Foreign-Invested Enterprise in China

We hold a Trust or Company Service Provider licence (TC008771) and register companies in Qianhai, Guangzhou and Hengqin, Zhuhai: checking the company name, assembling the shareholder, legal representative and supervisor documents, and obtaining the business licence and the chops. We can also provide a registered address. A Shenzhen limited company with mainland shareholders is $6,000; the fee for a foreign-invested company depends on the place of registration, the shareholding structure and the scope of business, and is as quoted by us.

We register companies in Qianhai, Guangzhou and Hengqin, Zhuhai. The documents required in the three places are broadly the same; Guangzhou and Hengqin, Zhuhai also require documents for the business premises and a bank credit reference, as set out in the table above.

The documents obtained on completion in Qianhai, Guangzhou and Hengqin, Zhuhai are the same:

• Business licence, original and duplicate
• Company chop, contract chop, finance chop, invoice chop and legal representative chop
• Articles of association

1. The registered address of a company in Qianhai may be attached to the address of a Qianhai business secretary free of charge, and the enterprise may operate from another location, which lowers the cost of starting up and the cost of operating.
2. An enterprise registered in the Qianhai free trade zone more than 70% of whose principal business income falls within the Catalogue of Preferential Corporate Income Tax Treatment is charged corporate income tax at the reduced rate of 15%.
3. Income derived by an insurance enterprise registered in Shenzhen from providing international shipping insurance business to an enterprise registered in Qianhai is exempt from business tax.
4. Income derived by an enterprise registered in Qianhai from offshore service outsourcing business is exempt from business tax.
5. A modern logistics enterprise registered in Qianhai that meets the prescribed conditions enjoys the policy under which pilot logistics enterprises are charged business tax on the balance.
6. An enterprise confirmed as a technologically advanced service enterprise is charged corporate income tax at the preferential rate of 15%, and its staff education and training expenses are deductible before corporate income tax as actually incurred, up to 8% of the enterprise’s total wages.
7. For a private equity fund enterprise, Qianhai grants a settlement award according to the size of the fund.
8. Overseas high-end talent may be exempt from individual income tax.
9. Qianhai operates innovative financial policies, and low-interest cross-border loans from outside the mainland are available.

1. A production enterprise with an operating period of 10 years or more is exempt from corporate income tax for the first 2 years from the year in which it begins to make a profit, and charged corporate income tax at half rate for the following 3 years.
2. A production high-technology enterprise with an operating period of 10 years or more (evidenced by the high-technology enterprise certificate) is exempt from corporate income tax for 2 years from the year in which it begins to make a profit and charged at half rate for 3 years. The enterprise may apply for the corporate income tax charged at half rate to be exempted in full, subject to approval by the finance department at the same level; if it is still an advanced technology enterprise when the period expires, the half-rate charge of corporate income tax is extended for 3 years, and where the half rate is less than 10%, tax is charged at the rate of 10%.
3. A technology-intensive or knowledge-intensive project, or a production project with foreign investment of more than US$30 million and a long payback period, may be charged corporate income tax at the rate of 15%.
4. An advanced technology enterprise that, after the statutory period of exemption and reduction of corporate income tax expires, is assessed as still being an advanced technology enterprise may have the half-rate charge of corporate income tax extended for 3 years.
5. Where the statutory period of exemption and reduction of corporate income tax of an export enterprise has expired and the output value of its exported products for the year reaches 70% of its total output value for the year, corporate income tax may be charged at half the rate prescribed by the tax law. An export enterprise already paying corporate income tax at the rate of 15% that meets the above condition is charged corporate income tax at the rate of 10%.
6. Where a foreign investor invests the profits distributed to it by the enterprise directly in that enterprise, or establishes a new enterprise in the development zone, and the operating period is not less than 5 years, 40% of the corporate income tax already paid on the reinvested amount is refunded; where that investment is in an export enterprise or an advanced technology enterprise and the operating period is not less than 5 years, the whole of the corporate income tax already paid on the reinvested amount is refunded.
7. A production foreign-invested enterprise is exempt from the land use fee during the preparatory period stipulated in the contract. Export enterprises and advanced technology enterprises may have the land use fee reduced or waived.
8. Land in the development zone is granted for consideration in every case, in accordance with the relevant laws and regulations of the State and the local government, and a State-owned Land Use Certificate of the People’s Republic of China is obtained for enterprises that enter the zone.

While fully implementing the State’s existing investment incentive policies, the Administrative Committee of the Zhuhai Special Economic Zone applies further incentives to foreign investment. The specific provisions are as follows.

Relaxation of the ratio of domestic to export sales. Where a foreign investor invests in Zhuhai in an encouraged or permitted project under the Catalogue, or acquires or takes a shareholding in a state-owned enterprise, the approving authority does not fix the ratio of domestic to export sales; the investor determines and adjusts the ratio itself according to demand in the domestic and overseas markets, with the aim of keeping foreign exchange in balance. Where a foreign investor invests in Zhuhai in a restricted category A project under the Catalogue, a domestic sales ratio of 30-50% may be granted with the approval of the Guangdong Provincial Commission of Foreign Trade and Economic Cooperation; for an investment in a restricted category B project, the ratio of domestic to export sales is determined by the Ministry of Foreign Trade and Economic Cooperation.

Exemption and reduction of corporate income tax. A foreign-invested enterprise established in Zhuhai is given a period of exemption and reduction of corporate income tax counted from the year in which it makes a profit: a production enterprise with an operating period of 10 years or more is exempt for the first 2 years and charged corporate income tax at half rate for the following 3 years; an investment in a port or wharf with an operating period of 15 years or more is exempt for the first 5 years and charged corporate income tax at half rate for the following 5 years; an investment in a service industry with an investment of more than US$5 million and an operating period of 10 years or more is exempt for the first 1 year and charged corporate income tax at half rate for the following 2 years. Corporate income tax on a foreign-invested enterprise established in Zhuhai is charged at the preferential rate of 15% (33% in the interior and 24% in the coastal economic development zones). A foreign-invested enterprise assessed as “technologically advanced” by the Zhuhai Municipal Science and Technology Commission, or as “export-oriented” (exporting 70% or more) by the Municipal Commission of Foreign Trade and Economic Cooperation, may still be charged corporate income tax at the reduced rate of 10% after the period of exemption and reduction expires. Where the profits distributed to an investing enterprise are reinvested (as an increase in capital or in a new enterprise) and the operating period is not less than 5 years, 40% of the income tax already paid on the reinvested amount may be refunded; where the reinvestment is in an export-oriented or technologically advanced enterprise and the operating period is not less than 5 years, 100% of the corporate income tax already paid may be refunded.

Tax rebates to encourage the export of products. Where a foreign-invested enterprise or a processing enterprise operating under the “three plus one” trading-mix arrangement exports products, an export licence is not required for any product other than restricted items, for which an export licence must be applied for or a quota purchased (applied for, according to the original approval authority, to the Provincial Commission of Foreign Trade and Economic Cooperation and to the Guangzhou office of the Commissioner of the Ministry of Foreign Trade and Economic Cooperation); export duty and value-added tax are both zero. A foreign-invested enterprise that purchases Chinese raw and auxiliary materials, parts and components on which tax has already been paid and processes them may claim a rebate when the products are exported; where imported raw and auxiliary materials, parts and components are processed, the method is “charge first, refund later” — tax is charged on import and rebated on export. The export rebate rates are: 17% for the four major categories of mechanical and electrical products, namely machinery and equipment, electrical and electronic products, means of transport, and instruments and meters; 13% for agricultural machinery, textile raw materials and products, clocks and watches, footwear, ceramics, steel and steel products, and cement; 11% for organic chemical raw materials, inorganic chemical raw materials, coatings, dyes, pigments, rubber products, plastic products, and travel goods and luggage; and for goods currently on an export rebate rate of 6%, including industrial products processed from agricultural produce and other goods, the export rebate rate is raised to 9%; the export rebate rate for agricultural produce is 5%. Where the products of such an enterprise are sold both domestically and for export, the tax to be exempted or rebated on the export portion may be set off against the tax payable on the domestic portion, calculated by quarter: where the export amount is 50% or more of total sales, any exempted or rebated amount remaining after the set-off may be refunded; where the export amount is less than 50% of total sales, any exempted or rebated amount remaining after the set-off is carried forward to the next quarter for set-off.

Appropriate reduction of land prices for high-technology industries. A foreign-invested production enterprise assessed by the Zhuhai Municipal Science and Technology Commission as a high-technology industry is granted a preferential land price, set according to the four categories of international, national, provincial and municipal level and according to the different areas in which the land lies, and payment by instalments may be negotiated.

Duty-free import of equipment for the enterprise’s own use, together with fittings and spare parts, within the total investment of encouraged and restricted category B projects. For a foreign investment project that falls within the encouraged or restricted category B of the Catalogue and that transfers technology, equipment imported for the enterprise’s own use within the total investment is exempt from customs duty and import value-added tax, other than the commodities listed in the Catalogue of Imported Commodities Not Entitled to Duty Exemption for Foreign Investment Projects (which covers televisions, video cameras, video recorders, video players, audio equipment, air conditioners (excluding central air conditioning), refrigerators, freezers, washing machines, cameras, photocopiers, program-controlled telephone exchanges, microcomputers and peripherals, telephones, radio pagers, fax machines, electronic computers, typewriters and word processors, motor cars and motorcycles, and all commodities under the tariff codes of Chapters 1 to 83 and Chapters 91 to 97 of the Customs Import Tariff of the People’s Republic of China). Equipment imported for the enterprise’s own use under foreign government loans and loans from international financial organisations, and equipment supplied by a foreign party for processing trade without charge, are treated in accordance with the above provisions. Technology, fittings and spare parts imported with the equipment under the contract are also exempt from customs duty and import value-added tax.

The preferential treatment of the Zhuhai bonded zone is available. The Zhuhai bonded zone is located at Hongwan, covers 3 square kilometres and is under closed management. Within the zone a foreign investor may carry on export processing (mainly capital-intensive and technology-intensive projects), entrepôt trade (commodity futures trading may be conducted with approval), warehousing and transport (including the trading of bulk bonded producer goods), wholesale and retail, and finance and insurance (offshore business and foreign exchange futures business may be tried with approval), as well as other special services, such as establishing law, accounting and audit firms. The scope of business of every enterprise in the zone is unrestricted, other than what the State prohibits, and a production enterprise may carry on trading business at the same time. An enterprise established in the zone may move goods of every kind freely between the zone and places outside the mainland (including Hong Kong and Macau), including the production equipment, parts and components, raw and auxiliary materials, fuel and packaging materials imported by an export processing enterprise; customs clearance is by a system of registration and filing, no import or export licence is required (except for commodities that require a quota to be exported), and import customs duty, value-added tax and consumption tax are exempt (excluding the few commodities that remain taxable, such as motor cars, tobacco and alcohol); there is no time limit on displaying or warehousing imported commodities, and for materials imported and exported by export processing industries there is no guarantee-deposit ledger and no guarantee deposit is collected, with the export tax rate at zero. With the approval of Customs, an enterprise in the bonded zone may import and export goods through a port outside the bonded zone or through another bonded zone in the mainland; goods in the bonded zone may also be moved out of the zone and sold once customs duty, value-added tax and consumption tax have been paid; goods from outside the bonded zone that enter the bonded zone are treated as exports, and an export rebate may be claimed as prescribed. Besides being able to enjoy the State’s policy of exempting and reducing corporate income tax, with tax charged at the rate of 15%, a foreign-invested enterprise in the bonded zone that meets the State’s relevant encouragement policies may be charged corporate income tax at the reduced rate of 10%. The bonded zone applies the Regulations on Foreign Exchange Control in Bonded Zones: accounts in foreign currency and in renminbi may be opened with financial institutions inside or outside the zone, no verification procedures are required for export proceeds or import payments, settlement in foreign currency or renminbi may be made directly with a bank, and the currencies of all countries are allowed to circulate within the zone.

Hong Kong and Macau vehicles for an investor’s own use may apply to enter. A foreign investor whose actual investment in Zhuhai reaches a prescribed level may, during the term of its contract, apply for the driving licence and permit needed for a Hong Kong or Macau registered vehicle used by the investor to enter Zhuhai or elsewhere in Guangdong Province.

A company registered in the mainland by an overseas shareholder is foreign-invested; Hong Kong and Taiwan persons are both treated as foreign persons. Foreign investment must be dealt with according to the rules for the industry: finance, property, education, transport and mining are all industries that affect the national economic lifeline, and in some of them the foreign shareholding ratio is restricted and operation is prohibited. The Chinese party to a Sino-foreign joint venture may not be a natural person, and must contribute its capital as a domestic company.

Lease evidence or a property ownership certificate must be provided for the registered address. Registered capital must be paid up within the time agreed in the articles of association, generally not more than 5 years in an ordinary district and not more than 10 years in Qianhai.

• For a company funded by mainland persons or by a mainland company, see domestic Chinese company.
• To incorporate a limited company in Hong Kong, see Hong Kong company registration.
• For a company registered in another jurisdiction, see offshore company.