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1. What is WFOE standard for?

WFOE stands for Wholly Foreign Owned Enterprise. WFOE is a China limited Liability Company 100% owned by foreign investor(s).


2. What are the Registered Capital and Total Investment?

Registered Capital – A certain percentage of the Total Investment is specified as the Registered Capital in the application. For example, if the Total Investment is USD200,000, it normally will mention 70%, USD140K, is the Registered Capital. This is the minimum amount the Parent Company need to injected and verified. Registered Capital is the funding account of the operation of WFOE.


Total Investment – This is the amount specified in the application of the WFOE. This is the TOTAL approved account the parent company can put in as Capital investment (called Registered Capital*) and loan to the WFOE. Any money inflow more than this Total Investment will need to go thru an advanced government approval process. This is the maximum amount the parent company can fund the WFOE.


3. What are the different WFOE bank accounts?

Account Type Currency Features Remarks
Capital Account Capital USD, CND, etc.
▪ Mandatory

▪ All capital injection will first come to this account, be verified as Registered Capital** and then be exchanged to RMB (to the Basic Account) for operating purpose.

▪ The only account to introduce Capital from the parent company.

▪ The maximum amount this account can flow thru is the Total Investment* indicated in the WFOE*** application.

Basic Account Current RMB ▪ Mandatory

▪ Basic operating account for the WFOE.

▪ To pay for rent, payroll and suppliers etc.

▪ Check, cash and transfer are all allowed in this account

▪ Collect income / revenue payment

▪ Basically the is “THE” bank account” of the WFOE.  All the local currency transactions are going thru this account.

▪ Money inflow from other companies, including the Parent company, are considered as income and therefore subject to local business and corporate income tax.

General Account Current RMB ▪ Optional

▪ Transfer only

▪ No Cash or check allowed

▪ No payroll payment allowed

▪ Most company choose not to open this account because it is not as flexible as the Basic Account.
Foreign Currency Account Current RMB ▪ Optional

▪ To accept foreign currency income /revenue payment

▪ The money can be exchanged and transferred to the Basic Account

▪ Money inflow from other companies, including the Parent company, are considered as income.

▪ The money, after exchange and transferred the Basic Account, therefore subject to local business and corporate income tax.

Tax only Account Current RMB ▪ Optional

▪ Used for tax paying purposes

▪ Most of the company choose not to open this account because the Basic account can serve the same purpose.

▪ Some of the local banks do not even support this account anymore because of the unpopularity


4. What is a Legal Representative?

Legal Representative is the responsible person of the organization. The head of the factory, manager, and chairman of the board or a committee member can be appointed as the Legal Representative.


Legal Representative represents the interests of the organization and can execute the power authorized to him. Internally, he leads the operation, production and all organization activities. Externally, he represents the organization and has the authority to handle all civil matters.


5. What is a Supervisor?

Supervisor is the representative of the investor with the following duties:


1. Inspect company financial situation;

2. Monitor the duties of the directors and executives; terminate the directors and executives who violate the laws, regulations and memorandum of articles or association;

3. Correct the decisions of the directors and executives when they are not acting for the best interests of the company;

4. Call and run shareholders meeting when the board of directors is not acting accordingly with the regulations;

5. Present proposals at the shareholders meeting;

6. Prosecute the directors and executive;

7. Execute the duties listed in the memorandum and articles of association.

Supervisor can attend the board of directors meeting with proposals and queries. Supervisor can or hire third-party accounting firm to, investigate the company’s operation for abnormal activities.

Supervisors should have at least one board meeting every year. Supervisor, however, can call for meeting at anytime.


6. Eligibility of Legal Representative or Supervisor

People with the following status are prohibited from being appointed as a legal representative or supervisor:

1. Anyone who is prohibited by the court;

2. Anyone who has been convicted of a felony in the last 5 years because of corruption or steal of assets;

3. Anyone who has acted as a director, manager, or has personal liability of any company which is filed bankruptcy within the past 3 years;

4. Anyone who has acted as a legal representative or has personal liability of any company which is closed by the court or business registration terminated within the past 3 years;

5. Anyone who has a personal high debt ratio and/or a large amount of unpaid debts.


7. What are the different taxes for a WFOE in China?

Monthly: Sales / Business Tax / VAT (~5.6% on revenue or 17.5% on VAT invoices)

Sales Tax or VAT Tax is calculated and filed before the 10th or 15th of every month strictly base on amount of receipts (fapiaos) issued by the company.

Quarterly: Corporate Income Tax (25% on Net Income)

At every quarter end, the company is required to file and pay the Corporate Income Tax.

Annually: Corporate Income Tax Return (or called “ Settlement of Payment of Corporate Income Tax”)


8. What does enterprise need after WFOE registration?
Immediate after Registration:


1. Register employees with the local Social Securities Bureau

2. Setup corporate accounting & reimbursement systems

3. Interview with the local Tax Assessor to finalize the reporting deadlines and tax rates of the WFOE

4. Open the corporate bank accounts

5. Inject capital from the parent company

6. Arrange capital verification (at least 15% of the Registered Capital should be injected by the parent company within the first 3 months upon the issuance of the first business registration license);

7. Renew the Business Registration License after the capital is verified

8. If the WFOE is subject to Value Added Tax(VAT), then apply for the general taxpayer status

9. If the WFOE is in the imports and exports business, then apply for the import/export license.


Monthly Compliance


1. File Business Tax / Value Added Tax Return

2. File Individual Income Tax Return


Quarterly Compliance


1. File Enterprise Income Tax Return


Annual Compliance


1. Perform Annual Statutory Audit

2. Perform Annual Examination

3. Renew all necessary licenses such as Business Registration License, Enterprise Code License, Tax Registration Licenses etc.

4. File Annual Enterprise Income Tax Return