The Wholly Foreign Owned Enterprise (WOFE) is a Limited liability company wholly owned by the foreign investor(s). In China, WOFEs were originally conceived for encouraged manufacturing activities that were either export orientated or introduced advanced technology. However, with China's entry into the WTO, these conditions were gradually abolished and the WOFE is increasingly being used for service providers such as a variety of consulting and management services, software development and trading as well.

Advantages of WOFE

The advantages of establishing a WOFE include:

Business Scope

One of the most important issues covered in the project documentation is the business scope of the WOFE. Business scope is narrowly defined for all businesses in China and the WOFE can only conduct business within its approved business scope, which ultimately appears on the business license. Any amendments to the business scope require further application and approval. Inevitably, there is a negotiation with the approval authorities to approve as broad a business scope as is permitted.

General business scope usually includes, investment consulting, international economic consulting, trade information consulting, marketing and promotion consulting, corporate management consulting, technology consulting, manufacturing, etc.

Registered and Paid up Capital

For the WOFE, the minimum amount of registered capital required starting from  RMB100,000 (about USD12,000), Under the Company Laws, the paid-up capital is equal to registered capital, Investors or shareholders must pay for the shares subscribed and deposit the money into a specified bank account. The amount of share capital so deposited should be audited by a firm of certified public accountants.

General Tax Information

The corporate tax rates range from15% to 31%, depending on the places where the company is registered. Shenzhen is among the lowest in the region. All enterprises are required to report to the Tax Administration Department monthly. You are welcome to contact us for more information.

Annual Return

Any limited companies in Shenzhen should summit annual return to the relevant authorities. The annual cost is about USD300. Any company will be subject be to a fine if the Annual Return is not submitted in a timely manner.

Terms and Termination

In China, terms of 15 to 30 years are typical for a manufacturing WOFE (although some may have a longer term). It is also possible to obtain extensions of the WOFE's duration. For projects in which the amount of investment is large, or the construction period is long and the return on investment low, projects producing sophisticated products using advanced or key technology provided by the foreign partner, or for projects producing internationally competitive products, the term of WOFE may be extended to 50 years. With special approval from the State Council, the term may be even longer than 50 years.

The WOFE may be terminated under certain conditions. For example, the inability of the WOFE to operate due to heavy losses, or in the occurrence of an event of force majeure, etc.

Documents Required

The documents required for setting up a WOFE are listed below:

1. An original copy of application letter signed by the Chairman of the Board (in printed form with company chop). 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. An original copy of leasing agreement with chop of the Housing Department;
4. Directors name list of board or management institution name list, importing equipment list.;
5. Copies of the business licenses or certificates of incorporation of the foreign investor (usually with the permission chop from the Industrial and Commercial Administrative Bureau);
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 balance, 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. Contracts and charter versions (signed by legal representative or Bailor);
11. An application form for company alteration;
12. A copy of the stub of corporate certificate of approval;
13. Whole set of materials for application of project establishment and approval documents (original) for project establishment.

Registration Procedures

1. Project Proposal and Approval
According to the PRC WOFE Law and its Implementing Rules as amended in April 2001, there should be a Project Proposal Approval stage before the final examination and approval. In practice, however, these two stages have been combined as one.

Project Proposal
The foreign investor is required to submit a Project Proposal to the local approval authority ("Approval Authority") where it intends to establish the WOFE. Generally, the Project Proposal should cover the following points:

(a) the purpose of the WOFE, production plan and market forecasting;
(b) the scope and scale of the business, the products to be produced / services to be provided (a 4-5 line description should suffice);
(c) financing, financial forecasts and evaluations;
(d) the technology and equipment to be used;
(e) land-use requirements (including the area), selection of sites;
(f) personnel and wages; and
(g) any requirements for public facilities (water, electricity, coal, gas or other energy source).

Examination and Approval
The following documents should be also be submitted to the local Approval Authority:

(a) a written application for the establishment of the WOFE;
(b) a Feasibility Study Report. Based on our experience, this is generally a 20 page document;
(c) the Articles of Association of the proposed WOFE;
(d) a list of the proposed chairperson and the members of the WOFE board of directors, and appointment letters;
(e) the incorporation document of the WOFE investor;
(f) a credit certificate of the WOFE investor issued within 3 months;
(g) lease agreement for the premises. Based on our experience, an actual executed lease agreement is not required and it is generally acceptable and common for the WOFE investor to merely show an intention to enter into a lease agreement by entering into a space reservation agreement with the landlord;
(h) the reply of pre-registration of name approved by the relevant SAIC; and
(i) such other documents as may be required by the Approval Authority.
As for the timing of approval, Approval Authorities are required to make its decision within 90 days from receipt of all the documentation. However, many local Approval Authorities are able to give its decision within 5 to 15 working days upon receiving all the required documentation. More...

2. Registration for Business License
Within 30 days after obtaining the approval certificate, the foreign investor will need to register and apply for a business licence for the WOFE from the local SAIC. As part of this step, the foreign investor will need to submit similar documentation to the approval documentation for SAIC filing purposes. This is purely a procedural step and the local SAIC must issue the Business License within 30 days, but in our experience SAIC will usually issue the Business Licence within 5-10 days after receiving all the required documentation.

Once the business license is issued, the WOFE is deemed to be a legal person duly organised and existing under PRC law and will have full operational rights to operate a business in China within the scope of its Business Licence. More...

3. Registrations with other Government Authorities
Registration is also required with other government authorities such as tax bureau, Foreign Exchange Control and Customs and so on. More...

Please call us at +852 2341 1444 or email us for further information.

China WOFE Registration Costs