Wholly Foreign Owned Enterprise (WFOE)

What is a wholly foreign owned enterprise?

As its name states, wholly foreign owned enterprise also known as a WFOE or WOFE, is a Chinese limited liability company which is invested 100% by foreign capital and owned 100% by foreigner or foreign corporate.

This type of company behaves in the same way as any other local Chinese company owned by Chinese citizen, in that it can do its business legally and freely in China, make revenue in CNY, invoice officially in CNY, can transfer its profits back abroad and can export as an exporter.

 What is the capital investment needed for China WFOE registration?

Register capital was traditionally required while setting up the WFOE to ensure the WFOE would not run out of necessary start-up fund before being able to break even.

In recent amendments to the foreign investment laws, the government has removed the minimum register capital requirement for incorporating a WFOE in China. Minimum capital injection is no longer a requirement.

The WFOE can determine on his own business plan for how much capital will be required to maintain his business operations and must simply ensure that he meets those targets within a period of maximum 30 years. The amount that he commits to will vary depending on the business that he is doing. While it may be more flexible, he will need to commit to registering an appropriate amount of capital upon forming the WFOE (for instance, a factory will require more than a trading company, and a trading company will be more than a consultancy service company). 

 What are the Pros and Cons for the WFOE?

Advantage of the WFOE:

---WFOE can independently operate its business in China and does not require a Chinese local partner.

---WFOE has the ability to do business as a normal local company, rather than a representative office only.

---WFOE can invoice to its suppliers or cooperative parties officially, and can receive revenue and profit in CNY too.

---WFOE can transfer profit in USD to the investor outside China.

---WFOE can hire local Chinese employees and foreigners directly and sign labor contract with them directly.

---WFOE can register its own brand names and logos and protect its intellectual property.

---WFOE can apply for employment permit and resident permit for its foreign employee.

 Disadvantage:

---Comparably, WFOE is a legal entity shouldering all its legal responsibility independently.

---Accounting and tax filing is comparably complicated and shall hire qualify accountant or entrust professional accounting firm to follow.

Documents Required For WFOE Setup

• 1. Investor’s passport copies: must be attested from Chinese Embassy from overseas; Original TWO sets. If the investor is holding valid business visa (or employment permit and resident permit of China) and is inside China by the time of submitting the application, then this document is not required.

• (If the investor is an overseas company (instead of an individual person), the investor’s business license copy shall be attested from Chinese Embassy from overseas; Original TWO sets)

• 2.  Rental contract (two original): office rental contract must be official recorded in the Housing management bureau. The rental contract period shall be no less than 12 months and the purpose of rental shall be office usage. Landlord’s ID copy and property right certificate copy with the landlord’s signature on the copies.

• 3. Legal Representative / Director / Supervising director: passport copy or ID copy of all of them, those position need to be specified before start.

• 4. C.V. (Resume) in details & photos of the legal person.

• 5. Any other information if necessary.

Time Required

Normally it takes 7-15 working days for the license registration, and it will take further steps and procedures for pre or post approval or permit application, and the time required will vary according to nature of those special pre or post approval or permit.