Open a WFOE in China – with the substance banks and the tax bureau expect.
Many Chinese companies opened by foreign founders never become functional: they cannot issue Chinese invoices, and the VAT refund they were opened for never arrives. We register the WFOE – a wholly foreign-owned enterprise – for the activity it will really run: filings, license, seals, tax and currency-control registration. And we stay on for the operations that follow.
When China is the right call
Most founders trading with China should not open a WFOE
For most founders the right answer is a Hong Kong company buying from China as a foreign purchaser. If your suppliers insist on being paid in RMB inside China, a non-resident account at a mainland Chinese bank covers that without a WFOE – though it cannot issue fapiao, so it solves paying suppliers but not selling with Chinese VAT invoices. A WFOE wins in the situations below.
You need fapiao and the VAT cycle inside China
Chinese clients that pay you in RMB need fapiao – the official Chinese VAT invoice. A WFOE can issue them; a foreign company cannot. The same applies in reverse: when your business model depends on reclaiming Chinese input VAT through the export rebate, you need a Chinese entity holding the trade.
You’re hiring multiple people in China
Hiring Chinese staff under Chinese labor law – with formal contracts and social insurance – is something only a Chinese entity can do. Without a WFOE you are limited to contractors and agency arrangements that work for one or two people.
Your trade volume justifies the substance cost
Office, staff, social insurance and taxes, treasurer, accounting, VAT cycle – the running cost of a real WFOE is meaningful. The economic break-even sits around $2 million a year in trade. Below that, the overhead of substance eats the gains.
What’s included
Everything the company needs to legally exist and start operating
A Chinese WFOE is the legal entity plus a set of registrations and seals that have to be in place before the company can sign a contract or receive a payment. The package covers all of them. All in – registration, document legalization, seals, tax registration and the bank account – count 20–40 business days; the registry filing itself takes about 15 of them in the standard cities.
Registration filings with AMR
Everything the Administration for Market Regulation needs to bring the company into legal existence.
- Company name pre-approval (Chinese name with city + trade type + 有限公司 suffix)
- Business scope formulation in the wording the local AMR will accept
- Filing of incorporation application with the local Administration for Market Regulation
- Coordination of shareholder document legalization if the shareholder is a foreign company
- Available in Shenzhen, Guangzhou, Shanghai, Beijing as standard – other cities on request
Business License and five official seals
The physical instruments the company needs to operate. Whoever physically holds the seals controls the day-to-day operations of the company.
- Business License (营业执照) with unified social credit code
- Company seal (公章), financial seal (财务章), contract seal (合同章), legal representative seal (法人章), invoice seal (发票章)
- Seals carved at the official 刻章 office inside or adjacent to the AMR building
- Storage and handover guidance
Year-1 registered address and office lease
A registered commercial address is mandatory – the company cannot be incorporated without one. The package covers the first year.
- Virtual office in a city where it is accepted (consulting WFOE in most cities)
- Lease certificate (红本 / hongben) issued in the name of the WFOE
- Reception of government correspondence and tax bureau notices
- Switch to your own real office when you take a lease later – the VAT refund application requires one
Tax registration, SAFE, and fapiao setup guidance
The post-license setup that makes the WFOE able to receive capital and issue invoices.
- Registration with the local tax bureau and choice of general taxpayer or small-scale taxpayer status
- Guidance for your treasurer (出纳 – the staff member who handles the company’s cash and payments) on the fapiao (发票) device setup so the company can issue Chinese VAT invoices – the setup itself is done by the treasurer, not by us
- SAFE registration (外汇登记) plus the foreign-currency capital account it unlocks – where your registered capital arrives from abroad, and the channel for repatriating profits
The people your WFOE names and the capital it commits
The legal representative – usually you – signs contracts and deals with the government. The liability is personal: if the company has tax arrears, court judgments or regulatory violations, its legal representative can be restricted from leaving China. The finance officer – often the accounting partner – handles tax filings and banking. A supervisor has been optional for a small company since 2024, if all shareholders agree. Registered capital has no legal minimum, but banks and partners judge the company by the figure – and the amount you commit must be paid in within five years, or the company can land on the abnormal-operations list.
Step-by-step: how to open a company in China
Roman walks through the eleven steps from defining the structure to going live – including the substance question, the legal rep’s mandatory trip, what a fapiao approval involves, and why most WFOEs end up non-functional.
Watch on YouTube →The substance reality
Registration is the cheap part. Substance is the real cost.
The real cost of a Chinese company is not the few thousand dollars to open it. It is the thirty to one hundred thousand dollars a year it takes to build and maintain the substance – the office a tax inspector can visit, the Chinese staff on payroll with social insurance, the six to twelve months of clean accounting books – that makes everything else possible.
VAT refund is the most common reason founders open in China, and the most common reason they regret it later. The refund is real, but it sits behind that substance. By the time the first cycle clears, fifty to one hundred thousand dollars is already spent. When the refund does arrive, the extra margin is two to four percent – the same number a Chinese export agent charges to handle the export with none of the setup.
Before you commit, watch these videos and the rest of the China playlist on our channel about the operational realities of running a Chinese entity.
Do you really need a Chinese company?
The six most common reasons founders open in China – and why each falls apart.
Why we talk clients out of opening in China
When Hong Kong is the better base, and the rare case China wins.
How China export VAT refund works
The four conditions the tax bureau checks before paying out.
The full China series
The complete playlist – from the intro to opening a company and the operational realities of running it.
How we work
From the first call through ongoing operations
The first step is the honest qualifier most providers skip. The last one keeps going for as long as you need us.
We map your business and qualify the jurisdiction
A 30-minute call with Roman and the USG team. Together we go through your business model, supplier base, expected volume, and whether a China setup is the best option for you.
We prepare documents and the business scope
You answer the questions and provide the documents. We draft the business scope wording and submit the company name for pre-approval. If the shareholder is a foreign company, we help you coordinate the legalization of the corporate documents in your home country.
AMR filing and legal rep travel
We file the incorporation with AMR. Most cities require the legal representative to be physically present for face verification, and for the bank account opening that follows. We schedule the trip so the on-the-ground steps are grouped into a single visit.
Tax, SAFE, customs, bank accounts
Seals are carved, tax registration goes through, SAFE is filed for capital and repatriation, the import-export registration with customs is completed, and we open corporate accounts at branches chosen for your profile.
Operations support and accounting
Advisory on running the company day to day, monthly accounting and tax filings, and the further steps your business will need – import-export procedures, supplier sourcing, contracts, and help with the export VAT refund cycle.
Book a free call
The wrong company in China is expensive to unwind. A thirty-minute conversation with Roman and the team is the cheap check before you commit.
Book a free 30-minute call