Wholly Foreign-Owned Enterprise

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A Wholly Foreign-Owned Enterprise ( WFOE ) is a form of company and a form of market entry into China . This is a form of limited liability company which is similar to the German company with limited liability . A WFOE, unlike when setting up a representative office, enables foreign companies to employ local and foreign workers as well as to carry out profitable activities such as B. offering services, manufacturing, trading and exporting goods. The company can operate independently in China without working with a Chinese partner.

advantages

Due to the advantages compared to establishing a joint venture or a representative office, entering the market in the form of a WFOE is the most popular option for foreign investors.

  • Independence and independence guaranteed, as no Chinese partner is required to operate in the Chinese market.
  • Issue of Chinese invoice in RMB.
  • Execution of profits abroad possible.
  • Independent management of the staff.
  • No minimum inventory requirement for the foreign investor.
  • Buying / selling real estate.

disadvantage

  • Complex and time-consuming start-up process.
  • High capital investment and start-up costs.
  • Hardly any opportunities for government grants.
  • A WFOE is fully taxable.
  • Closing a WFOE is more costly and time consuming than closing a representative office.

Establishment process

The establishment of a WFOE in China can generally be divided into two important stages: in the run-up to the licensing and after the successful licensing of the WFOE. Important steps must be taken during both phases to guarantee a successful start-up.

In the run-up to licensing:  

  • Compilation of all documents required for the application process
  • Approval of the company name for registration / pre-registration of the WFOE
  • Registration of the documents and signature of the main representative of the WFOE
  • Obtaining the Certificate of Approval from the Ministry of Foreign Economic Relations and Trade
  • Obtaining the business license

After a successful licensing:

  • Registration with the local public security bureau
  • Production of the company stamp
  • Opening the company bank account
  • Application for import and export licenses (if necessary)
  • Application for VAT Refund and on tax refund authorization (upon request)

Individual evidence

  1. ↑ Revolution in market entry in China: No need to set up a company? - Expat News . In: Expat News . June 8, 2017 ( expat-news.com [accessed May 31, 2018]).
  2. ↑ How to start a company in China (WFOE or Joint-Venture) . In: Sapore di Cina . December 6, 2017 ( saporedicina.com [accessed June 5, 2018]).
  3. ↑ What is the process of setting up a WFOE (Wholly Foreign Owned Entreprise) in China? - Quora. Accessed June 5, 2018 .
  4. ↑ Richard Hoffmann: How do you close your WFOE and a representative office. In: Ecovis Beijing. October 18, 2016, accessed June 26, 2019 .
  5. ↑ Setting Up a WFOE in China | Wofe Incorporation Solutions in China. Retrieved July 5, 2018 (American English).