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China, People's Republic of - Offshore Jurisdiction

 

PEOPLE'S REPUBLIC OF CHINA (PRC) is situated in eastern Asia, bounded by the Pacific in the east. She is established on 1 October 1949 and is now one of the fastest growth countries in the world. [MORE backgrounds of China]

Please note that a China company is real operative company/factory or real business and must be having activities and staff recruitments etc... There is no shelf company available and dormant company is not permited. Please do not expect a China company is an offshore company like that as in British Virgin Islands, Belize, or even Hong Kong for fund transfers, offshore reinvoicing etc...

 

Representative Offices (ROs)

A foreign company (or Hong Kong company) may establish a presence in China by setting up a representative office. A RO must confine its activities to promotion, liaison office on behalf of its parent company or support back office. A RO must not engage in any trading or business activities directly or on behalf of its parent company.
Advantages: (1) least costs for China presence; (2) RO is not a legal entity, hence no minimum share capital is required; (3) capable of handling market research, sourcing, project investigation on behalf of its parent company; (4) may hire local staff; (5) least taxability with appropriate arrangement and...

Disadvantages: (1) limitation in activity; (2) no trading or invoicing; (3) local staff should be recruited and handled by authorised economic services agents; (4) subject to taxes even though it is a cost centre and...
    Procedures and minimum document requirements:
  • about 1-2 months to complete;
  • at least a Chief Representative (or and Representative) is to be appointed
  • ;
  • parent / foreign company must be at least 1 year old (please ask before setting up if your business is new);
  • bank reference letter (with 6 digit average balance in HK$ in past 6 months);
  • office premise rental agreement or provisional agreement (or ownership document) which is valid for foreign investor use and the tenancy should be at least 12 months or over;
  • application forms, application letters, resume of representative, broad mintues, and other documents (as sampled and assisted by us);
  • parent / foreign company's structural supporting (e.g. certificate of incorporation, business registration certificate, statutory director and shareholder listings etc..). For company incorporated outside Hong Kong, documents (in English & Chinese, if it is not) may be required to be notarised and submitted via China Consulate General in the respective country;
  • RO license may be approved at a maximum of 3 years, which dependent on rental lease terms and the business nature;
  • Requirements, parent company authorised share capital and documents required may be a little bid different, which dependent to the area where the RO is located/established.

Foreign Investment Enterprises (FIEs)

Equity Joint Ventures (EJV): a partnership of Chinese and Foreign Investors, whose benefits and liabilities are determined by contribution of equity formally.

Cooperative Joint Ventures (CJV): a limited liabilities partnership of Chinese and Foreign Investors.

Wholly Foreign Owned Enterprises (WFOE): a limited liabilities company which is wholly owned by foreign investors. A WFOE can engage itself in approved business activities and issue tax invoices on its own and it is the most preferable corporate vehicle.

Enterprises other than those listed above that have establishments or places of business in China and engage in production or business operations, e.g. factory, places for exploitation of nature resources, contracted project sites etc..
Advantages: (1) capital injection (dependent on the type of business and industry; (2) a legal entity; (3) capable of doing sales, both overseas and domestic, but appropriate costs arrangments should be considered; (4) capable of issuance of VAT invoice (5) hire local staff; (6) taxability on entity results and tax concessions agreed and...

Disadvantages: (1) high costs in company maintenance when compared with that of a RO; (2) subject to some taxes and other governmental levy even though the company is a loss company and...
    Procedures and minimum document requirements:
  • about 1-2 months (pre-incorp) and about 1-2 months (post-incorp) to complete (our services is mainly on pre-incorporated period, where your recriuted local staff will finalise the post-incorporated process);
  • parent / foreign company must be at least 1-2 year old (please ask before setting up if your business is new);
  • capital (cash or equipment etc..) should be injected within permitted period and capital verification report is required to be submitted by China CPA;
  • bank reference letter parent company for its good credit standing;
  • office premise rental agreement or provisional agreement (or ownership document) and the tenancy should be normally 2-5 years or over;
  • application forms, application letters, project proposal, feasibility study report, draft memorandum & articles of association, broad mintues, and other documents (as sampled and assisted by us);
  • parent / foreign company's structural supporting (e.g. certificate of incorporation, business registration certificate, statutory director and shareholder listings etc..). For company incorporated outside Hong Kong, documents (in English & Chinese, if it is not) may be required to be notarised and submitted via China Consulate General in the respective country;
  • established enterprise's license may be provisionally approved at 5-10 years, which dependent on rental lease terms and the business nature, annual renewal is still required;
  • Requirements, parent company authorised share capital and documents required may be a little bid different, which dependent to the area where the Enterprise is located/established.

China Domestic Company (DC)

A foreign company (or foreigner) is normally not permitted to establish China domestic company (few exceptions are for Hong Kong residents and restricted to some specific regions). Those clients with control in sources (e.g. final customers or materials sources) may establish a China domestic company via Chinese resident(s). The legal owner of the business is the Chinese resident(s) and client using this approach may risk the loss of the total business unless he/she is having the control of sources.
Advantages: (1) capable of doing business in China; (2) handling the business directly; (3) capable of sales of products and issuance of VAT invoice locally; (4) may hire local staff; (5) least taxability with appropriate arrangement and...

Disadvantages: (1) high risk in lost of business; (2) conflicts with Chinese resident(s); (3) contingencies involved by the Chinese resident(s) and...

Procedures: the nominated Chinese resident(s) will handle all procedural process in the company formation. In general, monthly management fee for the company statutory administration is required and the fee is negotiable dependent on the size and business of the company.

People coming to China for businesses or for setting up offices in major cities like Guangzhou, Beijing or Shanghai, might be frustrated at complicated procedures and formalities. Our profound understanding to the China market may assist clients in the areas of China consultations, ROs & FIEs (or even DC) setting up, import and export agent services etc...

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Our aim is to provide a comprehensive service to our clients in Hong Kong and offshore operations. If you find above helpful, please free to contact us.

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