China Legal Incorporations and Tax Registrations – Regional Subtleties Make All the Difference

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Op-Ed Commentary: Chris Devonshire-Ellis

Jul. 31 – One of the issues in dealing with legal establishment and related matters when it comes to investing in China is the sheer size of the country. Covering nearly 9.6 million square kilometers, China is larger than the United States and Brazil by land size, coming third only to Russia and Canada. India, another massive country, would fit into China three times over with room to spare. Add to this massive landmass the world’s largest population at 1.3 billion people, a coastline of some 14,500 kilometers, a shared portion of the world’s tallest mountain, two of its biggest deserts and a border length of 22,147 kilometers touching 14 other countries, and one begins to get a sense of its vast expanse.

Not surprisingly, many subtle differences have developed with regards to the administration of foreign investment laws and taxes depending on the region within China – a point often lost on law firms not operational in the country or those with relatively small practices. The diversity in application procedures when handling foreign investment matters is one of the reasons that our consulting firm, Dezan Shira & Associates, maintains 12 fully-staffed permanent offices in the country and is not content to remain purely in Hong Kong, Beijing and Shanghai.

To illustrate the point, here we provide some of the pre and post incorporation differences that may be encountered when establishing operations as a foreign investor in different parts of the country. Such scenarios require a firm with a national presence, as lack of local knowledge can both seriously delay application procedures, render the new business inoperable, or present post-incorporation problems with the tax bureau and customs registrations.

Examples follow, from which there are literally thousands to quote from – so we have selected just a common few from some of the more popular foreign investment destinations in China.

Shanghai, Jiangsu and Zhejiang


  • When setting up a representative office (RO) in Jiaxing, Zhejiang – once an address is selected, pre-approval is required from the Jiaxing State Security Bureau before the address can be used to register the RO with the Administration of Industry and Commerce. In Shanghai, this step is not needed and the address can be directly used for registration as long as it meets the criteria for FDI registration (e.g. non-residential building, A-grade building, etc.).
  • Ningbo Business License applications have to be filed with the Ningbo Municipality (city level), as the district level government departments do not have the authority to approve company setups. In Shanghai, the application can be filed with the district level authorities, (e.g. Jing’an District).


  • Jiangsu cities (e.g. Nanjing) do not require Statistical Bureau Registration. This is required in Shanghai.
  • Obtaining visas in Suzhou requires a non-criminal record certificate (from either the home country or the home country’s consulate in China). This is not required in Shanghai.

Beijing and Tianjin

Commission of Development and Reform

  • In Beijing, this registration is not required for most wholly foreign-owned enterprise (WFOE) applications, but can be erratically enforced for manufacturing WFOEs.
  • In Tianjin, some districts require the investors to obtain approval from the Commission of Development and Reform prior to registering with the Ministry of Commerce (MOFCOM) – one example being the districts of Beichen and Heping.

Statistic Registration Certificate

  • In Beijing, this registration is required.
  • In Tianjin, this is not always mandatory, such as in Xiqing District, insofar as no Statistic Registration Certificate is issued, but a Statistics Form is required for completion.

Safety Bureau

  • In Beijing, for normal license applications, this registration is not necessary.
  • In Tianjin, WFOEs must file with the local Safety Bureau after the Business License is issued.



  • Notarized lease registration documents are required for all incorporations (including RO establishments).


  • All incorporation for foreign-invested enterprises should be approved by the AIC at the city level.


  • Statistics Registration is mandatory.
  • Customs registration certificates may only be applied for after the issuance of the renewed business license, satisfying the need that the first installment of the registered capital has been injected into the company.



Representative offices

  • All RO establishments are required to be filed at the Qingdao City AIC, not at the district-level AIC, however the tax registration has to be filed at the related district-level tax bureau afterwards.
  • The office should be a non-residential building.

Wholly foreign-owned enterprises

  • In some district level governments, the local MOFCOM needs to review the company name first and the Chinese translation of “trading company “ has some restrictions in certain district level governments such as Laoshan District. If the investment is lower than US$30 million, the “trading company” is not allowed to use the definition “贸易有限公司,” but it can use the translation of “商贸有限公司.”
  • In some district level authorities, the investor’s bank reference letter is required from the home country.
  • Concerning the office leasing contract, MOFCOM requires the signature of the individual lessee person as the investor, not the name of the new company; then on the AIC side, the investor should issue a letter to grant the new company permission to use this office.

Working visa

  • The Qingdao authority needs the non-criminal record issued from the foreigner individual’s home country and notarized by the notary and Chinese embassy.

Guangdong: Shenzhen, Guangzhou, Huizhou and Zhongshan


Registered capital

  • The Dongguan area previously had very high registered capital requirements, 5/6 times higher than national average, which is still the case for manufacturing WFOEs (US$1 million). However, based on our communication with Dongguan BOFTEC, the minimum registered capital requirement for service WFOEs and FICE was reduced recently in Dongguan, however, the authorities will not provide a detailed figure in this regard. Instead, they suggested that the registered capital amount shall both follow the laws and regulations and should cover the operational needs of the company. This implies a cashflow projection may be required as part of the application documentation.
  • In Dongguan, the minimum first installment of registered capital is generally 20 percent of the total, rather than the usual 15 percent.

Registration and examination

  • The city of Huizhou has issued application reforms under which it is suggested that the application of any special license requirements do not have to be done at the same time as obtaining the business license. Alternatively, the enterprise can register the company and apply for business qualifications at the same time, or the business license can even be granted to the enterprise before it acquires its business qualification.


General VAT-payer application in Shenzhen

  • Manufacturing WFOEs are always encouraged to apply for the general VAT taxpayer qualification even as a newly setup company.
  • For FICE, some officers express that they will scrutinize more thoroughly during their approval process whether or not the company meets the sales threshold.

Representative office annual compliance

  • In Guangzhou and Dongguan, the authorities are being more strict in ensuring timely completion of annual compliance procedures (annual inspection). Last year, ROs could apply for extensions up until August 31 for completing the annual inspection, but this year extensions have only been granted until July 31 in Guangzhou and July 10 in Dongguan. Penalties are between RMB10,000 to RMB30,000 for any ROs who fail to meet the annual inspection requirements before their respective deadline.

Social insurance in Guangdong

  • In Guangzhou, the pension base range is calculated on Guangdong Province’s social average salary figures, whereas medical, unemployment, maternity and work-related injury insurances are calculated on the Guangzhou city social average salary figures.
  • In Zhuhai, the pension base range is also based on Guangdong Province whereas other insurances are based on the average monthly salary of each particular district in Zhuhai.

Pensions in Guangdong

  • In Guangzhou, if the employee has a Guangzhou urban hukou, the company should contribute 20 percent towards pension, otherwise only 12 percent.
  • In Zhongshan, the upper limits of the contribution base for both pension and other insurances are based on Guangdong Province’s social average salary.

Medical insurance

In Zhongshan, there are two kinds of medical insurance. One is the basic medical insurance which is compulsory – where the employer pays 2 percent and the employee pays 0.5 percent (base is RMB1,850-RMB10,080 per month). The employee can enjoy it only for hospitalization and there are some conditions, such as:

  • Limitation per year: RMB39,150 (for employees having contributed to medical insurance for less than one year) and RMB117,450 (for those having contributed for longer than one year)
  • The threshold before insurance kicks in is determined differently by different hospitals

An additional, optional medical insurance can be applied for, under which the employer pays 7 percent and the employee pays 3 percent. The employee can use this for outpatient services and the purchase of medicine not included in the standard plan.

Maternity Insurance

  • In Zhongshan and Foshan, there is no separate maternity insurance, rather it is included in medical insurance.

Western China

China’s “Go West” campaign is still in force and has recently been amended and updated. Within this, a number of specific tax breaks and investment incentives are available, including preferential VAT treatments, income tax holidays, and refunds on business taxes against certain projects in particular areas. Given that West China is set to see some of the most dynamic growth in the middle class earnings capacity in China over the next decade, attention to detail needs to be paid to both evaluating your operations ability to apply for such benefits in addition to going through the application and verification processes.

Encouraged Industries

Every four years, China renews its Foreign Investment Industrial Guidance Catalog, which explains which industries are specifically welcomed and outlines the incentives on offer to foreign investors for doing so. Our practice has written about this extensively and handles the applications for obtaining encouraged industry status for companies across the country.


As can be seen, the examples we have provided demonstrate that, in China, regional differences in handling foreign investment applications can vary from paying small attention to detail (such as knowing which specific bureau to register documentation at), to more serious operational issues (such as tax registrations, insurance costs, and applying for customs registration). If these are not handled correctly, applications can be at best delayed, and at worse fudged with the investor missing out on crucial financial information – some of which can be very beneficial (such as tax incentives and income tax breaks).

Handling legal registrations in China is not a cookie-cutter process, even though it has become more simplified over the years. Local attention to detail is still a necessity to obtain the maximum benefit for your investment with the minimum amount of hassle. Readers are advised to seek advisory services from firms with national coverage when dealing with applications in China, and especially so when investing outside the typical first-tier cities.

Thanks to the following staff at Dezan Shira & Associates who contributed to this report: Sabrina Zhang, Adam Livermore, Cory Lam, Kate Wang, Liming Zhang, Hazel Wang, Rachel Xuan, Jerome Van Huigenbos, Lori He, Lina Wang, Rebecca Liu, Wendy Wen, Sisi Xu, Penny Li, and Jason Peng.

Chris Devonshire-Ellis is the Founding Partner of Dezan Shira & Associates – a specialist foreign direct investment practice providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email, visit, or download the company brochure.

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