How to deal with the blacklisted company in China?

Recently, many Foreigners ask why their WFOEs are put on the blacklisted company in China. Even worse, the Exit-Entry Bureau canceled their Resident Permits and Work permits. Actually, the Exit-Entry Bureau and the State Administration for Market Regulation (SAMR) have been conducting close inspections. The Shanghai Government is taking action to target the foreigner’s sham company in 2021.

Latest news about the blacklisted company

The Shanghai Government is starting an investigation into Illegal immigration. If they can not pass the company inspection, the Legal Representative’s Work permits will not be extended. For example, The Exit-Entry Bureau announced that more than 100 Foreign Invested Enterprises are put on the blacklisted company. Moreover, this is the Official notice of Cancellation of residence permit on 11th March from the Government.

Choose the legal Agency

Since last year, the Police have arrested several Chinese and Foreign suspects who are providing illegal Visa Work permit services to foreign Clients. The suspects allegedly confessed that they fabricated working positions for foreigners through company registration. Even more,  the police annulled the visas of all the foreigners who used the illegal service.

That is why many Chinese agents disappeared suddenly because they are worried about being investigated by the police.

Why do many Foreigners choose the illegal agent/agency while becoming blacklisted companies? The reason is very simple, they just want the cheapest price for company registration, accounting & Tax, Work permit, etc.

Below we explain how to deal with the problem of the blacklisted company.

Open the FEA account for your company

According to Exit and Entry Administration Law, in Article 43,  Foreigners who work in China beyond the scope allowed in the work permits shall be deemed as illegal employment, and Article 80, Foreigners who work in China illegally shall be fined not less than RMB 5,000 but not more than RMB 20,000; where circumstances are serious, they shall be detained for not less than five days but not more than fifteen days and shall also be fined not less than RMB 5,000 but not more than RMB 20,000.

So the newly registered companies must open an account at the Foreign Experts Affaires (FEA) for employees.  Notice that you need to use the registered address in the business license to apply for the work permit for employment.

Exit Entry public security bureau

The regulation for the employment of Foreigners

For the foreigners who obtain employment without application for the employment license and the employers who hire foreigners without Alien Employment License, they are violating the Regulations on the Administration of Employment of Foreigners in China, and shall be dealt by the public security organ according to the terms 44 in the Rules Governing the Implementation of the Law of the PRC on the Entry and Exit of Foreigners, that is, for those foreigners engaged in illegal employment without authorization by the Ministry of Labor and Social Security of PRC or its authorized department, at the same time of termination of their employment, a fine of less than RMB 1,000 ($162) shall be imposed; If the circumstances are serious, the said foreigners shall be ordered to leave the country within a time limit. For units and individuals who employ foreigners shall terminate employment, at the same time, shall be imposed a fine of not less than RMB 5,000 but no more than RMB 50,000, and shall bear the full repatriating cost of the said foreigners employed without permission.

For those foreigners who refuse the inspection of the employment permit by administrative departments of labor security, change their employing unit and jobs or extend the period of employment without authorization, the administrative departments of labor security shall retrieve their employment permit, and submit it to the public security organ to cancel their residential qualification. In the case that the authorities enforce the deportation, expenses shall be borne by the said foreigners or their employers.

For those foreigners and employers, who forge, alter, illegally use, transfer, buy and sell the foreigner employment permit and license, administrative departments of labor security shall take back the employment permit and license, and confiscate the illegal income, and impose a fine of not less than 10,000 yuan but no more than 100, 000 yuan; If the circumstances are serious enough to constitute a crime, they shall be transferred to judicial organs to investigate for criminal responsibility according to law.

Open the Tax Account on time

According to the Tax Law in China, in Article 15, “Enterprises, the branches and the sites engaged in production or business operations established by enterprises in other places, industrial and commercial households and institutions engaged in production or business operations (hereinafter all referred to as taxpayers engaged in production or business operations) shall, within 30 days from the date the business license is obtained, apply to the tax authorities for tax registration by presenting the relevant documents. ”

There are many Foreigner did not open the tax account for the company in the Tax bureau after registering their company because they want only the Work permit and the residence permit in China. But if you don’t open the tax account on time, the decision could have serious consequences.

The Importance of the Company’s registered address

Sometimes, the Government will spot-check the company’s registered address. If the registered address has expired, the corporations will be put on the blacklisted company. The first thing that you set up a company is to rent a real office with the landlord as the registered address.

It should be noted that if the lease contract has expired, you have to rent the new office while changing the registered address in the Business License. Otherwise, your company will also be a blacklisted company probably.

If you can not rent a real office in the beginning, you can choose the State-owned Development Zone as the company registered address. It is a government-sponsored project so they can provide the “Physical address” for the startups. Through the cooperative official development zone, we can confirm that it is the real registered address forever.

Bookkeeping and Tax filing

There are many agency’s bookkeeping & Accounting fee is only RMB 300 – RMB 500 for Foreigner’s company. In fact, it is impossible, because the formal accounting firm needs to provide Bookkeeping & Accounting report in English for the Foreign Invested Enterprises (FIEs) every month, including Bookkeeping, Reconciliation services, Tax return, drawing Faiao (Invoice),  payroll service, etc. If you used the wrong firm, your company will be put on the blacklisted company. It will be very hard to close down the blacklisted company because the balance sheet and other Sheets are totally WRONG!

Conclusion

The foreign investors should be well-versed in how the Government’s Accounting & Tax System works, what is the company’s Certificates, and how to apply for Work permits & Visa applications legally, etc. It means that the professional agency needs to take a lot of time to provide the standard service following the registration process step by step. In other words, the service price is not the most important thing, because the agency is on behalf of Foreign Investors and the legal representative needs to sign the Power Of Attorney with the agency according to the company law. Therefore,  Never “Illegal operation” if doing so will damage or destroy your business in China.

GWBMA is a professional services firm providing business advisory, tax, accounting, payroll, and Trademarks, Copyright services for multinational clients in the world.  We have a very strong relationship with the Shanghai Comprehensive Development Zone and the Shanghai Municipal Commission of CommerceChoose GWBMA, choose its expertise with high efficiency, and start your business in China.

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