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Looking to establish a company in China?
When you establish a company in China, there have 4 questions waiting for your decision
1. What kind of shareholders are suited to China?
There are 2 kinds of foreign companies in China:
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2. Director, shareholder and company secretary requirements?
Commonly, a company need provide a name list of president, vice-president, director, and supervisor. Please note that supervisor can be a certain person except president, vice-president, director. For a small-sized company,it can set a director and a supervisoronly. |
3. Share capital minimum requirement?
The minimum capital for a company is difference indifference fields. The lowest capital for a company is 30000 RMB. At present, Chinese government is reforming the procedure and requirements for company registration. We believe in the future, there has no limitation amount for paid-in capital for incorporate a foreign company. At the Meantime, the Chinese government is push to establish a trail in Shanghai free-trading zonefor company’s registration. |
4. Registered address?
In China, there have many kinds of“Virtual address” for company registration. Many industrial parks can provide the Virtual address with no charge. Not only free address, but company registered in industrial parks also can enjoy tax refund benefit from a portion of tax paid to tax bureau. If registered in the parks and work in another place in same province, the company should register a subsidy of the company with the working place according to company’s laws in China. However, many companies registered in China shall not do like that, considering no cost of breaking the rule. At present, Chinese government is reforming the procedure and requirements for company registration. We believe in the future, incorporate a foreign company shall be more easy and quick. |
Ok, now you have established the company, and ready to start to run business in China, the following legal responsibility for employee should be taken in mind.
IIT Tax
Companies have a responsibility to withhold individual income tax from employees’ salary on behalf of tax authority. The standard monthly deduction for expenses for Chinese and Foreigner is RMB3500 and RMB4800, respectively. Additional, foreigners can deduct more for expense.
IIT Tax Rate:
Monthly taxable income | Tax rate (%) | Quick Deduction |
Income of RMB1,500 or less | 3 | 0 |
The part of income in excess of RMB 1,500 to 4,500 | 10 | 105 |
The part of income between RMB 4,500 and 9,000 | 20 | 555 |
The part of income between RMB 9,000 and 35,000 | 25 | 1005 |
The part of income between RMB 35,000 and 55,000 | 30 | 2755 |
The part of income between RMB 55,000 to 80,000 | 35 | 5505 |
The part of income in excess of RMB 80,000 | 45 | 13505 |
Individual annual income over RMB 120,000 in any tax year need file the tax return to the tax authorities within 3 months after the end of each tax year.
Social insurance and house funding
When hiring an employee, the company should first sign an employment contract with the employee. Meanwhile, the company should pay social insurance and house funding for the employees. There are slight difference in the rates for social insurance and house funding in each different province. Shanghai's rates are as below:
Item | Employee | Employer | Calculation Base | Notes |
Social insurance | 31.2%-32.52% | 10.5% | The base is employee’s average salary. | The highest base is 3 times of last year’s average salary in domestic area. The rate of injury range from 0.2% to 1.52% is charged on company’s industry. |
-Pension | 20% | 8% | ||
e-Medical | 9.5% | 2% | ||
-Unemployment | 0.5% | 0.5% | ||
-Maternity | 1% | |||
-Injury | 0.2%-1.52% | |||
House funding | 7% | 7% |
Article supplied by Shanghai Ruanyin Financial Consulting