From company seals and bank accounts to audit reports and profit repatriation, this article delves into the things you need to do after obtaining your WFOE license.
PTL Group specializes in company registration in China. We make sure that China company registration is done right, because doing so will help us focus on the real goal: long-term WFOE management. To help our clients, we provide extensive operational support for registered entities. This is where our knowledge and expertise really make a difference.
We hope you find the following information useful.
Post-Licensing Registration Stages
You have now received your business license. However, starting a business in China requires you to take a 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.
Our two cents:
- 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 third party if it is used frequently. For example: The Financial seal and Legal Rep. seal should not be held by the same person. Also, Company seals should only be left in the hands of a trusted person or third party service provider.
Read more about the Chinese Chops
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, which is a must for a WFOE’s daily business operation in China. From this account, the 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 at 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 to 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 regularly to the Tax Administration Department, on a monthly and quarterly basis. In addition, it is highly recommended that the WFOE submit annual Audit Reports by the end of April each year for the previous financial year.
Our two cents:
- PTL Group’s financial services are designed, among other things, to assist you in meeting these requirements, as well as other requirements pertaining to company registration in China. 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 Chinese Government enables WFOEs to take their profits out of China in the form of dividends. These 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 that were not distributed in previous years may be distributed together with those from the current year. During the term of business operation, transferring the Registered Capital out of China is forbidden.
Regulations in China change relatively frequently. For the most up-to-date regulations, please check in with us.