Guide to setting up a company in China

Introduction

Setting up a company in China is a significant decision for global investors considering China’s robust economic growth and its position as a key player in the global market. This FAQ manual aims to provide comprehensive guidance on the process of registering a company in China, essential information required for incorporation, and taxation aspects pertinent to businesses operating in the country.

Why Register Your Company in China?

Registering a company in China enables foreign investors to directly manage local staff and conduct business activities within the territory, tapping into one of the world’s largest consumer markets and a vital player in the global trading system.

How to Register a Company in China?

Registering a company in China involves several steps, which can be complex due to language barriers and governmental requirements.

Here’s a simplified guide:

• Choose an Expert: Select a reliable expert to guide you through the registration process.
• Discussion and Planning: Discuss with the expert to determine company structure, key roles, business model, etc.
• Pre-Registration: Complete online pre-registration and obtain government approval for the company name.
• Document Preparation: Prepare required notarisation and certification documents in the shareholders’ country.
• Apply for Business License: Obtain a business license
• Company Seals: Create company seals.
• Bank Account: Open bank accounts.
• Tax Registration: Register the company in the tax system.

Information Required for Incorporation

To incorporate a company in China, prepare the following documents and information:

• Proposed company name
• Investor information
• Management structure of the company in China</
• Nomination of key roles
• Registered capital and total investment amount
• Registered address

Taxation in China

Businesses in China are subject to Value-Added Tax (VAT) and Corporate Income Tax. Here’s an overview:

• VAT: The tax rates vary based on business activities and taxpayer classification.
  • General taxpayer: Rates range from 6% to 13%.
  • Small-scale taxpayer: Generally 3% of income with tax incentives, subject to specific conditions.
• Corporate Income Tax: The standard rate is 25%. SMEs may qualify for preferential rates:
  • Profit < 1 million CNY: 2.5%
  • Profit between 1 million and 3 million CNY: 10%

Tax Calculation Example

For a small-scale taxpayer with a taxable sales amount of 2 million CNY and a net profit of 800K CNY in 2020

• VAT: 20,000 CNY (1% of 2,000,000 CNY)
• Corporate Income Tax: 20,000 CNY (2.5% of 800,000 CNY

Conclusion

Setting up a company in China offers access to a dynamic market, but the process requires careful planning and understanding of regulatory requirements and taxation. Consultation with experts is recommended to navigate through the complexities of registration and compliance.

For expert guidance and assistance in registering your company in China, contact us at ,hello@monx.team