Category Archive Blog Entry

What You Need to Know: China Visa Requirements

Chinese has become home for many Western expatriates who desire work outside their home countries. The Chinese government’s visa application process has been greatly simplified in recent years, but is still rather complicated. Anyone looking to acquire a Chinese work visa should keep in mind some crucial tidbits of information that will be crucial in deciding the status of your work permit.

There are three different kinds of work visas one can apply for:

  • M Visa: Issued to people who are not employed nor paid by a Chinese firm. Typically for brief business trips that total lest that 6 months per year
  • Z Visa: Granted to foreigners who are employed in China and spent for that 6 months out of the year in China.
  • R Visa: Issued to highly qualified individuals who meet the requirements for a class A visa, as well as their immediate family. However, it is limited to 180-days per entry.

How do you obtain a Work Visa?

The Chinese government has a point system which classifies visas by a certain criteria, which includes one’s expected earnings in China, work experience in one’s respective industry, level of proficiency in the Chinese language, and level of formal education. Applicants deemed to be low-skilled need to score a minimum of 60 points for a class B and 85 points for class A visas, whereas there is no limit on the number of class A visas issued for those considered high-skilled.

Documents You Will Need:

After deciding on which visa is best for you, you will need to provide the following documents:

  • Passport, visa or valid residence permit
  • Job qualification certificate
  • Medical report
  • Employment contract, employment certificate, or government authorization letter
  • Authenticated copy of your educational certificate (or diploma) of your highest academic degree or relevant vocational qualification certificate
  • Certificate that proves you have no criminal conviction

While making a list of the required documents might appear simple and straightforward, the information needed from those documents are more complicated. Here’s what you need to know:

Certificate of No Criminal Conviction

The Certificate of No Criminal Conviction is an essential document for applying to a work visa. This should be obtainable online and will appear differently depending on your country of origin. There are usually a government website where such a document can be requested. If you are in the USA, you should follow the procedure listed in this document or from the US Department of State. The Certificate of No Criminal Conviction will need to be notarized by a public notary or solicitor.

Educational Certificates

To prove your level of education, you will need to have the pertinent documents notarized by a public notary or solicitor. This includes diplomas (from college or high school), degrees, or even TEFL or TESOL certificates if you intend to be an English teacher.

“Legalization”

Once all the needed documents are notarized, you will then need to deliver them to your local Chinese embassy for “legalization,” along with an Application Form of Consular Legalization of the Embassy/Consulate of the People’s Republic of China. Barring rare exceptions, these documents must be submitted in person, not by mail.

How much does it Cost to get a work visa?

The costs of applying for a work visa vary by country of origin. US citizens, for instance, would need to pay USD 140 for a single entry Z visa while it would cost a UK citizen GBP 151. If collecting all the documents, making separate payments, and delivering finalized documents to a Chinese embassy is too difficult, It may be easier and cheaper to pay an agent a flat fee to take care of the whole process for you. 

Getting Started…

The above is a general outline of the process to apply for a China work visa. It is important to understand which visa you are applying for and gather the necessary documents in a timely manner to maximise your chances of a successful application. 

At Incorp China, we can assist you through the entire process, and liaise with necessary parties to collect your documents and submit your application. For more information on our services, please contact us at any time for a free quote

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Profit Repatriation: How to Get Your Money Out of China

As China’s economy continues to grow, it appears to foreign companies as an increasingly attractive place to do business. China is the only major economy to have grown during 2020, a year remembered by many for the coronavirus pandemic and concomitant economic recession. But as foreign businesses invest in the China, a growing number of them are also looking for the most efficient way to bring their profits back home. 

The rules for repatriating funds are different for individuals and companies, regarding both the preconditions one must meet and limits on the amount transferred. Here, we will can compare the regulations for companies and people:

For Companies

There are three methods by which a Wholly Foreign Owned Enterprise (WFOE) can remit its profits across borders: paying dividends, intercompany payments, or granting loans to a related foreign firm.

Repatriation with dividends

Transferring profits through dividend payments can only be done once the follow conditions have been met:

  1. You have paid the corporate income tax of 25%.
  2. The annual audit report has been completed.
  3. Accumulated losses from previous years have been recovered.
  4. All registered income has been included into the WFOE.
  5. 10% of the WFOE’s after-tax profits have been put into a mandatory surplus fund. (This is not necessary if the fund has already reached 50% of registered capital).

Intercompany payments

A WFOE can repatriate money to the parent company by including such funds in intercompany transactions. However, this method is a trade-off: because cash transfers of this nature face fewer preconditions, they may face heightened scrutiny from Chinese officials, necessitating thorough record-keeping on your part.

Loans to related foreign company

A WFOE can also extend loans to a related foreign business. A maximum of 30% of the parent company’s equity can be extended if both companies have an equity sharing relationship, have been established for at least a year, and comply with foreign exchange rules.

For Individuals

Most individuals who have a legitimate employment contract and duly pay their taxes will not find it very troublesome to repatriate their earnings back home. Methods differ slightly depending on the size of the amount being repatriated.

Small amounts

Any amount smaller than RMB 200,000 is allowed to be carried on your person as you leave China, while sums exceeding that figure have to be declared as you transit through customs. If you are leaving on short notice, keep in mind that foreign nationals have a withdraw limit of only US$500 per day.

Large amounts
Those sending larger amounts our of country must supply their bank with their employment contract, valid identification, payslips, work permit, and tax payment documents (including Tax Identification Number).

Once all necessary documents are received, the bank will make an application to China’s State Administration of Foreign Exchange (SAFE), which exercises strict control on money entering and exiting the country. Once the application is accepted, the predetermined sum of money can be transferred to a foreign account of your choice. This can be done by the bank itself or a wiring service, such as Western Union.

Choosing the right method for you

All methods of profit repatriation in China are fluid and frequently changing.  They are different from province to province, city to city, and sometimes even vary between local district within the same city. To find the best plan for you, it would be best for us to provide a complimentary consult to clearly understand your needs.

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WeChat: What is it and Why is it so Popular in China?

WeChat. It allows Chinese people to make payments, install other apps, and even write micro-blogs. Despite its popularity in the Chinese mainland, it is not often used in other countries for privacy issues. However, let’s get started with the fundamental question:

What is WeChat?

WeChat (微信) is a Chinese multi-purpose app developed by Tencent. First released in 2011, it has become the most popular app in China due to its numerous functions, despite it initially only sending instant messages. Why did WeChat grow so rapidly in popularity? The answer is simple: as an all-inclusive app which has no competition in mainland China, WeChat is the dream of every developer. WeChat’s ubiquity in Chinese society makes it a necessity for anyone even visiting for a short time, so make sure to download the app once you’re in China, otherwise you might not even be able to pay a taxi driver.

WeChat data statistics and insights - most popular app in China - 2019

Figure 1 Share of mobile users using the leading social media platforms in China as of October 2019

The poll above shows that in 2019, 73.7% of Chinese netizens frequently used WeChat, a percentage that can only have since increased, especially since the outbreak of the coronavirus pandemic has make virtual transactions so necessary. Furthermore, in addition to being sponsored by the Chinese government, China’s youth tend to use WeChat to buy music online. Some may think that there is no need for WeChat because other apps could take its place.
But remember to keep in mind the “Great Firewall”, that blocks Facebook, Google, Twitter and WhatsApp. As the versatility of WeChat grew, the need for other social media apps dropped. Instead of a messaging app like WhatsApp, the Chinese netizens have opted for WeChat; instead of Google Pay, they have opted for WeChat pay, and so on. That’s why and how the app developed by Tencent has become an all-inclusive dominant super-app for the Chinese users.

How safe is WeChat?

Unfortunately, this question has no easy answer. According to Tencent, the company does not track or store users’ data, as long as the Chinese authorities do not solicit such information.  For foreign and Chinese users, the situation might be different: “Overseas Users” are not obliged to follow the strict regulations applied to Chinese users. For example, a Chinese user can not receive a message containing sensitive words such as “Free Tibet”; in other words, the app monitors the messages and censors some keywords which might be perceived as threatening by the political regime. Therefore, foreigners can talk to each other about sensitive topics, such as the 1989 Tiananmen Square massacre, but the same messages can not be received by Chinese netizens.

How Safe is a WeChat account?

In order to get a WeChat account, one only has to register and join the app with a username and a password, thus your account is safe as long as you choose an effective password and you frequently change it. The management of data is a little bit more troublesome: all conversation history is stored locally on your device, which implies that if you change your phone you will have to manually transfer the data to your new device. But why is this troublesome? WeChat doesn’t provide users with end-to-end encryption but with transport encryption. The end-to-end encryption is widely used by western messaging apps and it allows only the sender and the receiver to see the message; whereas the messages sent with transport encryption might be read by third parties. Even though Tencent claimed that all messages, once delivered, are deleted on the server, they still are on your mobile. According to Chinese law, apps, blogs and online forums are accountable for the content of their website which includes what users have written, so were the government to ask, WeChat would hand them your data.

Is WeChat Pay safe?

Users’ credit or debit card  information is stored in a secure server. However, WeChat Pay works only in mainland China and few other countries. WeChat pay is the most popular payment method in China and it requires you to link a source of credit or (just for users with a Chinese bank account) debit card. You can send red envelope (hongbao), transfer money and pay for your groceries with WeChat Pay—no surprise that the app has come to be the emblem of China’s cashless society.

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How To Open a Bank Account in China

Planning to operate a wholly foreign-owned enterprise business in China, whether it be a small business, a global company, or even a Fortune 500 company, can be fairly effortful. It is essential to take all the precautions needed to for your business to be successfully established. Once you acquire a business license, there are more steps to be taken further, such as, opening a bank account in China, to assist your business affairs. Although this step is necessary and can sound simple, opening an account in China can be challenging, especially recently, as the regulations became more stringent.

As of April 2020, the People’s Bank of China (PBOC) have made it obligatory to follow high level of analysis during the Know Your Customer (KYC) process. Because of this, the PBOC have ordered that all banks not only to oversee business activities, including financial transactions, but also to induct a few other conditions such as investigating your other bank accounts in addition to dormant accounts, seek capital transitions, examine times of transactions as well as suspicious or abnormal activities, restrict pay outs and limit online banking transactions.

In order to open a bank account in China, one must acquire a few essential documents including:

  • Ownership certificate (lease contract or site certificate) 
  • Proof of utility or rent transfer voucher for the past month (must resonate with lease contract)
  • Original copy of company business license (official seal, financial seal, private seal of legal person) 
  • Original copy of ID card and company associated documents of the legal person

As the process of opening a bank in China can be lengthy and challenging, China banks advise that a legal representative is present in China through the process. Due to the travel bans, banks in China have made an exception in video applications, if all is well the bank will then approve of the proposed bank account. Aside from all of these processes, the person representing the company applying for the account will have to visit the bank with additional documents. The bank will then call and confirm the opening of the account. 

Additionally, various Chinese commercial banks are trying their best to aid new clients with alternate solutions such as organizing a virtual interview (with notarized documents from the Chinese Consulate or Embassy) to make the process more manageable. 

The challenges involved in setting up a WOFE can be interminable and demanding, feel free to reach out to us for a consultation!

+1 561 729 6508 | [email protected]

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robert fisch at the asia business conference

Asia Business Conference Speaking Opportunity

Recently, I was fortunate enough to be invited by The University of Michigan to join their discussion panel for their Asia Business Conference event. It was truly a wonderful experience being able to speak about the power of e-commerce and mobile technology in China.

I would like to thank everyone at the conference as well as fellow speakers Peter Sim, Lee Boyd, and Mon-Han (Hans) Chung, CFA for making the event as memorable and inspirational as it was. I also would like to extend my gratitude to Tiffany Chen, Alex Guo, and Yechunhe (Sylvia) Zhou for hosting the conference. It was wonderful to hear other professionals discuss their experiences in China’s ever-growing market.

I’m happy that I was able to take my experience in consultancy and economics running Incorp China and apply that directly to China’s ever-changing markets. Being able to share my experiences with future business professionals and witnessing them learn and grow is something that is inspiring to watch. I hope everyone at the conference walked away as motivated and with as much new knowledge gained as I did, and wish you all the best in your future careers.

robert fisch at the asia business conference

ICP Licensing: How to Start Your Chinese Business off Strong

Promising untapped markets are emerging all over China. As companies race to break into the new business climate, ICP Licensing is in growing demand. With rules and regulations constantly changing, and an overwhelming amount of Chinese paperwork, the registration process can get confusing. Nevertheless, completing this step is a fundamental part of your successful game plan, and we’re here to help.

In this article, we’ve created an all-you-need-to-know-guide on how to properly establish a competitive web presence in any mainland region.

Beware: This is a fragile and crucial part of your company’s success. The process is not to be taken lightly, although there are certain service providers out there who treat it so in order to make a quick buck or yuan. Pay attention to the points provided and we will teach you how to do it right.

First things first:

As in all Chinese business, cultivating strong relationships is step one. Registering your license involves proving to the government that your intentions are pure, that your site is worthy of hosting, and that you can operate within the boundaries of Chinese law.

No book or website can fully prepare you for this process. Sure you can google a nice flowchart, but the business culture in the east is rooted in a social system more delicate than any western country.

Certain steps absolutely require a Chinese contact. For example, certain user registrations require an input on SMS verification codes which only send to China-based numbers. Furthermore, not all registration sites accept international payment methods.

As your documents are filled out and translated from region to region, a trusted cultural insider will quickly become your most valuable research tool.

See why Incorp China is the right relationship for you here.

Now, let’s get specific…

What is an ICP License?

An ICP (Internet Content Provider) License is a permit, applicable to legally registered companies, issued by the MIIT (Chinese Ministry of Industry and Information Technology) that permits websites to operate in China. It is a key piece in your site going live, one between purchasing a hosting and creating your domain.

Does every business need an ICP License?

If your goal is to launch a website using a server hosted in China or on a Chinese content delivery network, an ICP License is mandatory.

However, say you are a US company hosting your website in America. The Chinese consumer is merely a fraction of your target market. Is it possible for your website to function, for Chinese consumers to view your content without an ICP License?

The answer is yes, but anticipate firewall blockage and don’t expect a fast-loading website.

Note: In Hong Kong, thanks to a more western style set of laws, entering the online playing field can be a smoother process.

Learn more about the benefits of opening your company in Hong Kong here.

Which ICP License is right for my business?

There are two types:

1. Commercial License

A commercial license is for companies offering goods or services to customers chiefly online. Its parameters are strict and swift:

• Commercial ICPs are almost never issued to companies with any foreign investment.
• Therefore, you must be a completely Chinese-owned business.

2. Bei An (Filing) License

The ICP Bei An license is the standard license, available to foreign-owned entities: Representative Offices (RO), Joint Ventures (JV), or Wholly Foreign Owned Enterprises (WOFE). All mainland China hosted sites must obtain one before they begin any business online.

Given that our company assists non-Chinese businesses in entering the market, this is the license we will focus on.

How do I get an ICP Bei An License:

Within the category of Bei An licenses, there are two ways to go:

A. Proxy Process

This is the only option for companies that do not have a physical entity present in the country. It allows you to nominate a locally-registered Chinese company to hold the domain for you as a proxy.

With this plan, you take on additional risk. Because you are linked with entities other than your own, if the proxy becomes blocked for any reason, it’s game over for everyone with no way back in.

B. Direct Process

This plan ensures the highest possible control over your site. The process is slightly longer, but ultimately worth it for companies serious about their Chinese presence.

When a client needs this license, here’s what happens in flow chat form followed by a more clear explanation:

Chinese ICp licensing process, ICP License,

• We translate and submit the required documents to your web provider
– In review, additional documents may be required
– When approved, your provider sends the documents to MIIT

• MIIT reviews your ICP license application documents
– When approved, we will be notified via our Chinese phone number
– Within twenty days, you will have received a registration number

• We apply for a PSB (Public Security Bureau) ICP Filing
– We have thirty days to apply after receiving the number
– Once again, the documents must be submitted in Chinese

• We submit the documents to start accessing China-based web services
– With the license, you can now purchase hosting and CDN services
– Finally, you are able to register for a .cn domain

Note: Failure to keep the information you submitted to MIIT up-to-date can result in fines or complete cancellation of your ICP license.

Once your site is up and running, the license numbers will be displayed in the website footer.  Check out this example:

ICP Licensing footnote example picture Michael Korswww.michaelkors.cn

At this point, local competition knows you are serious about your sales and ready to compete. Your fast-loading website will keep customers around and partners engaged, and all the paperwork will be worth it.

Ready to get started? Call now for a consultation with an IncorpChina team member, and establish your most important relationship in China success. +1 561 729 6508 | [email protected]

#icplicensing #businessinchina #chinesemarket

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Be Prepared: Five Important First Steps for Setting up your Business in China

Compared to the fast-paced explicit processes which dominate Western business, starting a company in China can be a headache.  Combine extensive legal work with a social system opposite of your own and even the most experienced businessmen and women are in for a challenge. 

However, establishing a presence in China continues to be a profitable move for entities in every business sector. With endless resources at your disposal, how to begin gets confusing.  We’ve stripped away all the particulars and provided you with a basic idea.

The following list highlights five steps that your business needs to properly complete before beginning operations in China.

Think about how your business will fit into each section and most importantly, think of the relationships you can and will establish along the way. To succeed, you need sturdy connections to lean on during every step. Finally, be patient. Remember everything takes time in Chinese business culture.

 

1. Research, research, research

Begin by investigating the industry and areas you are interested in. Government officials publish a five-year plan stating the specific kinds of businesses they are looking for. Make sure to use it.

When you have an idea of the best place for your business, take a trip. Don’t stay in one place; compare other regions. Start making observations. Attend trade shows. Network.

2. Decide which entity is best for you

There are three kinds of business entities you can register for. Consider your particular business scope and decide which entity will supply you with the most opportunity and least amount of risk. The three potential business entities are:

i. Representative Office (RO)
– significantly limits what your company can do
– easiest to open

ii. Joint Venture (JV)
– your Chinese partner will have a home field advantage
– JVs create greater risk should the partnership fail
– only entity in which a “restricted” business can operate
– less limitation

iii. Wholly Owned Foreign Enterprise (WOFE)
– allows foreign entrepreneurs to own 100% of the company
– requires an extensive set-up process with registered capital
– can operate as trading and retail companies

3. Develop a five-year business plan

Be precise but be broad. Once your business plan has been finalized, you are only able to operate within its guidelines.

Note: Protecting your intellectual property is important. If you plan to trademark your company or product, act early and do so in both Chinese and English.

4. Apply for approval with your local authority

Necessary documents can vary depending on where and with who you are doing business. Be sure to comply with the regulations specific to your location. The documents must be converted to Chinese by a reliable translation company. Applications can take up to 90 days to be approved.

5. Find a bank

Once you have approval, you have 30 days to register with the Chinese Administration for Industry and Commerce (AIC) and apply for a business license. Once you have the license, you will be able to open a Chinese bank account.

 

Know more: Authenticating your US documents to be used in China

With these five steps complete, you have solidified a foundation.  Now it is time to focus on the particulars.  Exactly which way to go next will depend on your specific business plan.  Again, this can get confusing; but Incorp China is here to help.  Whether your next step is filing a trademark, registering for an ICP License, or finding a general manager and employees you can trust, we know how to get it done right.

 

“The time is now. Be part of the process as China becomes tomorrow’s economic powerhouse.”

Ready to expand your business and break into China’s upcoming markets? Call now for a consultation with an IncorpChina team member, and establish your most important relationship in China success.

+1 561 729 6508 | [email protected]

 

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business registration in china

The Transformational Trend: Why China is the place to be and how to start your business there

Why bring your business to China?

The future of China’s economy has never looked this bright. With a thriving middle class, a new wide-spread consumerist approach to spending, and increasing liberalization, China is now home to a wide variety of promising untapped markets.

Since the late 1980s and 1990s, China’s economy has been executing significant reform to the state-owned industry. Upon the passage of The Company Law in 1993, limited liability companies were approved, and firms were able to retain a share of their profits. As a result, private ownership increased rapidly. By 2005 it accounted for about 70% of China’s gross domestic product.

Among reforms, China established an unprecedented manufacturing presence as a result of highly competitive pricing and sheer production power. After dominating our global economy as the world’s largest exporter of goods since 2009, China’s focus now shifts from expansion to stability, that is back to service and consumption.

Amidst all this economic activity, China’s middle class has boomed. With a current urban population of around 800 million people, that is only going to grow, 54% percent are expected to be the upper-middle class by 2022.
Take a look:

China’s Middle Class as Percent of Urban Households, doing business in china

At this point, the economy’s growth has slowed. However, China is still ahead of their goal to double GDP between 2010 and 2020 and more industries are open to investment than ever before.
See below China’s GDP yearly growth since 2008 and China’s GDP annual growth rate over the last four years, respectively:

 

 

 

 

 

Even with a declining growth rate, China’s economy is still expanding at a rate three times higher than that of the US.

This is merely the start of China’s rebalancing. Economic prosperity is spreading as wages rise and workers demand better treatment. Furthermore, the quality of life is improving thanks to upgrades in transportation, health standards, and a wealth of technological advancements.

Increased opportunity and success is leading to higher disposable incomes and ideal target markets as the new Chinese consumer emerges, ready to spend. See below China’s consumer spending trend over the last ten years:

 

 

What is driving the Chinese consumer? Markets dealing with luxury items and services are bursting with opportunity and demand.

Interest continues to increase in:
• technological products
• luxury brands
• cosmetics
• nutritional care
• trendy foods
• high-quality goods
• entertainment
• travel

Get specific: See why Hong Kong is a great place to start

“The time is now. Be part of the process as China becomes tomorrow’s economic powerhouse.”
Ready to expand your business and break into China’s upcoming markets? Call now for a consultation with an IncorpChina team member, and establish your most important relationship in China success. +1 561 729 6508 | [email protected]
#chinesebusiness #chineseculture #whychina #chineseindustry #RO #JV #WOFE #chineseeconomy #GDP #thenewconsumer #culturaldifferences #chinesemarket #economictrends #AIC

10 steps to authenticate your U.S. documents to be used in China

This might be something you have not given a whole lot of thought in the past. However, Chinese authentication of US documents is required with almost every application process you will encounter on the road of opening your own China business entity. Registration of an entity in China requires documentation preparation in the US and China. We will help you with documentation preparation in both the US and China saving you time and money. Having your American documents authenticated by the Chinese Consulate means they have passed the official screening to be used in China.

Failing to prepare your foreign documents may result in the delay or refusal of your applications. Here’s a guide on how you can complete this initial process in ten steps:

1. Identify documents

At first, you will need to select the documents that need legalization and clarify who is the legal representative/applicant for the company.

2. Notarization

There are some instances in which the US documents need to be notarized. In this case, we have a specialized legal services providers network to help you in completing this step easily.

3. Fill out document authentication form

Your legal representative/applicant (as defined in step one) now has to fill out and sign the Chinese application for document authentication. Because forms may vary, depending on in which state you want to apply for US document authentication, visit the respective state’s Chinese consulate website to find the correct form.

For the New York China consulate, e.g. you can find the document here: http://newyork.china-consulate.org/chn/fwzc/cgbg/P020171201186551196801.pdf

(Leave section 1 and 7 blank. Have legal representative/applicant sign twice in section 8 (top and bottom). We fill out section 7 and sign as the agent in section 8.)

4. Compile supporting documents

The next step is to obtain a copy of the following supporting documents:

  • The legal representative’s/applicant’s passport
  • Company’s certificate of existence and good standing
  • Articles of incorporation

5. Submit the documents

Submit the documents that need to be legalized by the State Department or Secretary of State to be certified. Some states require to authenticate the documents through the county’s clerk office before submitting them to the State Department or Secretary of State, so be sure to check.

6. Keep a record

Once the documents are certified by the State Department (and possibly the county clerk’s office) make a photocopy of them for your own records as well as the next step.

7. Submit the docs to the Consulate

Go to the Chinese consulate or embassy and submit the originals as well as the photocopies of the certified documents along with the application for the authentication and supporting documents.

8. Get a receipt

The consulate will issue a receipt with the total owed and the pick-up date for your documents.

9. Collect your authenticated documents

Return on the pick-up date with the receipt, pay the amount owed and process to then collect your authenticated documents.

10. Verify that all the documents have been authenticated

Once you’ve completed all the steps above, verify that all your documents have been authenticated. In case we have completed this process for you, we would then ship the authenticated documents back to you, our client, or wherever you want them shipped.

 

If you have any questions or would like to get a free consultation from us, simply email [email protected] or call +1 (561) 729 6508.

Like what you read?

Continue with 7 Benefits of Opening Up a Company in Hong Kong:

 

hong kong, incorpchina

7 benefits from opening up a company in Hong Kong




Besides being a prestigious business address, Hong Kong has a variety of benefits to offer for those who are looking to or already own a company in China. Ranging from financial over legislative to cultural reasons. Below are your top 7 benefits from opening up a company in Hong Kong together with a WOFE in Mainland China.

 

  1. Tax benefits

While you are expecting to pay 25% income tax on your profits in China, with a Hong Kong company under your name you are able to send said funds across the border for a 5% transfer fee. This method can save you a considerable amount of money, especially considering that funds can be transferred between China and Hong Kong companies without currency controls. What that means is, when sending money from China abroad, usually, there are extremely high fees in place as well as a maximum amount of money that can leave the country per person or company per year.

Additionally, Hong Kong operates under a territorial tax regime. This means that there is a zero percent tax rate on money that is not earned in Hong Kong. Profits earned in Hong Kong are subject to a 16.5% tax. On the other hand, startups are eligible for VAT tax refunds. Either way, income tax in Hong Kong is significantly less than on the mainland. The exact tax break will always depend on the industry of your company as well as the location of your WOFE. In the QianHai zone in Shenzhen, for example, companies are given a particularly generous tax break.
To find out about this in more detail, contact Incorp China to get first-hand tax advise from local accounting and tax experts.

 

  1. Free economy and trade

Imports from abroad to Hong Kong are significantly easier to arrange and cheaper than transporting goods straight into Mainland China. Under CEPA, an agreement between Hong Kong and China with the aim to encourage trade, Hong Kong goods can even be imported into China under zero tariffs, as long as said goods and your company complies with CEPA rules. (http://www.hktdc.com/resources/MI/Article/cepa1/2009/06/274914/1244104141867_cepapdf.pdf) If you are planning on regularly moving cargo across Chinese borders, Incorp China would strongly advise talking to us about setting up an entity in Hong Kong.

 

  1. Intellectual property

Other than in Mainland China, Hong Kong takes into consideration the prior use of intellectual property when filing for trademarks, patents, copyrights, etc. China, on the other hand, operates under the first-to-file principle. If you are interested in finding out about the Chinese trademark system in more detail, please read more about it here.

 

  1. Familiar and regulated legal system

Whether tax law, intellectual property registration and enforcement, an open economy or the general bureaucratic processes, Hong Kong offers a much more Western mindset when it comes to legal systems and business culture. Familiar documents, consistent bureaucratic procedures and English speaking government officials can offer a smoother entrance into the Asian business world, not just for inexperienced businessmen. Bureaucratic processes can furthermore be executed more rapidly in Hong Kong than they would in China. For example, changing the structure of your company by reallocating shares would take about two months in China, whereas such an action would only require about a week in Hong Kong.

 

  1. Hong Kong as an international node

The proximity to the mainland and its open, capitalist mindset make Hong Kong the perfect connecting point between East and West. Strong economic ties with the ASEAN countries as well as a trustworthy environment for Western investors make Hong Kong a fertile ground for businesses from all around the world. The combined understanding of both the Western and Eastern business and cultural mentality will prove to be beneficial in more ways than you would expect.

 

  1. Relatively hassle-free setup

…especially if you are turning to Incorp China to help you out! We are offering a free initial consultation to help you figure out how to open up a company stress-free.

Hong Kong companies take less time to open in comparison to Chinese enterprises. More importantly, government institutions are considerably more straightforward and consistent regarding their requirements for opening an entity. In Mainland China, rules and regulations can change unexpectedly and abruptly, making it absolutely essential to have a team on the ground that is tirelessly checking up on your application and actively pushing it forward. On top of legislative changes, in China, it is common that institutions like banks or government bureaus will change their mind unexpectedly about a signature or document they require on top of what you were instructed to provide. Don’t let this discourage you as this is a commonly observed phenomenon, especially towards foreigners.

 

  1. Simplified China WOFE setup

Opening a Hong Kong entity makes applying for a Chinese WOFE significantly easier. Hong Kong incorporation documents are filed in English as well as Chinese which speeds up the process of incorporating a company on the Mainland.

 

  1. Limited liability

Setting up a limited liability company (LLC) in Hong Kong can protect you from lawsuits even in Mainland China. Since each shareholder of an LLC can only be held accountable for the capital they have invested and the Hong Kong company is liable for the registered capital in Mainland China, in case of a lawsuit, your personal capital outside of your business would be protected.

 

 

No doubt, a Hong Kong company can be highly beneficial to those planning to open up a company in China and even those who already own one. Nevertheless, if you are unsure or would like to talk to us about your specific situation. Don’t hesitate to contact us by calling us (+1 (561) 729 6508) or sending us an email ([email protected]).

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