Subsidiaries in China or Foreign Invested Enterprise (FIEs) as they are known, are preferred business forms by foreign investors who want a flexible and independent structure, with 100% ownership of the share capital by the parent company. Knowing the requirements for establishing a subsidiary in China and the attributes of the Chinese market will lead to a proper implementation of a subsidiary. In this matter, our company formation agents in China can offer information and in depth-assistance. If you want to open a company in China please talk to our advisors at any time.
|Applicable legislation (home country/foreign country)||
China Company Law
Best used for
Minimum share capital
|Depending on the selected city for subsidiary|
|Time frame for the incorporation (approx.)||
Around 8 months
|Legal representative required||
|Local bank account||
|Independence from the parent company||Yes|
|Liability of the parent company||No, the subsidiary is fully liable|
|Corporate tax rate||25%|
|Possibility of hiring local staff||Yes|
Table of Contents
The features of a subsidiary in China
From the beginning, we mention that subsidiaries in China may act in accordance with the rules and regulations of the parent company but it can operate on the Chinese market under a different name. Likewise, if the subsidiary in China has its share capital 100% owned by the parent company, then the control of the financial operations and of the activities are on behalf of the foreign enterprise. To directly do business in China’s performant sectors under a legal entity like the subsidiary, a business license is mandatory. The owner of a subsidiary in China has legal powers to appoint the board of directors and impose their liabilities. We mention that subsidiaries in China are subject to long-term business objectives, which is why it is a preferred and a trustworthy form of business in this country.
As for the company registration of a subsidiary in China in 2022, one must confirm the documents and the information about the parent enterprise, the share capital and the purposes of such an entity. We remind that foreign investors can benefit from the company formation services offered by our team of specialists in company incorporation in China.
How can subsidiaries be registered in China in 2022?
Subsidiaries in China are also known as Foreign Invested Enterprises or FIE which can be registered by at least one foreign investor. The incorporation procedure is the same as for WFOEs in China, in respect to the Companies Act. It is good to know that there are certain sectors in which subsidiaries are not allowed to activate, such as telecommunications. In this matter, a joint venture is recommended, meaning that a company can be established by a local and a foreign investor. If you would like to know information about the tax structure in China and about the VAT registration, feel free to talk to our consultants.
Opening a subsidiary in China in 2022 requires complete attention and guidance. In this matter, you can rely on the support and assistance offered by one of our specialists in company formation in China.
How are subsidiaries controlled in China?
Subsidiaries in China are managed by a board of directors which is established at the time of company incorporation. This is also available for subsidiaries set up by only one stockholder. In addition to the management linked to the board of directors of a subsidiary in China, several measures between the parent company and the subsidiary in China can be set up for a better control of operations in the country. It is good to know that subsidiaries in China can create internal documents which can contain information about the liabilities of the managers and the owners and complete details about how such entity can be controlled.
Here is a video that explains the rules and regulations of setting up a subsidiary in China:
What are the benefits of subsidiaries in China?
Starting a business in China in 2022 is subject to an easy incorporation, particularly if you are interested in a WFOE in China or a subsidiary. The latter one is subject to several advantages an entrepreneur takes into consideration before setting up a company in China, such as:
- subsidiaries can perform the activities through WFOEs in China;
- you can rely on the local skilled workforce, there are tax benefits, and it has a flexible structure;
- they can act independently on the Chinese market compared to branches;
- the Intellectual Property Rights are protected by the authorities in China;
- the business licenses can be easily obtained (ask our advisors for support in this sense).
Frequently Asked Questions
Our company formation specialists in China often receive questions about how to set up a company in this country, and more precisely a subsidiary. We have prepared some of these questions, to which you will find the right answers for the dilemmas you might have. In addition, you will be able to get an idea of this type of structure before contacting our team of local agents.
1. Who can open a subsidiary in China?
Foreign entrepreneurs who want to grow their business in China can consider setting up a subsidiary. This structure is suitable for medium and medium companies abroad. We emphasize that registering a subsidiary in China is a fairly simple process.
2. Can the subsidiary have a different name from the parent company?
Of course, according to Company Law in China, subsidiaries may operate under a different name than a company originating in a foreign country. Our local agents can provide you with more information in this direction.
3. Do you need a business license to open a subsidiary in China?
Yes, according to foreign investment laws in China, a company can only operate on the market if it obtains the necessary license for future operations. Assistance in submitting the necessary license documents can be provided by our team of agents.
4. How is the subsidiary known in China?
The subsidiary in China is also called Foreign Invested Enterprise (FIE) and is the structure preferred by international investors, due to the advantages offered.
5. Can the subsidiary be wholly owned by a foreign entrepreneur?
Of course, 100% ownership is the main advantage for subsidiaries in China. This means that entrepreneurs benefit from a flexible structure, but also complete control for the activities and direction of the respective subsidiary.
6. Can a subsidiary have other activities than those of the parent company?
Yes, this option is valid for Chinese subsidiaries and is a major advantage for this type of business structure. Do not forget to take into account the necessary licenses and permits before starting the operations.
7. How fast can a subsidiary be registered in China?
The process of registering a subsidiary in China is quite simple and fast if all the documents are in order and are accepted by the relevant institutions. We remind you that our team of local agents can offer you all the support in this endeavor, so do not hesitate to get in touch with us.
8. How are subsidiaries taxed in China?
Corporate tax between 10% and 25% is applied to Chinese subsidiaries. More information about the tax system in China can be given to you by our experts.
9. Is a VAT registration required for a subsidiary in China?
Yes, subsidiaries in China must be registered for VAT in this country. We remind you that the standard VAT in China is 13% for all taxpayers. Lower VAT rates are imposed under certain conditions.
10. What is the best structure to open a branch in China?
WFOE or Wholly Foreign-Owned Enterprise is the right structure for setting up companies in China, including subsidiaries. The formalities are quite simple and can be managed by our specialists in this field. As soon as you contact us, we will take care of the registration of your business.
Why invest in China
China is one of the world’s strongest economies and an extremely important financial center, especially for foreign investors. With a dynamic and stable economy, affordable business costs, and an experienced workforce, China is among the favorites of international players looking for business development and substantial profits.
Free trade zones are available in China, and there are already hundreds of foreign companies that benefit from an advantageous taxation system, but also from a stable and well-developed business climate. There are many reasons why China is in the attention of overseas investors, and the following statistics highlight other interesting aspects:
- The total FDI for China in 2019 was about USD 1.770 billion.
- In 2020, the service sector attracted the most of the investments, accounting for 70% of the total.
- According to the 2020 Doing Business report, China ranked 31st out of 190 world economies in terms of business conditions.
- 2020 is also the year in which China was declared the second largest beneficiary of foreign investments, immediately after the United States.
Long-term business strategies are related to subsidiaries in China which is why such entity is accepted and established by many foreign entrepreneurs. You may contact our team of advisors if you are interested in setting up a company in China and particularly a subsidiary in 2022.