Offshore Company in China

1. Why China?

China is a developing country and it's populations are more than 1,3 billion. Since Deng Xiaopin mastered China's political power in 1978, China has started to implemented political and economic reforms. Since then, annual growth rate of Chinese economy is 10%. China has formulated a series of laws and policies which are favorable to foreign investments. At the same , China's local governments provide various preferential conditions for foreign enterprises. China's large population and vast area provide unlimited business opportunities for foreign enterprises to invest in China.

2. Legal Framework

China's highest legal body is the National people's Congress, one of its duties is to approve laws submitted by relevant departments. The local governments may set up various regulations and rules which are suitable to the local areas. Foreign enterprises may establishing companies and run their business in China without violating Chinese laws, local regulations and rules. The foreign companies should pay taxes according to Chinese tax laws.

3. Banking

China's central bank is the people's Bank of China. China has 4 big state owned commercial banks, they are bank of China, Industrial and Commercial Bank of China Construction Bank. All these 4 banks handle deposits and loans of RMB and foreign currency. China Development Bank is also a state-owned bank, its main function is to serve significant long term national economic development strategy through handling deposits and loan of RMB and foreign currency. China has many private banks, some of them handle deposits and loans of RMB and foreign currency and some only handle deposits and loans of RMB.

4. Financial Regulatory Authority

China has the State-owned Assets Supervision and Administration Commission of the State Council, China Securities Regulatory Commission, these 3 institutions main function is to supervise and manage China's financial markets and they have their own branches in each province of china.

5. Taxation

5. a. Corporate Tax

The income tax rate for domestic and foreign enterprise is uniformly 25%; small-profit enterprise's income tax rate was 20%; high-tech enterprise income tax rate is 15%.


5. b. Personal Tax Rates 


Personal income tax rate has nine levels from 5% to 40%. Tax exemption amount of personal income tax for Chinese employee is RMB Yuan 2,000, for foreign employee is RMB Yuan 4,800.


5. c. Social Security


Social security tax includes five categories: life insurance tax, medical insurance tax, unemployment insurance tax, industrial injury insurance tax and birth insurance tax. These 5 Taxes account for 42.3% of personal wage and they are borne by company and individual together, the company will pay 32.1% and individual will pay 10.2%.


5. d. Customs & Excise Duties


The imported goods need to pay custom duties. the tax rates are decided by goods customs duty is 17%. The excise duties will be levied for the following four categories of goods:

1. special goods, which over-consumed will be harmful to health, social order and ecological environment (Tobacco, Alcohal, Firecrackers, Fireworks);
2. Luxury goods and other non-necessary life goods (Precious jewelry and jade jewelry, cosmetics);
3. High energy-consumed luxury goods (Cars, Motorcycles);
4. Non-reproduced and non-alternative resource goods. (Gasoline, Diesel).

Also imported and exported diamonds need to go to the Shanghai Diamond Exchange for their custom clearance procedures, other ports can import and export diamonds.


5. e. V.A.T.


China's value added tax rates are different according to different taxpayers. Small scale taxpayers tax rate is 3%, special industry's tax rate is 13% and general taxpayer's tax rate is 17%.


5. f. Tax Incentives


The central and local governments have formulated various tax preferential policies to encourage foreign investment in China.

6. Main Types of  Corporate Forms

China's main types of Chinese companiesL: State-owned company, joint-stock company, limited liability company, partnership firm and sole proprietorship. Different limited liability companies registered capitals will not be less than the following minimum amounts:

1. The minimum registered capital of limited company engaging in production & operation company is RMB Yuan 500,000;
2. The minimum registered capital of company engaging in commodity wholesale is RMB Yuan 500,000;
3. The minimum registered capital of commercial; retail based company is RMB Yuan 300,000;
4. The minimum registered capital of company engaging in technology development, consulting and service is RMB Yuan 100,000.
5. The minimum registered capitals of joint-stock company and listed company are RMB Yuan 10 million and 50 million respectively.

7. Company Incorporation

The procedures for foreign investor to establish a company ion China are as follows:

Establishment of project: foreigner should have its foreign business license(registered certificate), ID card or power of attorney and fill in form of establishing enterprise in china (3 days after all materials are submitted);

Approval of the feasibility study report and articles of association(10 days);

Business license is approved by the local industry and Commerce Administration (2 days).

8. Reporting & Auditing

The financial year of Chinese company is from January 1 to December 31, foreign company can also choose a different financial year. China's tax authorities annually audit the financial statements of Chinese and foreign companies.

9. Special Notes / Country Update

China has carried out tax reforms several times, the Chinese and Foreign companies enjoy the same favorable tax rates and treatments.

Double Taxation Agreement

China has double taxation treaty with different countries:

·                     Austria

·                     brazil

·                     Bulgaria

·                     Cyprus

·                     Czech Rep.

·                     France

·                     Germany

·                     Hungry

·                     India

·                     Indonesia

·                     Israel

·                     Italy

·                     Japan

·                     Kuwait

·                     Malaysia

·                     Malta

·                     Mauritius

·                     Mexico

·                     Morocco

·                     Netherlands

·                     Poland

·                     Portugal

·                     Romania

·                     Russia

·                     Singapore

·                     Slovenia

·                     Spain

·                     Switzerland

·                     Tunisia

·                     Turkey

·                     UAE

·                     UK

·                     USA

·                     Venezuela