Guide for Taiwan company incorporation in China

Guide for Taiwan company incorporation in China

Establishing a company in mainland China does entail going through various procedures, but it doesn’t have to be so complex. The process is anything but simple, and many find it a challenge. But if you understand the special characteristics of mainland companies and can answer the questions frequently asked about getting a business going there, the process becomes much easier. As well, regard reliable assistance from mature professionals on the mainland China company registration application as strongly recommended in order to attain a more pleasant journey.

Understanding Regulations and Pre-Application Research

Many attractive conditions and incentives have been set up for overseas companies, so perhaps you have heard about many Taiwanese and foreign businesses setting off to mainland China. You can also find much news about registering companies there. The Chinese market has tremendous business opportunities, attracting both Taiwan and foreign investment. Meanwhile, the Chinese government has relaxed several restrictions on establishing foreign funded enterprises to attract investors.

What benefits are there for Taiwanese opening firms in mainland China? I’ll take you through the starting points when doing commercial registration in mainland China, explaining which regulations to look at and how to go about making inquiries.

Regulation: The Company Law of the People’s Republic of China

The Company Law of the People’s Republic of China provides comprehensive information on matters such as procedures, requirements, required documents and so forth concerned with registering a company in mainland China. If you are thus planning to set up a mainland company, it’s a good idea to start with the official regulations published by the local government. The following regulations specify the principal requirements and procedures for company formation.

Moreover, the adoption of the PRC Regulations on the Administration of Market Entities in 2021 and implementation thereof in 2022 further centralizes various sporadic regulations about market entities. Key points worth noting include:

  • Amendments to restrictions on qualifications of the legal representative
  • Introduction of a voluntary “cessation of operations” system
  • Simplification of procedures for company deregistration
  • Strengthening corporate supervision and classification management

The legal requirements for setting up a company in China are no less dynamic than those for Taiwan. Not sure how to go about undertaking commercial registration in mainland China on your own? We recommend that you engage a professional corporate service provider to take you through it!

Pre-Application Research

Is there a channel which can quickly check on Chinese enterprises as an initial point of reference? Just as Taiwan’s Ministry of Economic Affairs has a Bureau of Foreign Trade, so the Chinese regulatory authority is the State Administration for Market Regulation of the People’s Republic of China. On the National Enterprise Credit Information Publicity System page, you can find information about queries regarding Chinese company registrations. Below is a simple guide on the National Enterprise Credit Information Publicity System:

National Enterprise Credit Information Publicity System

If you want to inquire about specific company information, you need to determine the registered location of that enterprise. In the upper right corner, access the links for different provinces or cities. Then, in the search field, enter the simplified Chinese name of the company or its Unified Social Credit Code (a total of 18 digits, similar to a company’s identification number).

Unified Social Credit Code

Once the search results are displayed, you can click on the specific company you want to delve deeper into. From this page, you can access basic introductions and check whether the company is listed on any blacklists or not.

Understanding the characteristics and benefits of China company’s structures

Following the completion of these preliminary steps, we are now in a position to properly move on to an examination of different kinds of mainland Chinese businesses. What is the right way to organize the operations of a business in China? What are the advantages for Taiwanese firms in setting up business in China?

3 Main Types of Foreign-Invested Company Structures in China

Besides traditional Chinese state-owned enterprises, other forms include limited liability companies (LLCs), joint ventures, wholly foreign-owned enterprises (WFOEs), foreign representative offices, private enterprises, sole proprietorships and so on. Here, we give a quick review of the three types of mainland companies most often formed for foreign investment.

Wholly Foreign-Owned Enterprise (WFOE)

According to local Chinese law, a Wholly Foreign-Owned Enterprise is a limited liability company directly operated by foreigners or the same nationality of which are wholly owned by foreign shareholders and don’t need any involvement from a Chinese shareholder. Here operators are able to make individual decisions in terms of operational policies, profits and the distribution of income without interference from Chinese shareholders. It’s an attractive option largely because of its independence and high degree of autonomy. It is like a limited liability company in Taiwan; this entity is recognized as an independent legal entity, liabilities being limited to invested capital and not affecting personal assets-it provides greater security. The benefits of a Wholly Foreign-Owned Enterprise include:

  • Engaging in all businesses registered in China
  • Full authority in making company decisions without interference
  • Registering trademarks as a local independent legal entity
  • Full control in hiring company employees

Standards for establishment and registration are more stringent than for other types of enterprises, because the WFOE has a high degree of freedom. Prerequisites include corporate address, name of company, short-term business plans, and for most industries a minimum capital threshold. As a result, when setting up this type of company extra effort should be taken for rigorous preparation.

Joint Venture (JV)

A Joint Venture is formed when foreign investment in the Chinese market seeks the assistance of a Chinese partner to jointly invest and establish a company. It is such a structure that different companies unite to become an autonomous entity, also commonly known as Sino-foreign joint venture. The structured form usually operates in the form of limited liability company. Normally, the distribution of equity between parties can be freely determined by negotiation. But, in fact, there are some special requirements due to local Chinese policies (specifically those dealing with restricted industries such as media).

The advantage of this is that the other party brings to the Joint Venture its cultural background and sales channels, so it can enter quickly into China. Yet a joint venture means investing in another enterprise, so the degree of power over operations is limited. As the local company is well-known, and its capabilities are good, it’s that much more important to select a suitable partner. Therefore, many investors still believe that the Wholly Foreign-Owned Enterprise remains the best choice for company registration in mainland China.

Representative Office (RO)

In fact, a Representative Office for foreign entities is not a separately incorporated body or legal person and doesn’t have full responsibility. Its function in China is to provide information relay for that entity’s head office. It cannot engage in direct profit-making activities or revenue-generating activities. For instance:

  • Cannot issue invoices
  • Cannot make outward remittances
  • Cannot sign purchase and sales contracts
  • Cannot receive income from service fees

Allowed activities include:

  • Employing staff for business liaison activities
  • Conducting market research and development within China
  • Opening bank accounts and receiving funds from the parent company for daily expenses
  • Signing contracts with customers and suppliers on behalf of the parent company
  • Engaging in necessary but non-direct economic contracts and business activities to sustain operations

With lower costs, setting up a Representative Office can be helpful in the process of exploring the Chinese market. But for some industries, such as finance, transportation, or insurance, extra documentation and approvals from the relevant authorities are necessary before continuing with the standard setup procedures.

In addition, after obtaining the consent of the competent authority, a foreign Representative Office is generally permitted to exist in China for three years, depending on the industrial category. Those wishing to proceed after this period must submit an application and annual report no later than 30 days before expiration. It is of great importance to keep up on applications, timelines and regulations.

5 Major Advantages of Establishing a Company in China

With the Chinese government following the international tide, it’s progressively more active in opening up to the outside. Through these adjustments, from fundamental regulatory reforms to the establishment of free trade zones, Taiwan residents have received strong incentives to establish new businesses in China.

Advantages of Establishing a Company in China:

Vast Market Potential: The soaring population of China (1.4 billion and growing), its massive market, numerous consumers, rapid growth in all sectors; with the public’s rising spending power it is no wonder that many Taiwan companies are turning to open their doors there. So through taking the initiative to establish a company in China, not only can you get on the spot with potential business opportunities and customers, but you can also find out what local consumer behavior compared to establishing bases in Taiwan.

Supply Chain Advantage: Another major consideration attracting foreign investment to establish companies in China is the all-embracing, many-faceted supply chain. Making a company in China allows for better and simpler integration into the local supply chain. Starting from raw materials suppliers, medium-sized intermediates such as manufacturers and e-commerce platforms, to logistics services providers within one comprehensive system, all kinds of things become easier to manage. More cooperation opportunities leave room for more people to play on the field along the supply chain.

Favorable Investment Environment: The government of China has actively encouraged foreign investment in a variety of forms through suitable incentive policies and measures. Simplified registration, tax incentives and exemptions; subsidy applications; comprehensive assistance provided by local governments to meet foreign investors’ varied needs for a connection with mainland China. State Council Measures: Creating conditions more conducive for attracting investment and company registration in mainland China fosters an environment favorable to foreign investors.

Rapid Technological Innovation:China has achieved big strides and made leaps in many areas of modern technology and innovation, mobile payments started it all. But you’ve also got unmanned facilities and chip technology along with artificial intelligence to name only a few examples. Discussion: With opportunity for collaboration with local research institutions, universities and tech talents, next to the leading tech companies in China, you can see from a better vantage point future technological trends in what is still largely considered the “Home of Technology”.

Geographical Location and Infrastructure: As a country in Asia, China possesses geographic advantages naturally. Add in well-established infrastructure and advanced transportation facilities and it allows all kinds of business exchanges with several countries, as well as direct access to global markets.

Having gone through the pros and cons of setting up a company in mainland China, do you intend to channel your efforts into company registration in China? Contact FastLane Group for free consultation on how to start a business in China.

How Taiwan Company Incorporation in China

Are you prepared to take a step into the deep water with a Chinese company? Are there any restrictions in relation to establishing companies by Taiwanese people on the mainland? Should one not go ahead with registration first? How does the process unfold? Let’s delve into this

10 Steps for Taiwan Company Incorporation in China

As there are some business establishment regulations and customs in mainland China with which you may not be familiar, it is often necessary to seek help from a professional agency. Taiwanese people can complete the 10 steps for opening a company in mainland China. In addition, several procedures are similar to Taiwan’s business registration as far as the Wholly Foreign- Owned Enterprise (WFOE) we previously discussed.

StepsEstimate Duration
1Preliminary Name Check5 days
2Application/Registration Form Submission3 days
3Certificate of Approval Processing5 days
4Business License Application5 days
5Seal Engraving (Official Seal, Financial Seal, Legal Representative Seal)1 days
6Foreign Exchange Registration1 days
7Basic Account Opening Permit5 days
8Online Banking, Capital Account Opening5 days
9National and Local Tax Registration5 days
10Customs Immigration Registration5 days

The overall duration, from initiation to establishment is normally 2 to 4 months. But it varies with the organizational structure and scale of the company involved. However, because China doesn’t recognize such international trademarks, we suggest that you reapply for trademark registration in mainland China to protect your own rights while doing so.

As for the frequently asked question ‘How can Taiwanese people get a permit to open up companies in mainland China?’, under previously-used rules, permits meant company business licenses, national and local tax registration certificates, and organizational institution codes. Since 2015, these three certificates have been replaced by one business license. In the future, when setting up a company in mainland China one need only obtain one license. If enterprise certification is required, showing the business license satisfies this. The process and units for Taiwanese persons setting up companies in mainland China may do so following the above mentioned procedure.

The fact is that even if the company is referred to in English as something like a “sole proprietorship” limited company, Chinese law says that besides one legal representative, there must also be at least one supervisor. For the company to exist, there must be two people, which is slightly different from the real meaning of a single one-person company in Taiwan. During the application process, attention must be carefully paid to this.

Documents required for Taiwanese individuals setting up companies in mainland China

  • Registered Name for the Mainland Company: It should include the region, company name, and industry suffix.
  • Registration Information of the Investing Company: Needs authentication by the resident embassy.
  • Registered Address for the Chinese Company: Valid lease agreement should be provided.
  • Basic Personnel Composition of the Company: Includes 1 legal representative/company head and 1 supervisor, both of whom should possess Taiwanese identification documents.
  • Total Investment and Registered Capital.
  • Business Scope and Operating Duration.
  • Bank Credit Certification.
  • Chinese Mobile Number Authentication: Required for company registration and bank account opening processes.

For certain industries like cosmetics, food, and medical devices, additional documents and separate inspection procedures may be necessary. Formal business operations may commence only after acquiring the necessary permits for these industries.

Taxation and annual compliance

Taxation

The tax laws of China are thus more complex than those in Taiwan. In addition to the Corporate Income Tax, there are all manner of different kinds of taxes depending on how they do business. The tax liability varies for different business activities. Besides, attention must be given to the personal income tax burden for local resident employees. To prevent legal repercussions, it is essential to manage these numerous aspects of taxation.

Annual Compliance

Governmental departments such as the Administration for Industry and Commerce also carry out an annual inspection to determine if companies are meeting all legal requirements and whether they possess valid operational permits. The inspection includes:

  • Registered Capital: Checking if the investment aligns with the stipulations in the company’s charter and application.
  • Business Scope: Ensuring the current business operations comply with permitted areas.
  • Company Scale: Verifying if the number of employees aligns with the registered conditions.
  • Registration Status: Confirming if any changes have occurred in the registered status during operations.
  • Financial Status: Reviewing profitability, tax payment, and adherence to policies and regulations on foreign exchange usage.

If you find this information overwhelming or need more clarity on registering a company in China or understanding the related costs, don’t hesitate to reach out to us at FastLane Group. Schedule a free consultation on how to start a business in China.