There are six ways of entering China market: 1. WFOE; 2. Joint-Venture Enterprise; 3. Processing Factory; 4. Rep. Office; 5. Bonded Trading Co.; 6. Business Co. Due to different purposes, foreign investors choose different investment structure. Setting up China Rep. Office needs no paid-up capital, and it is easy to set up and remove. Compared with Business Company, it is much easier to operate. And illegal trading company registered under China local resident can be immediately liquidated, and changed into Business Company for trading in Retail/ Wholesale. These are really wise movements for your trading in China.

Unlike WFOE which has complete legal entity such as Board of Directors, Registered Capital & Paid-up Capital, Foreign Processing Factory registered under China local resident has no invoice itself, and can only be used for contracts purchase / sale. As the ratio of domestic selling to buying greatly increases, big obstacle exists for entering. Most Processing Factories have been transferred to WFOE. Now, except Processing Factory & WFOE, other enterprise types can be 100% foreign owned. In 2006, released by the new Company Act, one shareholder is able to complete company / factory formation processes, and there will be no “Board of Directors”, therefore getting rid of the trouble in borrowing local person. In aspects of registered capital, except Rep. Office / Branch, other enterprise types are set up at 73,000 USD (500,000 RMB) by law, varied from different cities. Different investing areas & industries will cause different tax incentives for foreigners.
Dustinguish
Content
Factory Type
Company Type
WFOE
JVs
OEM
Reps. office
Trading Co.
Business Co.
Starting from
1980
1980
1980
1980
1990
2005
Foreign own
100%
25-99%
0%
100%
100%
100%
Domestic own
0%
1%-75%
100%
0%
0%
0%
Minimum shareholder
1
2
1
1
1
1
Minimum director
1
3
No
No
1
1
Legal person/ President
Foreigner / Chinese
Chinese
Foreigner / Chinese
Min. paid-up capital
73,000 USD
Running
Capital
Running
Capital
73,000 USD
73,000 USD
Where can be set up
whole nation
Guangdong
whole nation
15FTZs
whole nation
Days to set up
60-120
60-120
30-60
30-60
30-60
30-60
Export to foreign
Yes
Yes
Yes
Yes
Yes
Yes
Sell to domestic
Yes
Yes
Yes
Yes
Yes
Yes
Material from foreign
Yes
Yes
Yes
Yes
Yes
Yes
Material from domestic
Yes
Yes
Yes
Yes
Yes
Yes
Value added tax (VAT)
17%
17%
No
No
17%
17%
Tax incentive program
Yes
Yes
No
No
No
No
Net profit Tax %
15/ 20/ 25
15/ 24/25
No
No
20/ 25
15/ 20/ 33
Withholding tax dividend
10%
10%
No
10%
10%
10%
Personal income
5%-45%
levied on import
17%
17%
0%
17%
17%
17%
Tax refund of export
around 13%
around 13%
around 13%
around 13%
around 13%
around 13%
Branch set up
whole nation
No
No
whole nation
The minimum registered capital is 73,000 USD (500,000 RMB) for foreign enterprises, but 1 million USD in Dongguang, 1million HKD in Shenzhen.
Foreign Reps. in China can engage in import and export trade through bonded warehouse.
Value Added Taxpayer contains: General Taxpayer (17%) & Small-scale Taxpayer (3% since Jan.1, 2009). In one tax-paying year, sales turnover of manufacturing enterprises over 1 million or turnover of Retail / Wholesale enterprises over 1.8 million can apply for General Taxpayer.
High-tech/Environment Protection/ Infrastructure/Agriculture, from gaining the first income, can enjoy 3 yrs exemption and further 3 yrs half reduction. Production enterprises set up before Dec.31, 2010 in the west 12 provinces and 3 minority group autonomous regions go on to enjoy 2 yrs exemption and 3 yrs half reduction.
Since Jan 1, 2008, China has carried out unified tax rate of 25%. 20% for qualified small-scale enterprises, 15% for New and High-tech industries and western 12 provinces (like Guangxi/ Chongqing/ Sichuan/ Shanxi/) as well as 3 minority group autonomous regions. Enterprises with foreign investment set up before March 16, 2007 have 5 years tax transition period (increased from18%/ 20%/ 22%/ 24%/ 25%).
After applying Retail Right, trading companies in bonded area can set up branch for business outside bonded zone. From May 2006, it is forbidden to set up Office but branch in mainland China.