Starting a business in China
Which business structure should I use?
To do business in China, one of the first things to consider is your business structure. Different regulations may apply depending on your business structure and activities. Most foreign investors in China set up the following business entities:
- Wholly Foreign-Owned Enterprise
A wholly foreign-owned enterprise (WFOE) is a limited liability company 100% owned by foreign investors. The shareholders are liable to the WFOE to the extent of their respective capital subscription.
- Representative Office
A representative office is a liaison office for its overseas parent company. You can set up a representative office to conduct market research, promotion and other non-profit making activities. It is not allowed to make profits or enter into business contracts with businesses in China.
- Joint Venture
A joint venture (JV) is a limited liability company formed between foreign and Chinese parties, where profits and losses are distributed according to the ratio of their equity investment.
How long does it take to register my business in China?
It generally takes about 2 to 3 months from the submission of all required documents to the relevant authorities.
- Wholly Foreign-Owned Enterprise
Directors and shareholders (only applicable to WFOE)
How many directors do I need to set up a private company?
For a small private company, you need at least one executive director.
Can I appoint only foreigners as directors to my board?
Yes, your board can consist of foreign directors only.
Am I allowed to have a corporate director?
Must an appointed director hold shares in my company?
Are there any restrictions on who I can appoint as a director of a WFOE?
Generally, a director, supervisor or senior officer of a WFOE must have the civil capacity for the appointment. The person must not be:
- Serving any penalty for criminal offences in the past five years.
- Personally responsible for the bankruptcy and liquidation of any business in the past three years.
- Personally liable, as a legal representative, for the revocation of a business licence in the past three years.
- Heavily in debt.
Is there any age requirement for directors?
They must be above 18 years old.
Can a company in China be wholly-owned by foreigners? Do I need a minimum percentage of local shareholders?
Yes, your company can be wholly owned by foreigners, except for some special industries, which only allow Sino-foreign enterprises. These include but are not limited to education and medical institutions (such as hospitals and clinics).
How many shareholders do I need to set up a company?
You need at least one shareholder. It is possible to set up a WFOE with two foreign-owned corporate shareholders.
Do I need approval from the local authorities before my company operates?
Yes. The relevant government authorities including Ministry of Commerce, State Administration for Market Regulation and State Administration of Industry & Commerce need to approve all the proposed business activities when you apply for a business licence.
Are there business activities that foreign companies cannot do?
Yes. You are not allowed to participate in activities such as publishing newspapers and magazines, or telecommunication services. Check out the Negative List of Foreign Direct Investment for the full list of prohibited activities.
What are the activities that require a licence? Do I apply for licences before or after setting up my company?
All entities are required to have a business licence before operating in China. You need to apply for additional licence(s) depending on the business scope and industry. For example, businesses in food and beverages, require special licences/permits. The duration of time needed to obtain these licences varies from case to case.
Can I apply for a licence personally or must I engage a professional firm to do so?
It is not necessary for you to engage a professional firm but it is highly recommended. A professional firm can help you manage the complex processes and frequent changes in requirements when applying for licences.
Do I need to renew my licences each year?
Generally no, except for some special licences.
Do I need to display the business licence prominently at my business location?
It is a good practice to display your business licence, although this is compulsory only for certain types of businesses.
Share capital and capital contributionWhat is the minimum capital requirement for incorporating a private (limited) company?
There is no minimum capital requirement for a WFOE/JV except in the case where the WFOE/JV engages in a special industry.
Are there specific capital requirements for different types of licences or industries?
There are no specific capital requirements for retail businesses or restaurants.
However, there are requirements for industries such as labour dispatch, investment management companies and hospitals.
For example, the minimum registered capital is RMB2 million (S$97,600) for a labour dispatch company.
Can I have a high paid-up capital at the time of setting up the company?
If I have a high registered/issued capital, when must I pay up the capital in full?
The longest time frame to pay up the registered capital is within the term of business.
Will the local authority conduct capital verification?
The law in China does not require verification.
Is there a lock-up period for the company's paid up capital?
How long does it take to register the increase in capital with the local authority?
It takes about two months.
Do I need approval to increase the registered/subscribed capital?
Are there restrictions on bringing profits out of China?
You can only repatriate your profits after tax clearance.
Can I register capital in a different currency from the country of incorporation?
Can my company use dual or multiple currencies for its registered capital?
No. You may only use one type of currency. However, you can change your registered capital from one currency to another.
Do I need separate bank accounts for different purposes?
You need at least two bank accounts:
- Capital account for contribution of registered capital.
- RMB basic account for local working capital.
If these two accounts are opened with a foreign bank, you may be asked to open another account with a domestic bank for tax payment purposes.
Do I need to keep a minimum amount in my capital bank account at all times? Or can my company use the entire amount for business activities?
You don’t need to keep a minimum capital amount, unless the bank requires it. The full sum of capital can be used for business activities.
How long does it take to open a bank account?
In general, it takes two weeks to open a bank account.
Do all directors and shareholders need to meet the banker personally to open the bank account?
This is usually not necessary. But most banks will require your legal representative to meet the banker in person.
What is the current corporate tax rate?
Any special grant for foreign-owned companies and for specific industries favoured by the local government?
The Chinese government may give preferential corporate income tax treatment to the industries and projects they encourage. For example, high-tech companies can enjoy a reduced corporate tax rate at 15%.
Other industries with tax incentives include environmental protection and energy saving industries.
What about tax incentives for new companies?
Local governments provide different types of financial subsidies to new companies.
Besides corporate tax, what other taxes should I be aware of?
Other taxes include value-added tax, consumption tax, stamp tax, customs duties, land appreciation tax, deed tax, surtaxes and so on, depending on the industry you are in.
Is my company required to pay tax on behalf of my employees?
Yes. You need to withhold and pay the individual income tax on behalf of your employees every month with the local tax bureau.
When and how do I pay corporate tax?
You need to pre-pay corporate income tax based on accounting book within 15 days after the end of each quarter. You also need to perform annual income tax return within 5 months after the end of the tax year, to reconcile the book to tax adjustment.
Is there any tax treaty between Singapore and China?
Yes, there is a Double Tax Treaty between Singapore and China. Certain tax benefits may apply to your company.
What are the withholding tax rates on interest, royalties or dividends?
In general, the withholding taxes on interest, royalties and dividends are 10%. Tax rates may be further reduced under the Singapore-China Double Tax Treaty.
What are the mandatory procedures for hiring staff in China?
The key procedures include creating a labour contract with staff members, processing employment registration and monthly salary, filing individual income tax and registering social benefits.
What basic employment benefits must I give to my employees?
Besides salary, you need to make contributions to social security schemes, which include pension, unemployment, medical, work-related injury, maternity and housing fund to your employees.
If I send a Singaporean employee to work in China for a year, does the employee need a work permit?
You need to apply for a work permit and a residence permit for the Singaporean employee. The processing time is about two months, but detailed timeline differs according to local requirements in each city/region.
Must I have a physical office in China? Can I use another business’ address or a virtual office address?
By law, you are not allowed to use another business’ address. The use of a virtual office address depends on each city/region and varies from case to case.