WFOE in China

WHAT IS A WFOE IN CHINA

A Wholly Foreign-Owned Enterprise (WFOE), sometimes spelled WOFE, in China is a Limited Liability Company (LLC) which is established exclusively by the foreign investor’s capital (“wholly foreign-owned”). Our free WFOE white paper explains what a WFOE is and details the requirements and procedures for setting up a WFOE in China.

HOW THE WFOE ENTITY ORIGINATED

In the early days, the concept of WFOE was established with the aim of boosting manufacturing and exporting activities in China and there existed entry barriers for service-related companies. However, once China officially became a part of World Trade Organization in November 2001, tariffs on agreed products were reduced and market access was granted to foreign investments in many industries of which technology and service industry were the most dominant one. As of recent years, for most foreign investors in China a WFOE has become the preferred entry mode to access the Chinese market.

HOW MUCH DOES IT COST TO OPEN A WFOE IN CHINA?

The cost of setting up a WFOE typically varies depending on the type of WFOE you intend to setup, as well as any extra requirements the type of business activity may require, such as extra licenses, permits etc. The are 2 main costs involved in setting up a WFOE, namely:

1. Setup costs – which differs only according to the type of WFOE you setup and not according to the size or scope.
2. Registered capital – WFOE’s are not required to allocate a set amount of registered capital, but they should allocate an appropriate amount as it is a requirement for businesses to operate in China.

HOW DO I SETUP A WFOE IN CHINA?

When thinking of setting up a WFOE in China, the intending parties must pay mind to the requirements and process that must be followed. While in theory, the process of setting up a WFOE is straightforward, there are various practical aspects that can make it challenging and cause unanticipated delays.

When setting up a WFOE, the applicant needs to ensure that they have all the correct documentation (Articles of Association, Business Scope etc.) and they follow the relevant process of the region in which the application is being made.

ADVANTAGES OF A WFOE

• One of the most important advantages of a WFOE is that a foreign investor could maintain complete ownership over the entity.
• Foreign investors do not have to partner with local entities, so they have full control and decision-making power.
• WFOE’s can employ both foreign and Chinese employees.

The establishment of a Wholly Foreign-Owned Enterprise is subject to various laws and regulations in China, even some businesses in certain industries are still prohibited to set up their WFOE in China. To provide a better understanding on what is possible and what is required, we have prepared an extensive WFOE white paper to address the most important topics and considerations to take in mind when setting up a WFOE in China.​

Please send your request in the contact form on the right to receive our white paper and to learn more about how to setup your WFOE in China.