Trading company in China is one of the most popular enterprises structure for Foreign Invested Enterprises. With a population of 1.4 billion, China is a huge market in the world. In 2019, the value of goods imported and exported through Shanghai Port reached RMB 8.42679 trillion, ranking first across the globe. Besides that, Shanghai Port handled a throughput of about 43.30 million TEUs, remaining the world’s busiest container port.
If you are attracted by the enticing opportunities of China’s vigorous market, maybe you are thinking of setting up a trading company in Mainland China. As a foreign investor, you feel unfamiliar with market regulations and registration procedures. In this article, we’ve listed thorough instructions and crucial steps for trading company registration in China.
The Trading Company Registration process in China
Renting an office for the Company Registration
At present, when you decide to set up a company, you have to rent an office in the district in which the company locates. In addition, according to Company Law, different companies need different office requirements for company registration.
For example, if you want to set up a food & beverage Trading company, you need to rent an actual office address that is no less than 35 square meters for the Import & Export License. Moreover, this address should be the same address in the Business License.
The Chinese company’s Prename Approval
The normal Chinese Import & Export or Trading company’s name should be formatted as:
English: Shanghai XXX Import & Export Co., Ltd.
English: Shanghai XXX Trading Co., Ltd.
First structure: registered place (For instance: 上海 Shanghai)；
Second structure: Chinese name (For instance: XXX)；
Third structure: Key Industry (For instance: Import & Export / Trading 进出口 / 商贸 )；
Fourth structure: Form of Incorporation (For instance: Co,.Ltd 有限责任公司 )；
The English Name of the Trading company for the International payment
When companies in China are registered, they are done so entirely in the Chinese language including FIE (Foreign Investment Enterprise). Generally, Chinese companies don’t have the official English Name except they need the international transfer payment, especially Chinese trading companies that need English Names for banks. Meanwhile, choosing an English name becomes a necessary condition for overseas bank payments.
The registered capital of the Company
The Chinese company Law enforces the subscribed system after March 1, 2014, which requires no capital verification requirements to registered capital, Foreign-invested companies can confirm a certain amount of funds according to their own situation.
According to our experience, the minimum registered capital of the Trading company should be USD 100,000. That’s the only way to be the General taxpayer in the Tax bureau which is very important for the trading company.
The Shareholder Information
The shareholder is the natural person or company that holds the share of a limited company. When checking the Chinese names of the company, a natural person only needs to provide a copy of the ID card, the company shall provide a copy of the company license with an official seal.
Business Bank Account Opening
Above all, opening a business bank account in China is indispensable to ensure business in China. Generally speaking, as a trading company, you should open a Basic account, Capital account, or Foreign Exchange Account in the bank. Besides, you can also choose different banks to set up a bank account for the company. There are four famous company banks in China, that is China Bank, China Construction Bank, China Industrial, and Commercial Bank, China Agricultural Bank, etc. Of cause, you can also choose the Foreign Bank in China just as HSBC, SC, CitiBank, etc.
If the company has an international business, choosing an English name becomes a necessary condition for overseas payments. Trading companies need to use the English name to get approval from the Chinese bank for the SWIFT and CNAPS codes.
Taxpayer Type for Trading Company
The Invoice (Fapiao) is required by China’s tax authorities in order to compel companies to pay tax in advance on their sales.
According to the China Accounting Standard (CAS), taxpayers are divided into two types. That is the small-scale VAT taxpayer and the general VAT taxpayer. China’s Fapiao invoice system is created to avoid tax evasion. Normally, the trading company should apply for General VAT Payer in the Tax Bureau.
Thus, China’s invoice is obliged to be purchased from the Tax Bureau and print with the specified invoice machine of the unique invoice code for the company. With expertise in accounting and tax, we are here to provide an effective and prompt response to all your questions, concerning China’s invoice system.
Company Business License
After the Prename approval, you can receive the Business license within 3 – 5 Working days. Sometimes, the legal representative or investors shall go to the State Administration for Market Regulation(SAMR) to sign the legal documents. After, the Business License and the copy of the license, Official Seals, Finance Stamper, and corporate seal will finish within 7 working days.
Generally, there are 5 types of Business Registration Companies in China, this is what the New Foreign Trade Business License looks like:
Tips: You can use the China company Free Search Engine to verify the Chinese Trading Company.
Trading company’s Business Scope
According to the Foreign Trade Law of the People’s Republic of China, the business scope of a foreign-invested trading company may include: (1) to be a trade agent; (2) wholesale; (3) retail; (4) franchise; (5) export and import.
And the categories of the goods to be traded shall be specified in the business scope, for example, wholesale and export of textile, electronic products, furniture, etc. It means that the Trading Company can not do business beyond its business scope, or it will be fined by the State Administration for Market Regulation (SAMR).
A Trading company refers to a foreign-invested enterprise (FIE) that engages in the following activities:
- Retailing: Selling Goods from fixed venues or via television, telephone, mail order, internet, vending machines, and related services.
- Wholesaling: Selling Goods to retailers and industrial, commercial, or other customers and other wholesalers, and related services.
- Franchising: Authorizing the use of trademarks, trade names, and operation models for remuneration or franchise fees through the conclusion of contracts.
- Commission agency activities: Acting as a sales agent, broker, or auctioneer for goods, or as a wholesaler charging fees and conducting sales for others’ goods and related services on a contractual basis.
For example, the main scope of business of the Import & Export company is:
“To do the importation & Exportation business of goods and technology.”
This is an example of the business scope of the Trading company in China:
“The development and sale of computer software and hardware, sale of electronic products, handcraft gifts, office supplies, and other consultation services or trading business. Engaged in Import & Export business of goods and technology.”
If it is a Trading company, you must add the sentence ” Engaged in Import & Export business of goods and technology” in the Business scope of the Business License when you set up your company. Only in this way, you can apply for the Import & Export Licenses for Trading Company.
Please read this article to know how to apply for Import & Export Licenses for a Trading Company.
Generally speaking, if the trading company doesn’t have these Certificates, the customs will not carry out the trading procedures. Therefore, if you set up a trading company in China, you must complete the steps above to operate the import & export business.