Setting up a company in China?
You need to sign a lease of agreement for ‘’registered office address’’
10 key points when choosing a location
- Style of operation
- Demographics
- Foot traffic
- Accessibility and parking
- Competition
- Proximity to other businesses and services
- Image and history of the site
- Regulations
- The building’s infrastructure
- Utilities and other costs
Tip 1: Partner with a real estate agent in China
One thing that people don’t realize that real estate agents’ offer is location analysis.
Location Analysis – is a technique for discovering, assessing and specifying the optimal placement of an organization’s people, information, activities, and materials.
Location models are key performing location analysis by providing a well-documented common vision of current and desired location arrangements.
Research the right location
Tip 2: Partner with a local market entry advisor
To understand the legal consequences of selecting your China location
Legal Consequences
Registered Office address is a MUST for any type of company registration, and it MUST be your operational office as well.
Virtual office addresses are illegal and should be avoided
- Bank accounts can be frozen
- Random government inspections
A one-year lease agreement must be signed: any agreement shorter than this will be denied during the registration process.
Type of property is of utmost importance as it indicates your entity choice and business scope
- Factory/Warehouse – manufacturing business scope
- Commercial – trade/service business scope
- Retail shop – retail business scope
The key is remembering that, unlike other jurisdictions, only ONE company can be registered in ONE registered office space.
Tax Consequences of selecting your location in China
Each city in China is made up of districts. When you choose an office space, remember:
- You are registering your company in that city
- You are registering your tax status within that district in the city.
Tax incentives may be offered by the State, Local or District government
For example:
Tax Considerations – EXAMPLE
High New Technology Enterprises (HNTE) incentive criteria
- An HNTE is eligible for a 15% reduced corporate income tax rate (from 25%).
- The core IP should be owned by the HNTE. Enterprises that acquired intellectual properties (Ips) under a minimum five-year exclusive licensing arrangement no longer qualify as HNTEs.
- The minimum 30% of employees required to hold a diploma certificate or a higher degree is eliminated.
- The research and development (R&D) expense is reduced from 6% to 5% of annual revenue for enterprises that have no more than RMB50 million (approx. US$7.7 million) annual sales.
Other considerations
High New Technology Enterprises (HNTE) include also:
- Cloud computing technology
- Mobile internet
- Encryption technology
- E-commerce and modern logistics
- Inspection certification and standardized services
- Supportive technologies for cultural and creative industries
- Natural disaster monitoring
- Alert and emergency solutions
Should you wish to change office space and move to a new district in the future – understand the tax consequences!
Action Plan
1st decision: Business Center versus Operational Office
- Location, Location, Location
- Determine your rental budget
- Your location affects how you operate, total sales, talent acquisition and retention, logistics
- Your location can affect legal and tax considerations
- Don’t rush to make your decision
- Meet with real estate agents
- Meet with corporate service providers and other legal professionals
For any information on your registered address in China, please contact our team by email at info@opkofinance.com or by phone at +852 2654 8800/+86 187 177 31958
