A Guide to Corporate Taxes for Wholly Foreign-Owned Business in China

China is without a doubt one of the top destinations for foreign investors. Whether your company is in the services niche or manufacturing, China is the new go-to offshore jurisdiction with the potential to help your enterprise grow and become the success you have always dreamt of.

To access this potential jurisdiction, the first step is registering a company in China, and a wholly foreign-owned enterprise (WFOE) is the most preferred structure. In this post, we will look at the main taxes that you need to know about when thinking about incorporating a company in China.

Special Benefits of Registering a WFOE in China

Before looking at the main tax obligations, it is important to understand the key benefits of opening a WFOE in China. The main advantage of taking your company to China is to enjoy the large market. With a population of more than 1.3-billion, you have the opportunity to reach a larger market. You can even access a larger market in the neighboring Asian countries and globally because China has entered into many bilateral trade agreements. Other benefits include:

• China boasts of world-class infrastructure.

• A supportive administration through direct financing, research, and special economic trade areas.

• Good supply of highly skilled labor.

• Many bilateral trade agreements allow traders to easily import and export products.

• Economic and political stability.

Company Registration in China

The process of registering a WFOE in china starts with getting the name approval from the State Administration of Industry and Commerce (SAIC) office in the selected city. Then, you will need the following documents for company registration:

• List of controlling partners.

• The managerial structure.

• The legal address of the company.

• The articles of association.

• The registered capital.

• A feasibility study.

• Number of workers, their citizenship, salary, and associated benefits.

Once you have prepared the required documents, you need to apply for a business license with the State Administration of Industry and Commerce (SAIC) and the Ministry of Commerce (MOFCOM). Be prepared to provide any other document that might be required.

Corporate Taxes for Wholly Foreign-Owned Enterprise

To avoid getting into conflict with the Chinese authorities, it is paramount to comply with all the legal requirements, especially the taxes. So, here are the main corporate taxes that you need to know about:

• Corporate Income Tax: This is a tax that is levied on the profits of your company. The corporate tax in China is 25%, but you will be charged 15% if your company is in the encouraged sectors.

• Turnover Tax: This tax is levied on sales and ranges from 3% to 5%. However, it relatively higher in the entertainment industry.

• VAT: This is a tax levied on the consumption of goods and services.

• Custom Duties: These are taxes imposed on the products that are imported or exported from China. If your company is operating in a Free Trade Zone, you enjoy some reduction or full exemption from custom duties.

When opening a company in China, the three most important things are getting it right on company incorporation, having a good strategy, and ensuring the required taxes are paid on time. To ensure you are on the right side of the law, consider getting an expert agency’s assistance. With an expert on your side, you are sure of rapidly elevating your company to success in China and beyond.

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