Setting up an entity in China can be an exciting venture, as you build a new operation in a country that you enjoy visiting. Despite the administrative tasks involved, such as signing documents and interacting with various government departments, there is a sense of optimism as you assemble your China team – a team that could be the cornerstone of your company’s growth.
Engaging professional services, such as accountancy or law firms, is often the first step in navigating the initial complexities of registered capital, location, and other aspects. However, what may not be apparent at first are the ongoing costs of maintaining your operation.
Unforeseen Challenges
In promoting The China Desk by Kinyu, we’ve encountered numerous business leaders who have faced challenges and regrets after opening their entities in China. Having established our own entities in Hong Kong, Guangzhou, and a branch companies in locations across China, we’re well-positioned to shed light on the often-overlooked operational admin that is not clear from the outset.
These unexpected hurdles include:
- Profit Handling: Many overseas firms setting up in China aim to just cover costs without posting a profit, risking an official audit. China’s strict regulations require even profits earned abroad to be taxed.
- Capital Controls and Reporting: Unprepared companies may stumble on China’s capital controls and regular tax reporting requirements.
- Fragmented Social Insurance policies: Hiring and paying mandatory social insurance in multiple locations in China cannot be done with a single entity – every city has its own rules.
- Changing Office Address: Registering a new office address in China might take three months and cost up to $5,000.
Introducing the Kinyu Entity Essentials Series
The path to successful business operations in China is riddled with both expected and unexpected challenges. This guide aims to shed light on both, providing you with the tools and insights needed to thrive in one of the world’s most dynamic and intricate markets.
From the initial setup to cultivating a robust, united team, this series explores every twist and turn.
Administration-focused:
- Entity Setup: Chinese mainland vs. Hong Kong – What’s the Difference?
- Explore the legalities, benefits, and challenges of both regions
- Compare tax systems, laws, and business regulations
- Beware of the Shared Office as Registered Address
- Understand the risks and regulations regarding shared office spaces
- Learn how to choose the right location for your business
- China Permanent Establishment
- Grasp what constitutes a permanent establishment
- Discover the impact on taxation and regulatory compliance
- China’s New Registered Capital Rules – What to Know Before Incorporating
- Understand China’s new registered capital rules effective July 1, 2024
- Learn implications for foreign businesses incorporating in China
- The Role of the Legal Representative
- Understand the duties, responsibilities, and liabilities
- Learn how to choose the right legal representative for your business
- Exiting China – Key Things to Consider
- Understand that closing an entity in China is just as cumbersome as setting one up
- Learn how to plan for managing redundancies and severance payments
People-focused:
- Hiring Across Multiple Cities in China
- Explore the implications for foreign companies hiring across multiple cities in China
- Understand China’s new employee management policy
- Different Options for Hiring Your Team on the Ground
- Contracting vs. full-time hiring
- Navigate labour laws and cultural nuances
- Social Insurance Essentials for Hiring in China
- Understand how employer contributions can vary across China
- Learn the key factors affecting contribution calculations
- Tips for Engaging Your Remote Team in China
- Tackle common HR challenges, from recruitment to retention
- Discover strategies for building a strong, cohesive team
Many companies jump straight into setting up an entity. However, the aim of this series is to allow you to pause and ask yourself: do you really need to set up an entity? We hope this series will help you find answers to common questions and insights into challenges that might not be readily apparent!
If you need personalized advice or have any questions about setting up or managing your business in China, our experienced team at The China Desk is here to help. Book a meeting with one of our team members to discuss your specific needs and challenges.
