Cost to Incorporate a WFOE in Shanghai

If you are setting up a local WFOE to run your daily transactions and businesses, you have to decide what your WFOE does? What are the detail business activities for your Chinese enterprise? You have to register different licenses and permits for your business. Because these factors directly affect your opening costs and the annual maintenance costs of the business, normally, your WFOE can be a service industry, also can be a trade industry. Why SMEsChina say that first here, because service and trade industry, you have to apply for different permits, such as a trade WFOE, needs to apply for import and export license, and foreign trader certificate, and a trader maybe need to apply for the general taxpayer (VAT Qualification). All of these factors are affecting the whole costs and prices of each year.

Whatever your WFOE is, service or trade industry, you may apply for the business license and the approval certificate of foreign investment enterprise for Free. Exactly, do not doubt, please, Chinese government does not need to pay any government costs for these licenses and permits, certificates.

About corporate stamp (seals) costs, need hundreds RMB costs, such as Shanghai, the seal cost is 240 RMB to 360 RMB (difference of 120 RMB, is contract stamp).

Shanghai, China, as the most fashion and popular city, has many local professional lawyers, consultants and agents are providing the WFOE formation services with different prices and costs. Most of them providing registration services and license applications, also offering the later business operations and maintenance services for your WFOE, such as: virtual address, monthly tax returns, annual auditing, license renew and inspection services each year.

If you inquire a prices for your WFOE registration and annual company maintenance, each year you have to pay virtual registered address services, company registration fees and annual tax compliance to this agent around 2,000 USD to 8,000 USD each year to run a WFOE in China, just like SMEsChina provides these related services, our yearly package service fee is 4,950 USD (including following service items).

So, here comes the question, why the price is so much difference? Just like our chief manager of companies registration, Mr Mark, he was told from a potential customer, some company formation agents just need 1,000 CNY (100-130 USD) to complete the whole procedure of company formation, and bank account, and annual tax service package (12 months) only need 2,000 – 3,000 RMB (300-400USD). Amazing, so cheap costs to incorporate a WFOE in Shanghai China, SMEsChina hereby to explain the question, why the prices so much different in Shanghai China?

It was mentioned above, the government cost is free, just needs to apply for a set of company stamp with hundreds RMB, the rest of the prices quoted by these company registration agents are their service fees. Due to the agency’s operating costs and professional team members of the professional, skills, experience and other factors different, therefore, each agent provides different service fee to you, from the experience of company formation agency industry in Shanghai China, there has 3 types of traditional agents provide different service package to the market.

The first type of company formation agents, just have 2 to 3 people (maybe less) to provide services with a small work space, and through website market to get the orders from internet, at present, nearly 70% of the business registration agents in Shanghai are of this type. Due to the lower costs, these agents can provide a very low price to customers. Of course, most of them are very professional and reliable. And the prices they made are well below the market price.

The second type of the formation agents, have around 10 employees and the top leader has worked in the agent industry long time and has a certain customer base, the service chain involves company establishment, bookkeeping, trademark registration, personnel agency and other value-added services.

The third type of registration agents, have developed more than 10 years in Shanghai China, have own teams and lawyers and big amount of customer base, all legal files of company incorporation drafted by local lawyers without agents, and the team members have more than 10 person who have obtained the English speaking qualification examination. This type agents are licensed for providing services to nonresidents. So their service fees will be higher.

Main including 4 situations of the hidden cost as following, you have to learn, if you are deciding to register a WFOE in mainland China.

Most of the key people of a Chinese wholly foreign owned enterprise from other countries (nonresidents), so you have to find a local agent company to provide translating services, such as: notarized documents, company registration forms, legal documents, etc. Small agents will outsourcing the translation to local translate agents, or translate these required documents by themselves, you should inquire your agents if the translating legal files need extra cost.

General speaking, open a local bank account for your Chinese WFOE, needs to submit application forms and verify the passport information of the legal representative, then can be got approval to open a local account, in China, bank account opening is a most common hidden cost, you have to ask your local agents to confirm the banking package and annual operation costs for your bank account.

First, you have to ask your agent, if the virtual registered address is legally, and if can be get business license and bank account whit this office address, most the company formation agents provide office address services, but they will offer a higher prices of the virtual address from the second year with different reasons, so SMEsChina lawyers suggest you signing a contract or agreement for the virtual address.

General company agents will ask you pay the tax registration and invoicing machine fees, but some small agents will ask you to pay thousands RMB, and tell you that is paid to tax office, here, SMEsChina suggest you to ask this agent to give you the invoice issued by tax office, normally, the tax registration and invoice machine just need hundreds RMB (plus service cost).

Here, SMEsChina list a taxation table for your studies, if you want to learn more tax rules for your WFOE running and operation, you can link our guidance <What is the tax rules for a foreign company register in China> to get studies.

In China, each company needs to report annual inspection documents and auditing files to tax office to obtain the legal renew of business license. And each year’s annual inspection formula dates from January 1 to June 30, The corporate income tax settlement and audit procedures need to be completed between April 1 and 30 of each year. This period is the busiest time for accounting service providers, so the service fees will be increased. SMEsChina suggests you to confirm the prices in advance with no any hidden costs. Normally, government inspection and license renew no any government costs there, so just need to pay auditing costs to the providers, all package service just needs thousands RMB service and audit costs depending on the operations and taxation of the last financial year. The total package price of SMEsChina is 700 USD each year.

Normally, each year, tax office will ask local companies to provide the yearly settlement report of corporate income tax within April of each year. The market price around 100 – 120 USD each year.

Normally around 200 USD, if a trade WFOE needs another cost (50 – 100 USD) for import and export license and permits.

Depending on the total assets for the previous year, normally needs 350 USD each year, but sometimes, if your annual assets more than 5 million CNY, need to pay extra cost around 150 USD.