Wholly Foreign-Owned Enterprise (WFOE)
外商独资企业 (Wàishāng Dúzī Qǐyè)
Company formation in China
The WFOE is best suited for: Foreign companies with genuine China market ambitions in permitted sectors, Technology companies qualifying for High-Tech Enterprise (HTE) status and the 15% CT rate, Manufacturers operating in Pilot Free Trade Zones with streamlined registration, Service companies establishing a local entity for Chinese contracts and invoicing, Companies committed to long-term China presence with local management. A WFOE pays corporate income tax (CIT) at a standard rate of 25% on worldwide income. High-Tech Enterprises (HTE) qualifying under MOST (Ministry of Science and Technology) certification pay 15% CIT. Small and micro enterprises (annual taxable income under RMB 3 million, fewer than 300 employees, total assets under RMB 50 million) benefit from a reduced effective rate of approximately 5% on the first RMB 1 million and 10% on the next RMB 2 million. VAT is charged at 13% (goods), 9% (construction, food, agricultural inputs), and 6% (services, intangibles). Withholding tax on dividends to foreign shareholders is 10%, which may be reduced to 5% under the China–Hong Kong or China–Singapore tax treaties. Profit repatriation requires a completed annual audit, CIT filing, and SAFE approval. Transfer pricing rules are stringent — the SAT actively scrutinises related-party transactions.
- Foreign companies with genuine China market ambitions in permitted sectors
- Technology companies qualifying for High-Tech Enterprise (HTE) status and the 15% CT rate
- Manufacturers operating in Pilot Free Trade Zones with streamlined registration
- Service companies establishing a local entity for Chinese contracts and invoicing
- Companies committed to long-term China presence with local management
Key Facts
Step-by-Step Formation Process
Verify business scope against the Negative List
Check the current Foreign Investment Negative List (updated annually) to confirm that your intended business activities are not restricted or prohibited for foreign investors. Restricted sectors require a Joint Venture with a Chinese partner. Prohibited sectors are closed to foreign investment entirely. Engage a Chinese law firm to confirm eligibility.
Reserve a company name with SAMR
Apply to the State Administration for Market Regulation (SAMR) or its local bureau (AIC) for company name pre-approval. The name must include a Chinese name with specified components: administrative region, trade name, industry descriptor, and company form. Name approval can now be done online in many cities.
Prepare and file incorporation documents
Prepare the articles of association, feasibility study (if required), lease agreement for registered address, and appointment letters for the legal representative, directors, and supervisor. File the incorporation application with the local SAMR bureau. The registered address must be a commercial premise — residential addresses are not accepted in most cities.
Obtain the business licence
Upon approval, SAMR issues the Business Licence (营业执照, yíngyè zhízhào) containing the Unified Social Credit Code — the company's unique identification number used for all government, tax, banking, and regulatory interactions. The company now has legal personality.
Carve company chops (seals)
Register and carve the mandatory company chops with the local Public Security Bureau: company chop (公章), financial chop (财务章), legal representative chop (法人章), contract chop (合同章), and invoice chop (发票章). These seals are legally required for contracts, banking, invoicing, and government filings. Guard them carefully — the company chop has the legal weight of a corporate signature.
Open a corporate bank account and register capital
Open a basic RMB bank account (基本户) with a Chinese bank (ICBC, Bank of China, China Merchants Bank, HSBC China). The legal representative must appear in person with the business licence, company chops, and personal identification. Register the initial capital injection with SAFE (State Administration of Foreign Exchange) and convert foreign currency to RMB through the capital account.
Complete tax registration and post-incorporation filings
Register with the local tax bureau for corporate income tax and VAT. Set up the Golden Tax System (金税系统) for issuing official VAT invoices (fapiao). Register with the social insurance bureau and housing fund administration for employee benefits. Apply for any industry-specific licences or permits required by your business scope.
Required Documents
- Articles of association (in Chinese)
- Passport and notarised identification of all shareholders and the legal representative
- Parent company certificate of incorporation (notarised, apostilled, and translated into Chinese)
- Parent company audited financial statements (notarised)
- Board resolution of parent company authorising the China investment
- Lease agreement for registered office address (commercial premises)
- Appointment letters for legal representative, directors, and supervisor
- Bank reference letter from parent company's bank
- Feasibility study or business plan (if required by local SAMR)
Cost Overview
Tax Treatment
A WFOE pays corporate income tax (CIT) at a standard rate of 25% on worldwide income. High-Tech Enterprises (HTE) qualifying under MOST (Ministry of Science and Technology) certification pay 15% CIT. Small and micro enterprises (annual taxable income under RMB 3 million, fewer than 300 employees, total assets under RMB 50 million) benefit from a reduced effective rate of approximately 5% on the first RMB 1 million and 10% on the next RMB 2 million. VAT is charged at 13% (goods), 9% (construction, food, agricultural inputs), and 6% (services, intangibles). Withholding tax on dividends to foreign shareholders is 10%, which may be reduced to 5% under the China–Hong Kong or China–Singapore tax treaties. Profit repatriation requires a completed annual audit, CIT filing, and SAFE approval. Transfer pricing rules are stringent — the SAT actively scrutinises related-party transactions.
Pros & Cons
- Access to the world's second-largest economy with 1.4 billion consumers and a massive domestic market
- High-Tech Enterprise (HTE) status reduces corporate tax from 25% to 15% for qualifying technology companies
- Pilot Free Trade Zones (Shanghai, Shenzhen, Hainan) offer streamlined registration and preferential policies
- 100% foreign ownership is permitted in most sectors under the current Negative List
- Extensive double tax treaty network with 110+ treaties — the largest in Asia
- Strong manufacturing infrastructure, deep supply chains, and competitive labour costs outside tier-1 cities
- Hainan Free Trade Port offers additional incentives including 15% CT for qualifying enterprises and duty-free imports
- Setup process is lengthy and complex — 3–6 months is typical for a fully operational WFOE
- RMB capital controls mean profit repatriation requires proper documentation, regulatory clearance, and can take months
- The Negative List restricts or prohibits foreign investment in significant sectors including media, education, telecoms, and internet services
- All government filings, contracts, and legal proceedings are in Chinese — experienced Chinese legal counsel is mandatory
- Chop (seal) culture means physical security of company chops is critical — loss or misuse can cause severe legal problems
- Regulatory environment changes frequently — policies at national and local levels can shift with limited notice
- Data localisation requirements under the Personal Information Protection Law (PIPL) and Cybersecurity Law add compliance burden
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Get StartedThis content is educational and does not constitute legal or tax advice. Always consult a qualified professional for your specific situation. Data last verified March 2026.