Wholly Foreign Owned Enterprises (WFOE)
About WFOE
The registered capital of a Wholly Foreign Owned Enterprise (WFOE) should be subscribed and contributed solely by foreign investor(s). A WFOE does not include branches established in China by foreign enterprises and other foreign economic organizations. The Chinese Laws on WFOE 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 WFOE.
The WFOE is a Limited liability company wholly owned by the foreign investor(s). With China's entry into the WTO, more and more investors prefer to set up WFOE other than other forms of enterprises.
Because WFOE has its own advantages, it has been the most popular enterprise form for foreign investors to set up. In general, the advantages of a WFOE include, but not limited to: Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner; Ability to formally carry out business rather than just function as a representative office and enjoy the right of issuing invoices to their customers in RMB (Chinese Currency) and receiving revenues in RMB; Capability of converting RMB profits to US dollars for remittance to their parent companies outside China; Protection of intellectual know-how and technology; Greater efficiency in operations, management and future development.
The Advantages of WFOE
The advantages of establishing a WFOE, compared with other types of enterprises, include, but not limited to:
＃ Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;
＃ 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;
＃ Capability of converting RMB profits to US dollars for remittance to its parent company outside of China;
＃ Protection of intellectual know-how and technology;
＃ No requirement for Import / Export license for its own products;
＃ Full control of human resources
＃ Greater efficiency in operations, management and future development.
Important
One of the most important issues in WFOE application is business scope. Business scope needs to be defined and the WFOE 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 WFOE especially in trade, commercial and wholesale businesses.
Registration Procedures
Foreign companies are not allowed to directly submit the application documents to the relevant authority. They must retain a PRC entity that is authorized or permitted by relevant authorities to act as a sponsor. The sponsor will submit all the documents to the examination and approval authority on behalf of the foreign enterprise. Procedures to set up the Wholly Foreign Owned Enterprise in Shanghai are as following:
Step1: Check and Register Company Name (about 3 days)
Step2: Apply for Approval Certificate (about 15 days)
Step3: Apply for Business License (about 15 days)
Step4: Apply for Organization Code License (about 1 day)
Step5: Register in Shanghai Tax Bureau (about 15 days)
Step6: Open a RMB bank account (about 3 days)
Step7: Register Foreign Currency Certificate (about 1 day)
Step8: Check the registered capital (about 5 days)
#GOTOP
Documents Required
The documents required for setting up a WFOE are listed as below.
1. Copies of passport of the investor(s) or business license of the parent company
2. Photocopies of the ID card or passport of the chief of the board
3. At least 5 options of names
4. The resume, photocopy of the passport of the chief and 8 pieces of passport size photos of the chief of the board of the WFOE
5. Business scope and how long the WFOE is going to do business in China
6. Three sets of original credit certificate of the foreign investor(s)
7. Brief introduction of the foreign investor(s) including name, address and telephone number
8. Purpose and estimated investment
9. Total investment and registered capital and the make up of investment
10. Registered address, leasing contract, certificate of real estate, and certificate for leasing ( We can provide those papers upon your request)
11. WFOE¨s operational structure and number of employees
12. Permission for land use, environment evaluation report
13. Products, size of production, detailed list of equipment, and business plan
14. Environmental protection measures
15. Requirement for utilities such as power and water supply
Important
Other documents needed are subject to the type of the WFOE. Three main types of WFOE are trading company, manufacturer and consulting.company.
Registered Capital
The parent company will need to invest a minimum registered capital of USD140,000. The registered capital can be composed of cash and equipment to be used for production by the WFOE.
Our Services
We provide one-stop service for foreign companies that would like to set up wholly foreign owned enterprises in Shanghai. Our services include but not limited to:
• Introduce laws,policies and WFOE application procedures;
• Draft application letters, standard articles of association, standard feasibility study, and providing samples for necessary documents such as board resolution, bank reference letter, etc.;
• Research and obtain approval for the name of the WFOE;
• Obtain approval certificates from various authorities;
• Perform all the necessary financial, tax, labor, banking, customs and other registrations;
• Open the bank accounts required;
• Obtain the necessary work permits and resident permits for the legal representatives, etc.
Other than the above -listed services, we also provide customized service upon request. With our broad network, we can provide the following services: sourcing for suitable office, sourcing for local staff and management, suggesting best salary structure , law consulting, trademark registration and protection, and other business related services. Fees will be quoted on a case-by-case basis.
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