The advantage for WFOE in China
1) Compared with joint ventures with Chinese companies, WFOE is more free and independent, the foreign parent companies can consider their
investments as complementary of their global strategies;
2) Compared with the establishment of a Representative Office in China, it has a stronger operation capability in the business;
3) Free transfer between RMB and U.S. dollar and transfer to its parent company in the way of Telegraphic Transfer;
4) It benifits to protect its own intellectual property and patented technology;
5) There are no special requirements for the import and export license of its own products;
6) Can set and enjoy all personnel management rights;
7) Business management, development and operation can have higher efficiency.
Features of a Joint Venture in China
1）The organizational form of the Chinese-foreign joint venture is Limited Liability Company with the status of a legal entity. As a shareholder, both
parties of the joint venture shall bear limited liability for the debts of the enterprise.
2）Among the shareholders of a Joint Venture, the alien side could be foreign companies, enterprises, other economic organizations or individuals,
while Chinese team only includes Chinese companies, enterprises, and other industrial organizations, except to Chinese citizens.
3）For the registered capital of a Joint Venture, the proportion of the contribution of a foreign party shall not be less than 25%.
4）The Chinese and foreign party shall profits, losses and recover the investment under the proportion of capital contribution.
5）Joint Venture shall not have the shareholders' meeting, and its supreme authority shall be the board of directors.
6）The members of the board of directors shall allocate according to the proportion of investment and the articles of association of the Joint Venture.
7）Joint Venture shall not have a veto on the directors appointed by the other party, but the qualifications of the directors shall not violate the provisions
of the company law on the criteria of the directors.
The advantage for Representative Office in China
1）No registered capital required for incorporation, which means it is accessible for most foreign companies; Low cost for setting up (compared to
exclusively foreign-owned enterprise), no lowest limit for a registered fund, no requirement for contributed capital;
2）Rep Office in China allows you to engage in market research, publicity activities relate to company product or services;
3）The representative office china taxation calculation is different compared to WFOE and JV on its running expenses. There is a 10% tax on the
GROSS EXPENSES of the Rep Office;
4）It is easy for an accountant to process accounting & tax filling;
5）It is helpful to apply for a residence permit;
6）For the investors who want to invest Chinese mainland, the first thing is doing a market survey, then decide whether to make a long-term investment or
not, so the representative office is just like a bridge;
7）Foreign investors can set up a representative office first if they want to set foot in the field that is forbidden for a foreign merchant, because China may
alter the foreign investment law of the people's republic of China more freely because of the promise that China made it for joining WTO. Setting up
representative office means they can get into the Chinese market and get contact resources and know more about the market.
If you wish to manufacture products in China, you must register your company as a China Manufacturing Company, also called a manufacturing WFOE. In some instances, the government may provide incentives and tax breaks for foreign manufacturing companies. The rules and regulations for manufacturing companies are complicated. Hence, to get started, professional guidance is recommended. Tanikawa has developed unequaled expertise in the registration of manufacturing companies.
In China, a Trading Company requires an import – export license that enables it to import and export goods. One of the main reason to open an import – export company is to reclaim your VAT back. The Shanghai free-trade Zone is one of the fastest places in China to reclaim your VAT. This makes Shanghai one of the most popular destination for company registrations.
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