What is Wholly Owned Foreign Enterprise?

Wholly Owned Foreign Enterprise (WOFE) is a limited liability business entity registered by only foreign capital under the company law in People’s Republic of China (PRC).

Base on the business scope and field of investment of the entity, every WOFE must be categorized into corporations, economic organizations or individuals.

In other words, WOFE is a limited liability company wholly owned by foreign investor(s) with full control over management and operation in China.


Why setup of WOFE in China?

It is the only allowable separate legal entity for overseas entrepreneurship to do business in China.

Representative Office is a feasible alternative when transaction with customers and suppliers are not needed.

Suggestion:

China Representative Office Formation Service


Characteristics of WOFE:

Advantages:

  • A separate legal entity in China legal system from overseas owner
  • Invoicing, able to make profit (a major difference to Representative Office)
  • Feasible to carry out business activities with transaction (although the scope of business is restricted by the type of WOFE on its registration)
  • Tax incentive from China government (negotiable)
  • Employment of local staff directly
  • Suitable of company management

Disadvantages:

  • Complex application procedure
  • Mandatory capital injection to meet the industry-specific and territory-specific minimum amount.
  • Decision of business scope on setup
  • Restriction of future development of the company – bounded by original business scope, financing requirement, tax rates, and director board, etc.
  • A legal representative must be appointed for every WOFE whom bears unlimited liability of the WFOE.

Read more:

Double Tax Treaties between Hong Kong and Mainland China


Types of WFOE:

Registered capital may be varying based on the territory of setup
Types of WOFEMinimum Registered Capital (minimum mandatory capital injection amount)
Setup in Free Trade ZoneRMB 10,000
ConsultancyRMB 100,000 – RMB 500,000
ServicingRMB 100,000 – RMB 500,000
Hi-TechnologyRMB 100,000 – RMB 500,000
Trading / FICE / RetailRMB 500,000 – RMB 1,000,000
Food & BeverageRMB 500,000 – RMB 1,000,000
Manufacturing / ProductionRMB 1,000,000 or USD 140,000

General Requirement & Procedure:

Note

Setup of WOFE is a complex matter when comparing setup of company in Hong Kong and other offshore jurisdictions, the information is for reference only. Please contact ASIABC for assistance and consultancy.

Minimum Requirement:

  • One director
  • One shareholder
  • One legal representative

Client’s information:

  • Proposed Chinese name of WOFE’s name (Simplified Chinese)
  • Valid business license, Certificate of Incorporation, Commercial Registration of the foreign investors, certified by China Embassy.
  • Brief company introduction
  • The passport and/or identification certificate of the legal representative
  • The resume of the legal representative
  • The supervisor’s passport
  • Lease Agreement for the WFOE’s office, the property right certificate of the owner
  • Bank Reference Letter
  • All documents in foreign language must be translated into Chinese

Preparation of document:

  • Appointment letter from board of members of oversea investors.
  • The Article of Association of WOFE
  • Business survey of WOFE:
    • Business scope & products list
    • Business plan
    • Organizational structure
    • Number of Employee to be employed
    • Estimated the investment amount and its assignment, estimated register capital.
  • Entrustment Agreement
  • The application issued by Administration for Industry & Commerce

Procedure:

  1. Preparation of WOFE registration document
  2. WOFE name search
  3. Obtain Certificate of Approval from the Foreign Trade Bureau / Bureau of Trade and Industry
  4. Submission to State Administration For Industry & Commerce
  5. Obtain Business License from the Administration of Industry and Commerce
  6. To obtain company stamp
  7. To obtain Organization Code Certificate
  8. Registration at State Administration of Taxation
  9. Registration at Foreign Exchange Registration
  10. To obtain Finance Registration Certificate
  11. Statistics Certificate
  12. Total Processing Time at least 3 months.

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