China Simplified its Incorporation Process since 2016

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2020-09-11

When setting up a business in Hong Kong, you need to apply for a Certificate of Incorporation from the Company Registry. Apart from the Certificate of incorporation, you will need to apply for Business Registration in Inland Revenue Department.  Similarly, if you want to setup a company in China, you have to obtain a business license in State Administration for Industry and Commerce (SAIC).  Since 1st October 2016, China has simplified the incorporation process, in below, we will share some information about China incorporation.

Simplified Incorporation process 

Started from 1st October 2016, China integrated 5 certifications and registrations into 1 consolidated business license. It means integration of  Business License, Organisation Code Certificate, Tax registration certificate, Social Security Registration and Statistical Registration Certificate into a unified business license with a unified social credit code. The integration reduces the institutional costs for entities and stimulate market vitality as part of the country’s business registration reform. 

What are the job duties of State Administration for Industry and Commerce (SAIC)?

SAIC not only granting the business license to new business enterprise, but also responsible for Consumer Right and registration of Trademark. Enterprises have to submit the Annual Returns to SAIC. If the enterprise failed to file the Annual Returns on time. SAIC will revoke the business license accordingly. 

Types of Business Entity in China 

Foreign Investment Enterprise Vs Local Enterprise

In China, the way to define an entity might slightly difference from Hong Kong. For example, if you want to set up a limited company, it will be very complicated. If you want to set up an unlimited company, then it takes the nationality and the percentage of shareholder into account. Let say, if the overseas shareholders hold more than 25% ownership of the company. The company is a Foreign Investment Enterprise (FID). Otherwise, it is a local enterprise. 

Wholly Foreign Owned Enterprise ? Joint Venture Enterprise? Local Enterprise?

If you want to establish a Limited Liability Company, the concept is the same as limited company. If all shareholder is local mainland Chinese, then it is a local enterprise. Whilst 100% overseas shareholder, it calls Wholly Foreign Owned Enterprise (WFOE). If there is over 25% Share ownership owned by overseas shareholders. It is Sino-Foreign Joint Venture Enterprise. If less than 25%, then it is a local enterprise.

From the China point of views, Overseas shareholders are including entrepreneurs from Hong Kong, Macau and Taiwan.

For further information, please contact us.

You may want to read: COMPANY INCORPORATION IN CHINA. WHAT IS A WFOE?

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