A Wholly Foreign Owned Enterprise (WFOE) is a limited liability company registered with foreign capital under Chinese Company Law. For a foreign company to be able to issue receipts and export goods from China, it must be able to legally register as a local company or a WFOE. WFOE’s are among the most popular corporate models for non-PRC investors due to their versatility and unique advantages.
Advantages of WFOE
- Freedom and independence to execute global strategies of its parent company without the interference by Chinese partners
- Ability to issue invoices and receive revenue in RMB
- Ability to remit RMB to the parent company outside of China
- Increased protection of trademarks and intellectual property
- Greater efficiency in management, operations and control
- No requirement for Import / Export license for its own products
Different types of WFOE
There are many businesses for WFOEs. The following are frequently chosen by our clients:
- If the WFOE manufacture here, we call it Manufacturing WFOE.
- If the WFOE is allowed to do Consultancy or Service, we call it Consultancy (or Service) WFOE.
- If the WFOE is allowed to do trading, wholesale, retail or franchising in China, we call it a Trading WFOE or Foreign-Invested Commercial Enterprise (FICE).
Business Scope
One of the most important issues in WFOE application is business scope. Business scope needs to be defined and the WFOE can only conduct business within its approved business scope, which ultimately appears on the business license. Any amendments to the business scope require further application and approval. Inevitably, there is a negotiation with the approval authorities to approve as broad a business scope as is permitted. Generally business scope includes investment consulting, international economic consulting, trade information consulting, marketing and promotion consulting, corporate management consulting, technology consulting, manufacturing, etc. With China’s entry into WTO, more and more business is open to WFOE especially in Trading, Wholesale and Retail business.