Should foreign investors register a foreign-funded company or representative office when they register their companies in China? Business China now interprets this question that investors are concerned about, as below:
China Foreign-funded companies, also known as wholly foreign-owned enterprises (WFOE), mean those enterprises established within the territory of China in accordance with the Chinese laws that have all capital invested by foreign investors, and operating as Chinese legal persons, excluding branches of foreign companies and other economic organizations. Their specific forms include foreign joint ventures and wholly foreign-owned enterprises.
Representative offices in China usually play the role in carrying out the relevant business liaisons, guest reception, strengthening the parent company’s relationship with local companies and the government, as well as handling local matters on behalf of the parent company locally in China. The representative offices are not recognized as independent legal entities, so they cannot conduct direct profit-making commercial activities.
Differences
First, Difference in business scope
Foreign-funded companies can engage in consulting services, production and product sales, and also operate specific businesses, while representative offices cannot engage in business operations and can conduct business liaisons on behalf of the parent company only.
Second, Difference in legal status
Foreign-funded companies operate as legal enterprises invested and registered in China by foreign investors, with independent legal person qualifications, while representative offices operate as representative organizations established in China, without legal person qualifications.
Third, Difference in registered capital
Foreign-funded companies are registered with registered capital, while representative offices are registered without registered capital.
Fourth, Different requirements for registered address
Foreign-funded companies can handle official business as long as it is a common commercial office or office building, while representative offices can handle official business in an office building only.
Fifth, Difference in recruitment rights
Foreign-funded companies can recruit employees by themselves, while representative offices can only entrust foreign-related personnel agencies to recruit employees and pay insurance premiums.
Sixth, Difference in taxation
Foreign-funded companies can independently make out invoices and pay VAT or business tax based on actual invoices, while representative offices cannot make out invoices and should pay taxes according to expense costs.
Expenses for Company Registration in China
The expenses for company registration in China include: Expenses for registration type, registered address, stamp carving, tax control equipment, and financial costs and expenses.
You may consult
Business China for various expenses.
