WFOE or FICE is a limited liability company formed in China entirely by foreign investors. It is totally under foreign control and it does not involve any Chinese partner participation. It allows foreign investors to manufacture, process, assemble, trade, distribute, deliver services in Mainland China. The nature of business must be registered and approved by the Mainland China Government during the process of registration and it can be changed in later days with the prior approval of the Government. WFOE or FICE can generally control their own governance through the by-laws approved by the Government. The initial investment capital for setting up a WFOE is RMB100,000 to RMB500,000 for consulting industry field and RMB1,000,000 for trading and manufacturing industries. In recent years, it has been the Government’ policy to encourage businesses with specific business natures be setup in some second or third line areas and cities of some provinces. These provinces may offer lower investment capital requirements. Corporate Income tax rate is generally 25%. WFOE is the most popular corporate entity for non-PRC investors due to their versatility and some unique advantages as follows:
- the ability to uphold a company’s business strategy free from interference by Chinese partners
- total management control by investors within the laws of the Government
- the ability to both remit and receive RMB to and from the overseas parent holding company.
- increased protection of trademark and intellectual property, in accordance with international law
- shareholder liability limited to original investment