Wholly Foreign-Owned Enterprise in China: Part 1

30 Mar 2021

 

What is it?

The Wholly Foreign-Owned Enterprise (WFOE) is a privately held limited liability company in China in which all the shareholders are foreign

It allows full autonomy to implement the strategies of its parent company, without having to consider the involvement of the Chinese partner.

Abilities of WFOE:

  • Issue official VAT invoices in RMB to its clients and employ staff directly;
  • Run its business with registered capital from its investors and its profit;
  • Hire local employees directly;
  • Convert RMB profits to US dollars for remittance to its parent company outside of China;

What are the types?

WFOE are mainly classified (not limited to) the following 3 types: 

  • Consulting WFOE
    • Consultancies or companies that provide a service.
  • Manufacturing WFOE
    • Companies whose activities include manufacturing and trading of goods.
  • Trading WFOE or a Foreign-Invested Commercial Enterprise (FICE)
    • Companies who wish to engage in the trading of products. This grants companies both import and export licenses and allows them to trade locally.

Things to Note:

During your WFOE application, take note of requirements such as:

  • Sound organisational structure and experienced personnel;
  • Fixed work location (rental of a physical place of operation), sufficient funds and office facilities for the business;
  • Articles of association, a sound management system, well defined working rules, and a clear business scope;
  • Full civil capacity to bear civil liability independently; and
  • Other conditions as provided by the laws and regulations.

The information provided serves as a general reference guide and is not strictly advised by Funds Partnership Asia.

 

References:

https://www.wfoe.org

https://www.hongdaservice.com/blog/setting-up-a-wfoe-in-china-the-process-explained

https://www.hongdaservice.com/blog/3-key-types-of-wfoe-suitable-for-foreign-companies-trading-in-china

https://www.mills-reeve.com/insights/publications/wholly-foreign-owned-enterprise-wfoe

http://www.mohrss.gov.cn/gkml/zcfg/bmgz/202001/t20200103_351214.html?from=singlemessage&isappinstalled=0#10006-weixin-1-52626-6b3bffd01fdde4900130bc5a2751b6d1