Introduce to set up a whole foreign owned enterprise (WFOE)

China's rapidly expanding economy and vast population has made it one of the world's most attractive markets for business expansion. For companies engaged in the trading, manufacture, processing or assembling of goods who wish to either access the Chinese market or its cheap production costs, year ago most companies entered into join ventures with local Chinese companies, but today, A wholly foreign-owned enterprise [WFOE] are most often the chosen method of operation by foreign companies. We find this type of company attractive because of the full control and 100 percent ownership. And a WFOE has ability to do more than just liaison and their decision-making power.

The Concept of WFOE

What's WFOE? It is a business entity formed in China entirely with foreign capital. It is totally under foreign control and does not have any formal Chinese ownership participation. For a foreign company to be able to issue receipts and export goods from China, it must be able to legally registered as a local company or a WFOE. A WFOE is set up as limited liability entity and represents separate legal persons and is taxed according to local legislation.

Advantages of WFOE

1. Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;
   
2. Ability to formally carry on business rather than just a representative office function;
   
3. Issue invoices to their customers in RMB and receive RMB revenues. Convert RMB profits to US dollars for remittance to their parent company outside.
   
4. cheap labor, which can lower your cost;
   
5. not required to share profits with Chinese counterpart;
   
6. Greater efficiency in its operations, management and future development.

Taxation of WFOE

Tax rates can vary somewhat depending on the location of the WFOE, but generally, WFOEs selling into China will be subject to business tax of about 5% on all revenues in China; profits tax of 15-33% depending on location and in come instances withholding tax and VAT may be applicable.

Application Documents

1. A project proposal and feasibility study report ( in print and under the company seal);
   
2. Original copies of the application paper and the resolution by the Chairman of the Board of the foreign investor (in printed form signed by members of the Board and with company chop);
   
3. Copies of the business licenses of certificates of incorporation of the foreign investor (usually with the permission chop from the government department.)
   
4. An original copy of leasing agreement with chop of the Housing Department.
   
5. Directors name list of board or management.
   
6. An original copy of the corporate ratification paper (2 copies in duplicate).
   
7. Two original bank credibility letters for the foreign investors, stating a 7-digits bank balances, issued within 6 months in both English and Chinese language.
   
8. A copy of the approval paper for corporate formation and other papers for company alterations ( the original are required for check-up).
   
9. Notice of enterprise's name confirmation appraised by the Industry & Commerce Administrative Bureau.
   
10. 2 photos of the legal person of WFOE.
    
11. A copy of the stub of corporate certificate of approval