COMPANY FORMATION & COMPLIANCE

Oping provides China company formation and compliance services:

  • General consultation

  • Review incoming shareholders' documents

  • Provide virtual registration address with tax rebate scheme

  • Discuss and negotiate with the local Chinese partner

  • Draft company formation applications documents and fill-in government forms  

  • Check and reserve a company name

  • Registration with the commerce authority

  • Application for 5-in-1 Business License

  • Making company’s legal stamps (company chop, finance chop, and legal representative chop)

  • Registration the legal stamps with public security authority

  • Application for company unified digital USB certification

  • Perform Customs registration 

  • Assistance in opening bank accounts

  • Perform tax assessment

  • Application of working permit and visa for foreigner employees

  • Perform annual statutory audit

  • File annual settlement tax return

  • Perform joint annual inspections

  • Government relation

Enterprise Status Applications for China R&D Government Incentives:

  • R&D Enterprise Status Application

  • Software Enterprise Status Application

  • Integrated Circuit (IC) Enterprise Status Application

  • High-Teck Enterprise Status Application

  • VAT Exemption Application for Technology Development Contracts

  • Enterprise Status Renewal Application

  • Enterprise Status Inspections 

  • Software products registration

  • R&D auditing

  • ISO certification 

OPING is also an expert in offshore company formation for the jurisdictions of:

  • Hong Kong

  • Singapore

  • British Virgin Islands

  • Mauritius  

Offshore company formation and compliance services:

  • General consultation

  • Review incoming shareholders' documents

  • Provide virtual registration address

  • Acting as company secretary

  • Acting as registered agent

  • Acting as designated representative

  • SCR review in Hong Kong

  • Secretarial services

  • Nominee director services

  • Draft company formation applications documents and fill-in government forms  

  • Check and reserve a company name

  • Registration with relevant registry

  • Annual renewal 

  • Making company’s legal stamp and seal

  • Notarize and legalize company documents

  • Statutory audit

  • Tax filing

Following the unprecedented changes of regulations on representative offices of foreign companies (“ROs”) in January 2010, China is requiring higher standards with new rules effective in March 2011.

 

The Administrative Regulations on Registration of Foreign Representative Offices of Foreign Enterprises heighten scrutiny in the establishment and operation of ROs by introducing more stringent compliance requirements and tougher penalties.

 

Two China authorities had long been seeking to restrict the use of ROs, namely:

 

  • the Administration of Industry and Commerce, which suspects that ROs are used to hide profit-making businesses; and

  • The police, who want to close what they view as a visa loophole for foreign workers entering China.

 

The build up to these regulations goes back to January 2010, when China was start to crack down on ROs with unprecedented changes. The changes we emphasized back included the stricter compliance regime and the new requirement that a RO can only have four representatives. There was no existing legal basis for this, and since the early 1980s there has been no limit on the number of representatives allowed.

 

However, please note that ROs established by non-profit organizations are not governed by the RO Regulations. Similarly, law firms, insurance firms and accounting firms, which are separately regulated, will not be covered.

 

On 19 November 2010, the PRC State Council issued the Administrative Regulations on Registration of Foreign Representative Offices of Foreign Enterprises, and took effect on 1 March 2011. The Regulations heighten scrutiny in the establishment and operation of ROs by introducing more stringent compliance requirements and tougher penalties.

 

If an RO engages in profit-making activities, the government has the right to confiscate all proceeds and business-related tools, raw materials, equipment, tools and products, as well as a fine of RMB50,000 to RMB500,000. If the circumstances are serious, the RO’s registration certificate could be revoked.

 

The RO Regulations specifically allow ROs to carry out the following activities, provided that relevant prior government approval (if any) has been duly obtained:

 

  • Market survey, exhibition and publicity activities related to the products and services of foreign parent companies; and

  • Liaison activities in connection with sales of products, provision of services and domestic procurements and onshore investments of foreign parent companies.

 

ROs engaged in activities beyond the aforesaid scope have to make rectification within a prescribed timeframe. Failure to do so will incur a fine of RMB10,000 to RMB100,000. If the circumstances are serious, the RO’s registration certificate can be revoked.

 

ROs are also no longer exempt from corporate income tax in China. A circular issued by the State Administration of Taxation, Guoshuifa [2010] No. 18, issued on February 20, 2010, explicitly stipulates that ROs must pay corporate income tax on their taxable income, as well as sales tax and VAT, and will be required to assess Corporate Income Tax (“CIT”) liability using either the cost plus method or actual revenue method. Under each method, the deemed profit margin shall be no less than 15 percent, an increase from the previous deemed profit margin of 10 percent. The effective date of these measures was January 1, 2010.

 

Given the above, for foreign investors considering an initial entry vehicle into the Chinese market, it is advisable to weigh the pros and cons of the RO option in terms of compliance obligations and costs.

 

For foreign investment, in our opinion, Wholly Foreign Owned Enterprise (“WFOE”) is the best alternative in China.

 

WFOE is typically used for the following business activities:

 

  • Import-export and distribution

  • Retailing: selling goods and related services to individuals from a fixed location, in addition to TV, telephone, mail order, internet and vending machines,

  • Wholesaling: selling goods and related services to companies and industry, trade or other organizations

  • Agencies, brokerages: representative transactions on the basis of provisions

  • Franchising

WFOE is also typically used for the following business activities:

 

  • Consulting, other professional services

  • Quality control, product design, technical support, sampling (although minimum amount regulations apply)

  • Manufacturing

 

That being said, it should be noted that some industries are off limits (such as publishing) and others may require additional licenses to fully complete your administrative obligations.

 

In certain circumstances, a local Chinese partner may be required by law to form a joint venture enterprise (such as market research).

In short, the choices are all there. OPING will be able to advice on the suitable structure for you depending upon your specific needs. Your business strategy – what you want to accomplish – should determine the business structure.