A wholly foreign-owned enterprise, or WFOE, is how most foreign founders get a company of their own in Mainland China: one that can hire, lease premises, issue fapiao to Chinese customers and pay suppliers in renminbi, with no Chinese partner. Since 2020 the rules behind it have changed more than the name suggests. This guide covers what a WFOE is now, what you need, the steps, and what the company pays and files, from official Chinese sources checked in October 2026.
What a “WFOE” is today
China’s Foreign Investment Law took effect on 1 January 2020 and repealed the old Wholly Foreign-owned Enterprise Law. “WFOE” is now a practitioner’s word: legally, a foreign-invested company is set up under the same Company Law as a Chinese one, usually as a limited liability company. Foreign investors get national treatment before establishment, except in the fields on the negative list.
Sources: Foreign Investment Law (English, gov.cn)
Step one: check the negative list
The negative list sets out the sectors where foreign investment is restricted or prohibited. The edition in force is the 2024 one, effective 1 November 2024: it cut the restrictions from 31 to 29 and removed every restriction on manufacturing. Most consulting, trading, e-commerce, software and manufacturing businesses fall outside it, but check your exact business scope before anything else.
Don’t confuse it with the separate Market Access Negative List, which applies to all companies, Chinese or foreign.
Sources: gov.cn: 2024 negative list · NDRC Order 2024 No. 23
Own it directly, or through Hong Kong?
The investor can be you or a company. Many founders own the WFOE through a Hong Kong company, because of what happens to dividends:
- Owned directly by a foreign company: dividends paid out of China carry withholding tax at 10%, unless the owner’s country has a treaty that lowers it.
- Owned by a Hong Kong company holding at least 25%: the Mainland–Hong Kong arrangement caps it at 5%, provided the Hong Kong company is the beneficial owner and the arrangement’s anti-abuse test is met.
Owning it personally has its own rules for foreign individuals; see China’s dividend tax on foreign individuals. For the structure question, see where to put a holding company.
Sources: EIT Law and regulations (chinatax) · Mainland–HK arrangement Art. 10 (IRD)
What the company needs
- A business scope that matches what it will actually do, and a Chinese company name.
- A registered address in the city where it registers. What counts as acceptable varies by city.
- Registered capital, which since 1 July 2024 must be paid in full within five years of establishment. There’s no general minimum, so set an amount the business will really put in. Companies registered before then must bring their payment period within five years by 30 June 2027.
- Management: a small company can have a single director instead of a board, who can also act as manager. It can have one supervisor instead of a supervisory board, or none at all if every shareholder agrees.
- A legal representative: the director or manager who acts for the company, as the articles say. If that person stops being director or manager, a new legal representative must be named within 30 days.
Sources: Company Law, 2024 revision (gov.cn) · State Council: capital transition rules
Step by step
- Confirm the scope against the negative list and choose the city.
- Prepare the investor’s documents (company documents or passport) and the articles of association. Documents from abroad usually need to be authenticated before Chinese authorities accept them.
- Register with the local market regulation authority, which issues the business licence. The initial foreign-investment report goes in through the same registration system.
- Open the bank accounts, including the account that receives the capital from abroad.
- Set up tax: invoicing, monthly and quarterly filings. China has issued fully digitalised electronic fapiao nationwide since 1 December 2024; they have the same legal validity as paper ones.
- Hire, with social insurance registration, and work permits for any foreign staff.
In our experience the whole process usually takes six to eight weeks, depending on the city, the scope and how fast the documents from abroad are ready. There is no official timeline.
Sources: Market Entity Registration Regulations · MOFCOM: foreign investment information reporting · gov.cn: digital e-invoices
Tax and every year
| What | When / how much | |
|---|---|---|
| Annual report | Previous year’s annual report to the market regulator, published on the National Enterprise Credit Information Publicity System; it also serves as the foreign-investment annual report | 1 January to 30 June each year, from the year after registration |
| Corporate income tax | On profits | 25%. Small low-profit enterprises (taxable income up to RMB 3m, up to 300 staff, assets up to RMB 50m) pay 20% on a quarter of their income, about 5% overall, until 31 December 2027 |
| Dividends out | Withholding tax deducted by the WFOE when it pays | 10% to a foreign company; 5% to a qualifying Hong Kong parent |
| Profit remittance | After tax, and after making up losses from earlier years | A current-account payment through the bank; banks review documents above USD 50,000 |
Sources: SAMR: Enterprise Information Publicity Regulation · EIT Law Art. 4 · MOF/STA Announcement 2023 No. 12 · SAFE: profit remittance
An example
Invented for illustration. Elena runs a Hong Kong company that sells kitchenware to European retailers. Her quality checks happen in Guangdong, and she now needs local staff and to pay suppliers in renminbi. She sets up a WFOE in Shenzhen owned 100% by her Hong Kong company, with registered capital of RMB 500,000 that she plans to pay in over two years, comfortably inside the five-year limit. She is the sole director, manager and legal representative, and her shareholders agree not to appoint a supervisor. Her diary has the annual report window from January to June, and her adviser checks that the Hong Kong company qualifies for the 5% dividend rate before the first payout.
Set up your WFOE with us
We check your scope against the negative list, structure the ownership (often through a Hong Kong company), register the WFOE, open its accounts, and keep the yearly report and filings on time.
China company (WFOE) formationFrequently asked questions
What is a WFOE in China?
A company in Mainland China owned entirely by foreign investors. Since the Foreign Investment Law took effect on 1 January 2020, it is set up under the same Company Law as a Chinese company, usually as a limited liability company; “WFOE” is now an informal term.
Is there a minimum registered capital for a WFOE?
There is no general minimum, but since 1 July 2024 the registered capital a company subscribes must be paid in full within five years of its establishment. Set an amount the business will actually put in.
Which businesses can a WFOE do?
Anything not restricted or prohibited by the negative list. The 2024 edition, in force since 1 November 2024, has 29 restrictions and none on manufacturing. Check your exact business scope against it first.
What tax does a WFOE pay?
Corporate income tax at 25%, or about 5% for qualifying small low-profit enterprises until the end of 2027, plus VAT and local surcharges. Dividends paid abroad carry 10% withholding tax, or 5% to a qualifying Hong Kong parent.
Can a WFOE send profits out of China?
Yes, after tax and after making up losses from earlier years. Profit remittance is a current-account payment handled through the bank, which reviews the documents for amounts above USD 50,000.
General information for internationally mobile founders, not tax, legal or immigration advice for your situation. Rules and fees change; confirm your position with a qualified adviser in each country involved before acting.