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FAQs of China Company Incorporation

FAQs of China Company Incorporation (8)

FAQs of Foreign Investment Enterprise (FIE) Incorporation

Q:
What kind of enterprise can be incorporated by foreign investment in China?
A:
A foreign investment enterprise can be incorporated in the form of wholly foreign-owned enterprise, sino-foreign equity joint venture, sino-foreign co-operative joint venture and foreign investment partnership enterprise.
Q:
How should we name a foreign investment enterprise? What we should be notable?
A:
A foreign investment enterprises should be composed of administrative division, enterprise name, industry and organisational form, such as “Conpak CPA (Shanghai) Limited”. The following should be noted:
  • Company name shall not be identical to the name of other registered company in the same industry or unstated industry, except for those with investment relations
  • It shall not be identical to the original name of another enterprise was renamed less than one year ago
  • It shall not be identical to the name of the enterprise deregistered or whose business license was revoked less than three years ago
  • It shall be subject to the approval of relevant authority for the use of words, such as "Country", "China (Zhongguo)", "Chinese (Zhonghua)", "International" and others
Q:
What are the requirements of the registered address of foreign investment enterprise?
A:
The enterprises shall have actual working places, normally in office, commercial and residential buildings or business centres, etc.
Q:
What are the requirements for the time frame of capital subscription of foreign investment enterprise?
A:
The time frame of capital subscription should be subscribed in the articles of association, it includes the following two-ways:
  • The capital to be subscribed in lump sum as contemplated in the articles of association shall be paid up within three years from the date of issuing business license;or
  • The capital to be subscribed by installment as contemplated in the articles of association shall be paid up within three years from the date of issue of business license, with the first installment not to be less than 15% of the amount of capital subscription.
Q:
In what forms is a foreign investment enterprise subscribing capital?
A:
The subscribing capital can be in the form of cash, or property, plant, machinery equipment or other materials, industrial property right, special technology, right to the use of a site and others.
Q:
Does a foreign investment enterprise need a separate application for the import/export rights?
A:
Yes. Enterprise needs to apply for registration with relevant authority and get the import/export rights before conducting import/export business.
Q:
What process should be involved in foreign investment enterprise incorporation?
A:
The application for foreign investment enterprise incorporation is subject to the following sequence (if fire protection, health, environmental protection and other pre-approval and examination conditions are involved, these certificates should be obtained first):
  • Prior approval of the name of newly established enterprise
  • Approval of local Ministry of Foreign Trade & Economic Cooperation and get the “ Certificate of Approval for Establishment of Enterprises with Foreign Investment in the People’s Republic of China”
  • Application for the new integrated business license to Administration for Industry and Commerce
  • Ordering official company seal with Public Security Bureau
  • Opening bank account (including RMB basic account and foreign exchange capital account)
  • Foreign Exchange Registration Certificate
  • Processing necessary formalities for foreigner’s recruiting and work permit
Q:
What documents should be notarized for foreign investment enterprise incorporation?
A:
Documents to be notarized include:
  • Foreign investor enterprise's Business Registration Certificate and Registered Certification, etc.
  • ID card or passport, if the foreign investor is a nature person
The foregoing certificates shall be subject to notarisation by local solicitors first and certification by local Chinese consulate/embassy later; while the certificates of enterprises in Hong Kong and Macau regions shall be subject to notarisation by Chinese appointed attesting Officers.
Q:
Who will act as the corporate representative of foreign investment enterprise?
A:
There is no nationality limit for the corporate representative of foreign investment enterprise. In general, the chairman and executive director can act as corporate representative.
Q:
Can foreign investment enterprise increase the total amount of investment or registered capital in the course of operation?
A:
Yes, but it needs to provide the board resolution and the report on the verification of capital and other information.
Q:
What are the requirements for deregistration of foreign investment enterprise?
A:
Requirements are as follows:
  • The operating period contained in the business contract and the articles of association expires or other causes for dissolution contained therein occur, or amalgamation, spin-off, is declared bankrupt or ordered to close
  • Dissolution by board of shareholders or board resolution
  • Liquidating group is set up by the enterprise
  • Liquidation Announcement is published in municipal newspapers
Q:
What are the requirements for setting up branches of foreign investment enterprise?
A:
Requirements are as follows:
  • It has a name that meets the specification
  • Its place of business is located outside of its head office
  • It has a fixed place of business or meets the condition for production and operation
  • It has corresponding governing body and principal
  • The scope of business of the branches shall not exceed that of parent company
  • Subject to approval of relevant department
Q:
Can an incorporated foreign investment enterprise reinvest in China?
A:
Yes.
Q:
Can a newly incorporated foreign investment enterprise whose scope of business includes both production and trade, be entitled to tax incentive?
A:
If its productive operating income exceeds 50% of total business income, the enterprise can file an application, after examination and approval by competent tax authority, to be entitled to treatment of exemption and abatement of taxes of this year.
Q:
Can foreign investment enterprises incorporated in bonded area apply for distributorship? Can it set up a branch beyond the said area?
A:
Foreign investment enterprise incorporated in bonded area can apply for distributorship, and after obtaining approval, the enterprise can process customs formalities and foreign exchange verification and writing-off and other formalities, and can also sell the goods inside or outside the said area. After obtaining approval of competent department, it can also set up an operative branches outside the said area.
Q:
Can foreign investment enterprise incorporated inside bonded area alter its registered address to operate outside the said area?
A:
Foreign investment enterprise incorporated in bonded area shall adjust the original scope of business accordingly in order to apply for change of registered address to the original organ for approval. After the original organ of approval, asks for opinions and obtains consent of the competent commercial department, which intends to alter registered address, the enterprise can move out of the bonded area.
Q:
What is the minimum amount of registered capital for foreign investment enterprise incorporation?
A:
Foreign investment enterprise incorporation just needs to invest the registered capital suitable for the company size. The minimum amount of registered capital for wholesaling and retailing is RMB500,000; and for retailing is RMB100,000.

FAQs of Annual Inspection of Foreign-Funded Enterprise

Q:
What does the Joint Annual Inspection of Foreign Enterprise refer to?
A:
Annual Inspection refers to legal inspection carried out lawfully by governmental department to all foreign investment enterprises.
Q:
What inspection does the foreign enterprise have to join every year?
A:
Foreign enterprise has to join the industrial and commercial annual inspection, Settlement and Payment of Enterprise Income Tax, Joint Annual Inspection, Registration for Accumulated Equity in Direct Investment.
Q:
What departments are involved in the Joint Annual Inspection of Foreign Investment Enterprise?
A:
Annual License Renewal involves the Commission of Commerce, the Financial Bureau, the National Bureau of Statistics, the Local Taxation Bureau, the State Administration of Taxation, etc.
Q:
What is the Registration for Accumulated Equity in Direct Investment?
A:
Since 2015, State Administration of Foreign Exchange cancelled Annual Inspection of Foreign Exchange of Foreign-funded Enterprises and Annual Inspection of Oversea Direct Investment, and changed it as Registration for Accumulated Equity in Domestic Direct Investment and/or Overseas Direct Investment (collectively refer to as “accumulated equity in direct investment”).
Q:
When will the Joint Annual Inspection of Foreign Investment Enterprise take place?
A:
It take place from 1 January to 30 June every year. The time of the Joint Annual is according to the notification time announced by the government departments.

FAQs of Foreign Representative Office

Q:
What is the requirement for office premises of foreign representative office?
A:
The office of foreign representative office is generally located in office buildings, residential and commercial buildings, business centers, etc. It is not required to rent space in foreign office building designated by the Public Security Bureau.
Q:
What documents shall be submitted for setting up foreign representative office?
A:
The following documents shall be submitted:
  • Application Form for the Establishment of Resident Representative Office of Foreign (Region) Enterprises signed by the corporate representative of parent company
  • Registration certificate of Foreign Enterprise
  • Credit certificate issued by bank
  • Copy of ID card of the chief representative/resident representative
  • Lease agreement or certificate of title to house property
  • Documents certified by local Chinese consulate or embassy
Q:
What should be included in the Credibility Letter issued by bank?
A:
It should include the following context:
  • The time when the enterprise sets up accounts in the bank, and notes that it operates well with normal transaction of current business, no bad credit record and saving amount, etc.
  • If the Credibility Letter is written in foreign language, a translation copy shall be submitted and sealed by the translation agency
Q:
How long is the term of residence of foreign representative office?
A:
Generally 3 years, permitted to apply for extension within 60 days prior to expiration of the term of residence.

FAQs of Sino-Foreign Equity Joint Venture

Q:
What is the requirement for foreign investment ratio in sino-foreign equity joint venture?
A:
There is no requirement for foreign investment ratio in sino-foreign equity joint venture, the ratio is set by both parties.
Q:
Can sino-foreign equity joint venture be transformed into wholly foreign-owned enterprise?
A:
Yes. After being unanimously resolved by the Board of Directors, the proposal of transformation shall be submitted to the original organ for approval pertinent regulations.

FAQs of "CEPA"

The rules for defining origin
Q:
How to define the origin of the products entitled to zero-tariff?
A:
The rules for defining origin are as follows:
  • The origin of goods procured completely in Hong Kong and Macau shall be defined as Hong Kong and Macau
  • The origin of goods procured partially in Hong Kong and Macau can be defined as Hong Kong and Macau only if the goods are substantially processed in Hong Kong and Macau
Q:
How to obtain the Certificate of Service Supplier?
A:
The company has been incorporated under the Companies Ordinance of Hong Kong and other related ordinances, engaged in substantial commercial pursuit in Hong Kong with a valid Business Registration Certificate. The yardstick is:
  • Nature and scope of business: The nature and scope of services supplied in Hong Kong shall include the nature and scope of services intended to be supplied in mainland China
  • Service life: It has been registered or incorporated in Hong Kong and engaged in substantial commercial pursuit for 3 years or more
  • Profits tax: It shall pay profits tax pursuant to law during the operating period in Hong Kong
  • Business office: It owns or rents business office in Hong Kong, which shall match its scope and scale of business
  • Employment of staff: Amongst the staff hired in Hong Kong, residents with unrestricted residence in Hong Kong shall account for more than 50% of total staff
Q:
Can the procedure of processing and increment of value separately conducted in mainland China and Hong Kong or Macau be calculated in aggregate?
A:
No, they cannot be calculated in aggregate.
Q:
Should the final procedure of the products entitled to zero-tariff be completed in Hong Kong or Macau?
A:
The products not entirely produced in Hong Kong or Macau, or entitled to zero-tariff, can be required to complete their final procedure of manufacturing or processing inside Hong Kong or Macau, only if the products meet the rule of "ad valorem percentage criterion".
Q:
Can the goods entitled to zero-tariff in Hong Kong be shipped in transit?
A:
No, they must be shipped from Hong Kong directly to mainland ports.
Q:
Can the goods entitled to zero-tariff in Macau be shipped in transit by Hong Kong?
A:
Macau goods are shipped by Hong Kong only for geographic reason or transporting need, but they are not traded or consumed in Hong Kong, nor processed in any way in Hong Kong, except loaded and unloaded or kept in good condition by necessary efforts.
Q:
Can the materials imported by way of processing trade be entitled to zero-tariff preference?
A:
No, the goods cannot be entitled to zero-tariff even if they meet the origin criteria of goods in Hong Kong or Macau.
Q:
Are there any import quota and import license limitation imposed on the products entitled to zero-tariff?
A:
Mainland China does not impose tariff quota on imported goods of Hong Kong or Macau origin.
Q:
Are zero-tariff products still subject to VAT?
A:
Zero-tariff products are still subject to import VAT.
Q:
What is "ad valorem percentage criterion"? How many kinds of products in "CEPA" meet the increment percentage criterion?
A:
The "ad valorem percentage criterion" contained in "CEPA" means the value of raw materials, component parts, value of labor power procured completely in Hong Kong or Macau and the value of product development expenditure in aggregate shall account for 30% or more of the exported end-products free on board (FOB), and the final procedure of manufacturing or processing shall be completed in Hong Kong or Macau. There is no separate requirement in "CEPA" for meeting "ad valorem percentage criterion", but a combination of this criterion with other criteria in use.
Q:
How does one calculate the "ad valorem percentage criterion"?
A:
"Ad valorem percentage criterion" is calculated specifically in this formula: (value of raw materials + value of component parts + value of labour power + value of product development expenditure) / Exported end-product FOB x 100%
General Questions
Q:
How long will it take to set up a branch after the foreign investment enterprise incorporation?
A:
Hong Kong or Macau invested enterprises can open up branches at any time after normal operation, other than enterprises in cargo agent trade which require a definite time limit for setting up a branch.
Q:
Can subsidiaries incorporated in Hong Kong by foreign companies be entitled to the treatment contained in "CEPA" in order to enter mainland markets?
A:
Subsidiary falling in the definition of Hong Kong service supplier stated in "CEPA" can be entitled to the preference stated in "CEPA".

FAQs of Operation

Q:
Does foreign investment enterprise need evaluation by relevant department for its financial contribution by means of equipment?
A:
Yes, it needs approval by examining and approving body, the value of contributed equipment shall be assessed by Commodity Inspection and Testing Bureau, and tariff should be paid as per the assessed value.
Q:
How can foreign investment enterprise process export tax refund?
A:
Foreign investment enterprise that produces and exports goods within the scope of business, in compliance with the Administrative Measures on Tax Rebates (Exemptions) for Exported Goods and the Notice on Certain Issues of Tax Affairs in Foreign Investment Enterprise, can use relevant supporting documents to apply for "exemption, credit and tax rebate" formalities to competent tax authority per month.
Q:
Can the profits distributed to foreign investor from foreign investment enterprise be remitted abroad?
A:
Yes. The share of profits attributable to foreign investor can be remitted out of China by virtue of duty-paid proof.
Q:
What preference does foreign investor enjoy if it reinvests its share of profits distributed from foreign investment enterprise?
A:
Foreign investor who reinvests its earned profits into export-oriented enterprise or technologically advanced enterprise within China, for an operating period not less than five years, after application to and approval of tax authority, shall be entitled to refund of entire corporate profits tax paid on its reinvestment. Foreign investor who reinvests in general industrial enterprise shall be entitled to refund of 40% corporate profits tax paid on its reinvestment.
Q:
Can foreign investment enterprise raise loan with bank in China?
A:
Yes. Foreign investment enterprise can apply for loan in foreign currency or RMB to bank in China according to the needs of business activities.
Q:
Can foreign investment enterprise open bank account in foreign banks in mainland China?
A:
Foreign investment enterprise, by virtue of business license, can open bank account in foreign currency and RMB deposit account with banks or other financial institutions permitted to operate foreign exchange by State Administration of Foreign Exchange.

FAQs of Human Resources & Welfare

Q:
Can foreign employees with foreign investment enterprise process multiple entry-exit visa?
A:
Yes. Foreign employees can process employment permit with the Labor Bureau first and apply for Residence Permit for Foreigner in the People’s Republic of China with the Entry and Exit Administration of Public Security Bureau.
Q:
Can foreign employee’s salary income be remitted abroad?
A:
Foreign employee's salary income, after Individual Income Tax is paid according to tax law, can be remitted abroad.
Q:
Can enterprise recruit employees on its own? How can industrial dispute be settled if it occurs?
A:
Enterprise can recruit employees on its own. If industrial dispute occurs, and cannot be settled by negotiation of both sides, the dispute can be submitted to coordination and arbitration by local labor bureau or personnel bureau.
Q:
By what means can foreign investment enterprise recruit employees?
A:
Major means are as follows:
  • To entrust human resources agency or public employment recruitment organisation
  • To post recruitment advertisement at media
  • To participate in recruitment seminars, such as industry job fair, enterprise talent recruitment fair, university recruitment fair, etc.
  • To announce the message of recruitment via business website
  • To entrust professionals to recruit on its behalf, Conpak can provide this professional service
Q:
What are the requirements for employee's standard working hours?
A:
Employee's standard working hours are:
  • Not more than 8 hours per day
  • Not more than 40 hours per week
  • Not more than 36 OT hours in aggregate per month
Q:
What are statutory holidays for employees every year?
A:
Enterprises should comply with the requirements of the Labor Law of the PRC, take leave system and statutory holidays, with pay during statutory holidays and period of leave as usual.
  • Statutory holidays include: 1 day for New Year’s Day, 3 days for Spring Festival, 1 day for Ching Ming, 1 day for Labour Day, 1 day for Dragon Boat Festival, 1 day for Mid-Autumn Festival, 3 days for National Day, 11 days in total.
  • Wedding leave: Employee will enjoy wedding leave of 3 days. Besides, employees in some region will enjoy compensative holiday, e.g. 7 days in Shanghai.
  • Maternity leave: Pregnant female employee will enjoy maternity leave of 98 days, dystocia pregnant employee will enjoy another 15 days, and multiple gestation pregnant employee will enjoy another 15 days per birth. Besides, different region offers different amount of incentive leave, such as 30 days for Shanghai, 80 days for Shenzhen. During maternity leave, husbands will be given parental leave of 10 or 15 days.
  • Bereavement leave: Employee whose linear relative (parent, spouse, child) is deceased will be given bereavement leave within 3 days.
Q:
What insurance should enterprise purchase for its employees?
A:
Enterprise should purchase for its employees with a total of five kinds of insurances, including: Endowment Insurance, Medical Insurance, Unemployment Insurance, Industrial Injury Insurance, and Maternity Insurance. Foreign and Hong Kong or Macau employees need not be insured for that.
Q:
What are the requirements and certificates for foreign nationals to work in China?
A:
In addition, foreign employees shall meet the following requirements for employment:
  • 18 years old or above
  • Without criminal record
  • Holding valid passport or other international travel document
  • Have relevant professional technologies and more than 2 years working experience

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