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Frequently Asked Questions
Wholly Foreign Owned Enterprises (WFOE)
A Wholly Foreign Owned Enterprise (WFOE) is a Limited Liability Company established in China by foreign investor(s). A WFOE is very much like a LLC in the USA that it requires one member only.
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The registration procedures of a Wholly Foreign Owned Enterprise (WFOE) could be divided into 3 phases: aproval phase, registration phase and post-establishment phase.
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A Wholly Foreign Owned Enterprise (WFOE) could be terminated by way of liquidation or deregistration by its investor(s) or when the conditions of termination in its Articles of Association occurs.
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China Taxation
Under the current tax system in China, there are 25 types of taxes which could be divided into 8 categories. The major ones are Business Tax, Value Added Tax and Enterprise Income Tax. More
Representative Offices are also liable for Business Tax and Enterprise Income Tax. However, a RO could be exempted if its parent company is in the manufacturing business.
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Any individual who has domicile in China or who has no domicile in China but has resided in China for one year or more shall pay Individual Income Tax on his world-wide income.
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CHINA INDIVIDUAL INCOME TAX


Personal Allowances -
Foreign nationals working in China

The Individual Income Tax Law of the PRC allows deductions from certain categories of income in computing the individual income tax of foreign resident taxpayers, as follows.

Taxable income Deduction
Income from wages and salaries RMB1,600 per month
Additional allowance on wages and salaries for foreign expatriates RMB3,200 per month
Income from compensation for personal services, author's remuneration, royalties or the lease of property:  
    If the expenses amount to a single payment of not more than RMB4,000 RMB800
    If the expenses amount to a single payment in excess of RMB4,000 20%

Notes:

1. For income from compensation for personal services, author's remuneration, royalties or the lease of property, the economic substance of a transaction will determine whether income received in several installments of not more than RMB4,000 each (and thus eligible for multiple RMB800 standard deductions) will be treated as a lump sum. If the installment payments are the result of a single economic transaction, they will be treated as a lump sum.

Actual expenses are not deductible against compensation for personal services, author's remuneration, and royalties. A limited deduction is available for expenses incurred in connection with the lease of property.

2. Interest, dividends, bonuses on investments, contingent income, and other kinds of income are taxed on the gross amounts received, without deductions.

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