperative enterprise needs to be a production cooperative enterprise whose products are exported(refer to the products are mainly used for export and earn foreign exchange), or a production cooperative enterprise with advanced technology(refers to in which the foreign party provides advanced technology, engages in the development of new products to increase export earnings or replace import) if it wants to register successfully in the territory of China.


For a Sino-foreign joint ventures, it must meet many complicated requirements in order to register a company in China. Firstly, the number of its shareholders shall be less than 50. Then the foreign investor shall invest at least 25% of the registered capital, but generally, there is no upper limit on the investment of the foreign investor. Thirdly, Chinese investors shall be enterprises, other economic organizations, public institution legal persons, social organizations and private non-enterprise legal persons who may invest as investors upon approval of the examination and approval of the authority. And There must be a place of business and an article of association jointly established. If the company’s chairman and vice-chairman are determined through consultation and one of the Chinese or foreign joint venture partners serves as chairman, the other party shall serve as vice-chairman.


If any of the three types of companies meet all the legal requirements of their own situation, they need to prepare the following materials. A copy of the certificate of legal opening of foreign business (passport for individual investment), credit certificate (issued by the bank of deposit, valid for no more than three months. The contents shall include the number of deposits of the enterprise, the reputation of capital transactions and settlement) and original and translated copies of “letter of appointment” for the chairman and “letter of recommendation” for managers. Besides, the list of chairmen, managers and the copies of their ID card(passport), copy of ID card(passport), resume, photo (1-inch, 1 piece) of legal representative and the property ownership certificate and rental agreement of company residence (business premises) are also required.


The above documents shall all be written in Chinese. The commerce committee shall give its approval within 20 working days from the date of receipt of the above-mentioned documents which meet the requirements. Next, the enterprise must apply for “national organization code” to the local bureau of quality and technical supervision and apply for approval certificate procedures in the commercial committee. In addition, the application enterprise should be dealing with formalities of registration to local industrial and commercial bureau and then get business license from the day it gets approval certificate and complete the process within 30 days.


The Chinese government has introduced many preferential tax policies to attract foreign investors and promote economic development. To encourage the establishment of productive enterprises, for foreign-invested enterprises whose operation period is more than 10 years, the tax shall be exempted from tax in the first year and the second year, and the tax shall be halved from the third year to the fifth year.


Enterprises with foreign investment engaged in agriculture, forestry, animal husbandry and located in remote areas with underdeveloped economy after the expiration of the tax reduction or exemption treatment as stipulated in the preceding paragraph, may continue to reduce the income tax payable by 15-30% in the following ten years upon approval.


The tax rate for foreign-invested enterprises and foreign enterprises set up in special economic zones, as well as productive foreign-invested enterprises set up in economic and technological development zones, shall be reduced by 15%. For foreign-invested enterprises located in the old urban areas and coastal economic open zones of the special economic zones and the cities there the economic and technological development zones are located, the income tax shall be levied on a reduced rate of 24%. If the above-mentioned enterprises belong to energy, transportation, ports, wharves of other projects encouraged by the state, the income tax may be levied at a reduced rate or 15%.


For foreign-established export enterprises, where the output value of their export products reaches more than 70% of the output value of the enterprises of the year after the expiration of income tax reduction or exemption according to the provisions of the tax law, the income tax can be halved according to the statutory tax rate.


The incentives to expand and increase capital investment. Where the foreign investor of an enterprise with foreign investor of an enterprise with foreign investment directly reinvests the profits received from the enterprise int the territory of China, increases the registered capital, or sets up other enterprises with foreign investment as capital, and its business term is not less than 5 years, he may refund 40% of the income tax paid for the reinvestment; If the company reinvests to establish or expand an export enterprise or an advanced technology enterprise, all the tax already paid for the reinvestment can be refunded.


For more information please contact:


Monika Rutland, partner
rutland & partners, advokátní kancelář s.r.o.
tel: +420 226 226 026

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