Page 14 - Doing Business in China

BUSINESS ENTITIES

COMPARISON OF MAIN INVESTMENT VEHICLES

WFOE JV RO
Advantages
• Foreign investor has full equity • Reduce the investment amount and • Lower risk through initial market tests
control and management the risk for foreign investors

Disadvantages

• Cannot set up a WFOE in specific • Does not have full equity control and • Non-independent legal entity
industries management • Cannot engage in direct business
• Foreign partner can only contribute activities
up to 49% of registered capital in • Must engage a local agent to hire local
specific industries staff

Structure

• Shareholder or shareholders’ meeting • The shareholder or shareholders’ • A Chief Representative
is the highest authority of the meeting is the highest authority of • No Shareholder
company the company • No Director
• A Legal Representative • A Legal Representative
• No Supervisor
• An Executive Director or Board of • An Executive Director or Board of • No General Manager
Directors Directors
• A Supervisor or Board of Supervisors • A Supervisor or Board of Supervisors

• A General Manager (optional) • A General Manager (optional)

Tax
• Company Income Tax • Taxation based on a deemed income basis, mainly includes
• Value-Added Tax (VAT) company income tax, VAT and individual income tax (for
details, see section on Taxation)
• Individual Income Tax
• Avoidance of Double Taxation Agreements apply
• Enjoy tax incentives: such as “Qualified Advanced and New
Technology Enterprises”

Reporting & Compliance
• Annual Audit and Annual Report • Annual Audit and Annual Report

Lead Time to Establishment
• 1 month (upon submission of required documents) • 1 month (upon submission of required documents)
• Foreign Invested Commercial Enterprise expected to take
one month longer

Doing Business in China 2023 | 13