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WOFE Formation|Setup Wofe in Foshan

Introduction to WOFE

The Wholly Foreign Owned Enterprise (WOFE) is a Limited liability company wholly owned by the foreign investor(s). In China, WOFEs were originally conceived for encouraged manufacturing activities that were either export orientated or introduced advanced technology. However, with China's entry into the WTO, these conditions were gradually abolished and the WOFE is increasingly being used for service providers such as a variety of consulting and management services, software development and trading as well.
The registered capital of a Wholly Foreign Owned Enterprise (WOFE) should be subscribed and contributed solely by foreign investor(s). A WOFE does not include branches established in China by foreign enterprises and other foreign economic organizations. The Chinese Laws on WOFE do not have a clear definition of the term of "branches". The term of "branches" should include both the branch companies engaged in operational activities and representative offices, which are generally not engaged in direct business activities. Therefore, branches and representative offices set up by foreign enterprises are not WOFE.

Different types of WOFE

Following are different types of WOFE. Commonly,
1．If the WOFE only be allowed to manufacture，we can say it's manufacture WOFE.
2．If the WOFE is allowed to do Consultancy & Service, we call them Consultancy Service WOFE.
3．If the WOFE is allowed to do Trading, Wholesale, Retail or Franchise in China, we call them Trading WOFE or FICE (Foreign-Invested Commercial Enterprise).

Advantages of WOFE

The advantages of establishing a WOFE, compared with other types of enterprises, include, but not limited to:
1．Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;
2．Ability to formally carry out business rather than just function as a representative office and being able to issue invoices to their customers in RMB and receive revenues in RMB;
3．Capability of converting RMB profits to US dollars for remittance to its parent company outside of China;
4．Protection of intellectual know-how and technology;
5．No requirement for Import / Export license for its own products;
6．Full control of human resources
7．Greater efficiency in operations, management and future development.
8．To set up a WOFE, Investor doesn't have to be established it's business overseas for more than 2 years while Representative office's parent company is required to have the parent company been established over 2 years.

Business scope

One of the most important issues in WOFE application is business scope. Business scope needs to be defined and the WOFE can only conduct business within its approved business scope, which ultimately appears on the business license. Any amendments to the business scope require further application and approval. Inevitably, there is a negotiation with the approval authorities to approve as broad a business scope as is permitted. Generally business scope includes investment consulting, international economic consulting, trade information consulting, marketing and promotion consulting, corporate management consulting, technology consulting, manufacturing, etc. With China's entry into WTO, more and more business is open to WOFE especially in Trading, Wholesale and Retail business.

Registered capital and Total investment

Under applicable PRC law, registered capital is defined as the total amount of capital contributions subscribed to by the parties and registered with the Chinese authorities. The concept of “total investment”, on the other hand, includes both registered capital and external borrowings.
Registered capital is the amount that it's required to run the business until it can break even - the 'registered capital' is a guideline only. If you do looking for a minimum registered capital, for instance RMB 30,000 (which is impossible to establish a WOFE in China) this means you will run out of money pretty soon, which leads to increased costs in reapplying for permission to increase capital, additional licensing fees and renewals of business licenses and so on. The WOFE needs funding via it's registered capital until it's about to support itself from it's own cash flow.
The relation of total investment and registered capital are as the bellowing：
InvestmentRegistered capital
Amount of Total Investment(% of Total Investment)
<= US$3 Million70%
US$3 - US$10 Million50% or US$2.1 Million (whichever is higher)
US$10 - 30 Million40% or US$5 Million (whichever is higher)
>US$30 Million33.3% or US$12 Million (whichever is higher)
Consulting WOFE* ：Suggest Registered capital is RMB 100,000 ~ RMB 500,000
Service WOFE ：Suggest Registered capital is RMB 100,000 ~ RMB 500,000
Hi-Tech WOFE：Suggest Registered capital is RMB 100,000 ~ RMB 500,000
Trading WOFE / FICE：Suggest Registered capital is RMB 500,000 ~ RMB 1 million
Food & Beverage：Suggest Registered capital is WOFE RMB 500,000 ~ RMB 1 million
Manufacturing WOFE：Suggest Registered capital is RMB 1 million or USD 140,000

Registered and paid up capital

Registered Capital (US$M)Contribution Time Limit
<=0.51 year
>0.5 but <=1.01.5 years
>1.0 but <=3.02 years
>3.0 but <=10.03 years
>10.0subject to approval with reference to actual condition

General tax information

Since Jan. 2008, China's new corporate tax rates begins range from15% to 25%, the rate depends on the places where the company is registered and the industry that a company engaged. All enterprises are required to report to the Tax Administration Department monthly, quarterly, annually. FINERISE provides part time accountant service for our clients, you are welcome to contact us for more information.

Annual audit report

Any limited companies in China should summit annual audit report to the relevant authorities. Any company will be subject be to a fine if the Annual Audit Report is not submitted in a timely manner.

Profit repatriation

China Government allows Foreign Invested Enterprises remit their profits out of the country and such remittances do not require the prior approval of the State Administration of Foreign Exchange (SAFE). Dividends cannot be distributed and repatriated to oversea if the losses of previous years have not been covered while dividends not distributed in previous years may be distributed together with those of the current year. Repatriating the Registered Capital to home countries is forbidden during the term of business operation.

Terms and termination

In China, terms of 15 to 30 years are typical for a manufacturing WOFE (although some may have a longer term). It is also possible to obtain extensions of the WOFE's duration. For projects in which the amount of investment is large, or the construction period is long and the return on investment low, projects producing sophisticated products using advanced or key technology provided by the foreign partner, or for projects producing internationally competitive products, the term of WOFE may be extended to 50 years. With special approval from the State Council, the term may be even longer than 50 years.
The WOFE may be terminated under certain conditions. For instance, the inability of the WOFE to operate due to heavy losses, or in the occurrence of an event of force majeure, etc.

How can Finerise Consulting Help you？

● Register a Wofe in Foshan
● Accounting &Tax consulting service
● Annual return and alteration for WOFE.
● Apply work & residence permit for chief rep or representatives in Foshan
● Help to rent a office in Foshan
● Register a representative office, Joint venture enterprise in Foshan
 
 

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