Guide to Setting up a Representative Office (RO) in ShenZhen China, Procedures of Set Up Rep Office in ShenZhen

Guide to Setting up a Representative Office (RO) in ShenZhen China, Procedures of Set Up Rep Office in ShenZhen

Shenzhen is located on the western coast of the Pacific Ocean and at the central section of the north-south coastline of China. Facing the opportunities and challenges of the 21st century, Shenzhen has set its long-term strategic objectives for social and economic development. In near future, Shenzhen is planned to become one of the international economic, financial and trade centers of the world

Setting up a company in Shenzhen is a good choice for companies that are in computer software, IT, microelectronics and components, video and audio products, electromechanical integration, and key projects of light industry and energy.

When investors have plans on establishing representative office in ShenZhen, it is better for them to acquire more information in order to run a successful business in ShenZhen China.

An RO has no legal personality, meaning it does not possess the capacity for civil rights and conduct, cannot independently assume civil liability, and is limited in its hiring ability. Chinese staff working for an RO, although not limited in number, must be employed through a human resources agency that will sign a contract with the RO on the one hand and with the Chinese staff on the other in order to ensure social security and housing fund contributions are paid on a regular basis. No more than four foreign employees can be hired per RO. Foreign staff working for ROs should have an employment relationship with the parent company abroad, and any disputes should be settled under the laws of that country

ROs are usually taxed on gross expenses with the overall tax burden around 11.75 percent of total monthly expenses; however, these rates may be increased by the relevant tax bureau according to the industry. If the chief representative is a foreign national, whether they stay in China or not, they shall be subject to individual tax based on the income derived from the RO.

Setting up a representative office in ShenZhen China primarily requires 4 stages and this entire process can take up till 2-5 months time.

 - Pre-approval Stage
Once you have decided to base your representative office in which city, the next thing is to approach the local Ministry of Commerce (MOFCOM) for contacts of a local designated foreign enterprise service company (FESCO) who will be in charge of your representative office application process. You should be paying approximately US$800 to $1000 to a designated FESCO for their service of notifying you on the relevant upcoming deadlines and administrative procedures. In addition, a signed lease agreement is one of the pre-requisite for the approval;
Therefore it is vital to secure a lease for a “grade A” office space before submitting the application.

Stage 2 - Application Stage
Generally your application approval should be done by MOFCOM, but if your industry is specific to banking, insurance, law, accounting and media, you may have to approach the relevant authority which has jurisdiction over your industry sector. Once approved, you should have the Certificate of Approval certifying your legal presence for the next 3 years which can be further extended.

Stage 3 - Registration Stage
This stage is to register for your representative office’s business license which must be renewed annually. It is important to note that you must complete the registration within 30 days of your approval from stage 2. The application together with the supporting documents is required to be submitted to the local State Administration of Industry & Commerce (SAIC and the process normally takes about 1-2 months time).

Stage 4 - Post Registration Procedure
Firstly, In China, it is expected for your representative office to register the office location with the local police (Public Security Bureau) and to register with local and national tax bureaus.

Secondly, you should make financial and corporate seals as it is a practise in China to use them on official documents. Thirdly, opening a foreign exchange bank account will aid to facilitate overseas fund transfer. Fourthly, to import the relevant equipments or materials, remember to complete the relevant customs registration. Lastly, get a FESCO to assist you in recruiting of Chinese staff.

Once all this is done, your representative office is set to establish its presence in China. However before getting to this stage, a good market research study is required to ensure that your products or services are viable in the Chinese market.

1 A representative office may, however, negotiate contracts that are later signed in the name of the home office located outside China.

2 The application letter should contain, in part, the following: a description of the company’s history, business and scope; the names of the Chairman of the Board, the General Manager and directors; the names of its major trading partners in China; its business volume; the proposed name of the representative office; the purpose for setting up the representative office and the scope of its activities; the duration of the office and its chief representative.

3 Head office incorporation documents include certified copies of the company’s business registration certificate, the certificate of incorporation, the memoranda and articles of association, etc.

4 Other post registration formalities include: registering with the tax bureau; opening a bank account; completing a residence application with the with the local Public Security Bureau; applying to the Customs Administration for permission to import office equipment and daily necessities for use by the representative office and its personnel; appointing a FESCO to recruit local Chinese employees; etc.

Set Up a Representative Office in ShenZhen is a big project by itself, which requires financial and time commitments, business management knowledge and China expertise. Identifying a competent agent to manage the complex process will be a cost and time effective way to avoid potential pitfalls, Since 2006, Tommy China Business Consulting has been focusing on consulting services forour clients to Setting up a Representative Office (RO) in ShenZhen.

Contact Tom Lee for Set Up a Representative Office in shenzhen now

Email: tomlee@tommyconsulting.com, tomlee_cn@163.com,
WhatSapp/Wechat/Cell Phone: +86 18926401128, Skype: tomleeli
Tel: 86-755-25809219,Fax: 86-755-83256658

Set up The Wholly Foreign Owned Enterprise (WFOEs) in ShenZhen China, Process of Setup WFOE in ShenZhen

Set up The Wholly Foreign Owned Enterprise (WFOEs) in ShenZhen China, Process of Setup WFOE in ShenZhen

Shenzhen is located on the western coast of the Pacific Ocean and at the central section of the north-south coastline of China. Facing the opportunities and challenges of the 21st century, Shenzhen has set its long-term strategic objectives for social and economic development. In near future, Shenzhen is planned to become one of the international economic, financial and trade centers of the world.

Setting up a company in Shenzhen is a good choice for companies that are in computer software, IT, microelectronics and components, video and audio products, electromechanical integration, and key projects of light industry and energy.

The Wholly Foreign Owned Enterprise (WFOE) is a Limited liability company wholly owned by the foreign investor. The foreign company has sole responsibility for its profits and losses. Limited liability is recognized by the amount of registered capital injected into the business. It is required to register as a legal person who is restricted to certain businesses. The enterprise is able to implement strategies that effectively conform to the interests of the parent company abroad. Moreover, technology and know-how are given better protection.

To establish a WFOE in ShenZhen China, the project shall be examined and approved by the district authorities where the project is to be located. The foreign investor is required to entrust the authorized consultative bodies or agencies with the tasks of application and documents submission for approval..

Capital Contribution:

There is a minimum capital contribution required, known as registered capital, which varies according to the nature of business. The registered capital shall be matched with the actual business activities. There is NO real capital requirements since 2014.

Investor

The foreign investor may be a foreign company, enterprise, other economic organization, or a natural person.

(1) For a company/enterprise, the Certificate of Incorporation and Bank Reference Letter are required.

(2) For a natural person, the Identity Certificate and Bank Reference Letter are required.

-- the Certificate of Incorporation/Identity Certificate

--certified by the notary organ and the Chinese Embassy in your country

-- the Bank Reference Letter

-- issued by the bank in which foreign investor has a working or trading account and signed by an authorized bank officer

Process of Setup WFOE in China:

1. Reservation and Application of Company Name:

Prior to any of the following applications, the investor(s) should reserve a name for its prospective WFOE with ShenZhen Administration of Industry and Commerce (SAIC). SAIC requires that a proposed name and three other names be provided.

2. The Chinese name should be formatted as follows:

First word - company name; Second word - activity; Third word - location/name of town; Fourth word - company structure. The use of 'China' 'Sino' and 'International' are not permitted in the Chinese name unless very special permission is given, although they are permitted in the non-Chinese name.

3. Registration of Approval Certificate:

After the completion of Name Approval Notification, Approval letter and Approval Certificate are the next to register. At the time of application, Article of Association, Feasibility Study Report, Lease Agreement, etc. should be submitted to ShenZhen Municipal Commission of Commerce. The local Approval Authority will review all documentation and give instructions in accordance with the Company Law and local regulations. If all is up to standard, the authority is able to give its approval and issue the certificate within 10 to 15 working days upon receiving all the required documentation.

4. Business License and Organization Code Certificate:

Within 30 days after obtaining the approval certificate, the foreign investor will need to register and apply for a business license for the WFOE from the local SAIC. As part of this step, the foreign investor should submit similar documentation to the authority for approval and filing.

5. Once the business license is issued, the WFOE is deemed to be a legal person duly organized and existing under PRC laws and will have full operational rights to operate a business in China within the scope of its Business License.The organization code refer to the statutory code, the only and constant code identity given to every single organization, according to the compiling rules of national organization code. Application for Organization Code Certificate is purely a procedural step.

6 .Registration of Tax Registration Certificate:

Once your Organization Code registration Certificate is approved then you may proceed with applications to the local tax authority. At the same time, you should also apply for the company seal and legal representative seal from ShenZhen Municipal Police Bureau with the assistance of the authorized Carving Seal Agent.Together with Approval Certificate, Business License and other documents, the formal application form affixed with seals should be submitted to the authority for their examination and approval. Start from the second month after obtaining the Tax Registration Certificate, the WFOE is required to apply tax filling monthly / quarterly and inspection annually.

7. Other Certificates of WFOE:

-- Statistics Registration Certificate issued by Statistics Bureau;

-- Foreign Exchange Registration Certificate issued by State Administration of Foreign Exchange;

-- Financial Registration Certificate issued by Finance Bureau;

 -- Customs Registration Certificate issued by Customs Bureau.

8. Post Incorporation:

Having obtained approval from the tax and foreign exchange authorities, you are legally entitled to open Foreign Currency Capital Account and RMB Basic Account. Then you may proceed with capital injection, capital verification and certificates renewal.

9. Information and Documents Required:

--name and address of WFOE;

-- WFOE's office rental contract;

-- a written application for the establishment of the WFOE;

 -- the Feasibility Study Report covering items such as technological process, equipments, raw material supply, market survey, economic results, infrastructure facilities, expected profitability, etc;

-- the Articles of Association of the proposed WFOE;

-- a list containing the proposed chairman and the members of the WFOE board of directors and appointment letters;

 --- the Certificate of Incorporation of the WFOE investor;

-- the Bank Reference Letter of the WFOE investor;

-- other documents as may be required by the Approval Authority

After China's entry to WTO, most industries in China welcome foreign investment, WFOE setting up in China becomes the first option of foreign investment's entity structures instead of Rep Office setting up in China At the mean time, for tax purpose, effective licensing system etc more and more investors use Hong Kong as the holding company to invest China mainland, using this offshore company to hold their operations in China.

From 1st October 2016, China Ministry of Commerce has changed the foreign investment approval system into filing system. It means WFOE whose industry is not restricted type or prohibited type can directly start the business registration first and then complete the filling system on website of Ministry of Commerce. This change has greatly reduce the policy risk when foreign investor plans to start a WFOE in China.

Business set-up in China is a big project by itself, which requires financial and time commitments, business management knowledge and China expertise. Identifying a competent agent to manage the complex process will be a cost and time effective way to avoid potential pitfalls

Since 2006, Tommy China Business Consulting has been focusing on consultingservices for our clients to invest in ShenZhen China. We are specialized in establishment of wholly foreign owned enterprises (WFOEs), setting up of offshore companies, trading services, tax minimization Assist in obtaining government approvals and certificates for running business, negotiate and draft various legal documents provide legal advice, negotiate government officer for Land acquisition

Advising on formation of WOFE and business structures ,managing and controlling WOFE in ShenZhen China, drafting privacy policies and structuring commercial transactions, TCBC will manage all aspects of incorporation to get you a business license in ShenZhen China.

Contact Tom Lee now for setting up your WFOES in shenzhen

Email: tomlee@tommyconsulting.com, tomlee_cn@163.com,
WhatSapp/Wechat/Cell Phone: +86 18926401128, Skype: tomleeli
Tel: 86-755-25809219,Fax: 86-755-83256658