You have now received your business license. However, there are few more steps before you can actually use your WFOE.
Carving Seals (Chops)
An official seal (also known in China as a ‘chop’) is a legal requirement for all companies operating in China. The seal can be obtained from the local Public Security Bureau (PSB). The seal is round, and it bears the company’s official Chinese name. The company’s English name can be included as well. In China, a company’s official seal has legal precedent over the signature of a legal representative. The seal validates documents and contracts. Therefore, possession of the seal and its whereabouts are extremely important. The PSB keeps a duplicated copy of the official company seal in the event of fraud or disputes. In addition to the official company seal, a company must have other seals for various positions, practices or subjects: A legal representative seal, a financial seal; a seal for use on fapiao (a legal receipt that serves as proof of purchase for goods and services); and in the case of trading WFOEs, a customs seal.
PTL GROUP WORD OF WISDOM
Spread the seals between different positions in the company in China and overseas so that no single employee can access all the seals. The most important seal/s should be kept by a trustworthy employee either in China or overseas, or by a trusted 3rd party if it is required to be used frequently.
For example: Financial seal and Legal Rep. seal should not be held by the same person. Also, Company seals should be only in the hands of a trusted person or 3rd party service provider.
Foreign Exchange & RMB Bank Accounts
A WFOE in China needs to have at least two bank accounts. The first account is an RMB basic account. An RMB basic account is a must for a WFOE’s daily business operations in China. From this account company can withdraw RMB cash, and it often acts as a designated account for making tax payments. The second account is a foreign currency capital contribution account, which is crucial in order to receive capital injections from overseas. Approval to open this account can be obtained from the State Administration of Financial Exchange (SAFE).
A WFOE can establish bank accounts with both Chinese and international banks.
Opening a bank account normally requires that the Legal Representative be present.
Trading WFOEs Import & Export Registration Procedures
A customs registration certificate and an import-export license should be obtained in order to conduct import/export trading and distribution activities in China. These documents allow the company to exchange foreign currencies to RMB, and refund sales or VAT on imported or exported products. Furthermore, a trading WFOE should complete a foreign trader operator filing with MOFCOM, make a quality inspection registration with the Inspection and Quarantine Bureau, and obtain an E-port IC card, software, and card reader with the China Electronic Port.
Tax & Audit Report
All WFOEs are required to report to the Tax Administration Department on a regular basis: Monthly and quarterly. In addition, it is highly recommended that the WFOE submits Annual Audit Reports by the end of April each year for the previous financial year.
PTL Group’s financial services are designed, among other things, to assist you in meeting these requirements. Our financial team offers Tax Planning and Compliance, Bookkeeping and Accounting, Financial Auditing, Accounts Receivables Collection and Credit Management, Facilitate Local Currency Sales Contracts (RMB Invoicing), and much more.
The Government of China enables WFOEs to take their profits out of China in the form of dividends. Those profit transfers do not require prior approval by State Administration of Foreign Exchange (SAFE) but require the filing of audit reports. Note that previous years’ losses must be covered before dividends are paid and transferred out of China. Dividends not distributed in previous years may be distributed together with those of the current year. During the term of business operation, transferring the Registered Capital out of China is forbidden.
Read more about WFOE registration in the following chapters:
PTL Group offers WFOE registration services and ongoing operational support to registered entities in China.
We provide comprehensive C-Level management outsourced services to international corporations with or without existing business entities in China.
For additional information Contact us.
**The information is based on a China Briefing article from 2017. In this version we have updated the details that have changed since then and added practical tips based on recent cases we have dealt with.