A few options are available for foreign investors to establish a business in PRC. The most popular ones are Representative Office (RO), Consulting WFOE or Trading WFOE.
- It is the office set up by a company in a foreign country to conduct non-operational activities such as marketing or basic client consulting. Therefore, in theory, ROs do not generate revenues. Consequently, the taxable amount is not based on revenue, but expenditures incurred during the operation.
- The registration address of RO is required to be Class A office.
- 3. RO is not considered as a legal entity.
Consulting / Service WFOE:
- Consulting WFOE is considered as a legal entity and enabled to carry out revenue generating business activities. Therefore, the taxable amount is calculated based on revenue.
- There is no specific requirement on office address selection. Although, we usually suggest clients to register under a virtual address as it will save the hassle to notify all relevant authorities with each office relocation
- It takes longer time and more steps to register a trading WFOE compare to a consulting WFOE. Typically, the volume of transactions higher than that of other types of WFOE. Thus, the cost involved in registration and accounting component are higher.
- Trading WFOEs are legal entities and tax is calculated based on revenue.
Contact us for more information regarding entity registration.