Setup branch office in China :021-68877368
A branch office in China usually has three levels of meaning for a foreign entrepreneur: a branch office of an overseas company, a representative office in China, a branch office of a company in China. It is vital for a foreign investor to understand from a legal perspective the differences in between.
Firstly, setting up a branch office of an overseas company in China. A Wholly Foreign Owned Enterprise in China is called WFOE or WOFE. It is the most popular investment option for foreign investors. With a WFOE (branch office of an overseas company) in China, foreign entrepreneurs could fully control the enterprise and make fully independent management choices regarding all business-related decisions and bear limited liability restricted to the registered capital.
Secondly, incorporating a representative office in China. The representative offices of foreign enterprises can only engage in indirect business activities within the territory of China. For outreach activities in China such as market research, liaising with clients or suppliers, developing a local network, advertising, renting business and personal premises.It's a legal entity in China which can hire staff and takes far less time to set up than a WFOE (approximately 2 week versus a couple of months), and so the attraction to foreign businesses wanting to get a presence in China is understandable.
Thirdly, forming a branch office of a Chinese company in China. You should bear in mind that once you have a company in China, then you could form a branch office of the China company inside other cities of China or other districts of the same city. The registration of branch office of a China WFOE, for instance, requires the legitimate documents of the WFOE in China. The branch office could choose not to do independent accounting to save management costs.
Thus, how should we choose between WFOE and RO? Actually there’s lots of limitation for setup a RO. Generally speaking, a representative office cannot do trading, sign invoices, gain any income in China or hire a Chinese directly or hire more than 4 foreigners, etc.What's more, an RO is still taxed in China as well, despite having no right to earn an income, and typically the tax is a flat rate of around 11% of the company's total spending.
As a conclusion, if you don't need to trade, set up an RO. Otherwise, setup a WFOE would be more suitable. There's nothing wrong with an RO, but it just doesn't cover as many bases as a WFOE. Should you have any inquiries, please feel free to request a consultation through below.
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