Guangzhou is the
capital of Guangdong Province, a national historical and cultural city, a
National Central City, an international business center and an integrated
transport hub. As the south gate of China, it is located in the geometric
center of Asian-Pacific area, adjacent to the South China Sea, Hong Kong and
Macao. With a total area of 7,434 km2, it has a population of over 16 million. For more than 2,000
years, Guangzhou, known as the Millennial Commerce Capital, has always been
China's important trading port and the origin of ancient Maritime Silk Road.
FIPE Introduction
Foreign-invested partnership enterprise (FIPE) is an unlimited liability business entity at least one of whose partners is a foreign investor. Both foreign individuals and legal entities can be partners of a FIPE. The term partnership enterprise refers to general partnerships and limited partnerships. A general partnership enterprise may be formed by general partners who bear unlimited joint and several liability for the debts of the partnership. The general partners share unlimited liabilities for the debt of the partnership. On the other hand, a limited partnership enterprise is formed by a combination of general partners and limited partners where the limited partners bear the liabilities for the partnership's debts to the extent of their capital contributions.
A partner may contribute capital to the partnership to garner a share of the partnership's profits or losses. The capital contribution may include money, intellectual property right or other properties, and even labor services at a valuation determined by agreement among the partners.
As for profit distribution, the default format is to follow the percentage of capital contributions made by the partners. However, it can be fully decided by the partners provided in the partnership agreement in the way unnecessarily in proportion to the capital contribution.
Generally, a FIPE as a whole is only subject to Business Tax whose rate in most occasions is 3-5% of the turnover. No corporate income tax is required. The partners shall pay respectively their partnership income tax.
Why not Start Your Own Business by Setting up a FIPE?
Partnership Enterprise has been available only to Chinese citizens for nearly 15 years since August 1, 1997 when the Partnership Enterprise Law of PR China took effect. However, since March 1, 2010, according to the Administrative Measures for the Establishment of Partnership Enterprise in China by Foreign Enterprises or Individuals, FIPE is newly available for foreign investors who intend to start their own business here in China.
Compared with WFOE, RO and JV, FIPE is the most convenient way for foreign investors to set up business in China. It is especially tailored for professionals, like architect, fashion designer, private equity investor, who are highly motivated to establish business presence in Chinese market. Unlike WOFE, foreign partners in FIPE are relieved of doubly levied capital income tax; also there is no additional process of application for pre-approval from Chinese Ministry of Commerce, no compulsory minimum registered capital. The daily maintaining expenses of a FIPE is much lower than WFOE or RO. When foreign investors finally want to stop their business in a FIPE, they can simply quit it by signing agreement with other partners. By the way, the process to close a FIPE is very flexible and convenient as well.
Establishing Steps
FIPE can apply for business license directly to local State Administration for Industry and Commerce (SAIC) without application for Certificate of Approval by local Ministry Of Commerce. However, if a FIPE’s business scope falls into some special category, for instance, manufacturing, finance, it needs to obtain a pre-approval as well.
Foreign-invested partnership enterprise (FIPE) is an unlimited liability business entity at least one of whose partners is a foreign investor. Both foreign individuals and legal entities can be partners of a FIPE. The term partnership enterprise refers to general partnerships and limited partnerships. A general partnership enterprise may be formed by general partners who bear unlimited joint and several liability for the debts of the partnership. The general partners share unlimited liabilities for the debt of the partnership. On the other hand, a limited partnership enterprise is formed by a combination of general partners and limited partners where the limited partners bear the liabilities for the partnership's debts to the extent of their capital contributions.
A partner may contribute capital to the partnership to garner a share of the partnership's profits or losses. The capital contribution may include money, intellectual property right or other properties, and even labor services at a valuation determined by agreement among the partners.
As for profit distribution, the default format is to follow the percentage of capital contributions made by the partners. However, it can be fully decided by the partners provided in the partnership agreement in the way unnecessarily in proportion to the capital contribution.
Generally, a FIPE as a whole is only subject to Business Tax whose rate in most occasions is 3-5% of the turnover. No corporate income tax is required. The partners shall pay respectively their partnership income tax.
Why not Start Your Own Business by Setting up a FIPE?
Partnership Enterprise has been available only to Chinese citizens for nearly 15 years since August 1, 1997 when the Partnership Enterprise Law of PR China took effect. However, since March 1, 2010, according to the Administrative Measures for the Establishment of Partnership Enterprise in China by Foreign Enterprises or Individuals, FIPE is newly available for foreign investors who intend to start their own business here in China.
Compared with WFOE, RO and JV, FIPE is the most convenient way for foreign investors to set up business in China. It is especially tailored for professionals, like architect, fashion designer, private equity investor, who are highly motivated to establish business presence in Chinese market. Unlike WOFE, foreign partners in FIPE are relieved of doubly levied capital income tax; also there is no additional process of application for pre-approval from Chinese Ministry of Commerce, no compulsory minimum registered capital. The daily maintaining expenses of a FIPE is much lower than WFOE or RO. When foreign investors finally want to stop their business in a FIPE, they can simply quit it by signing agreement with other partners. By the way, the process to close a FIPE is very flexible and convenient as well.
Establishing Steps
FIPE can apply for business license directly to local State Administration for Industry and Commerce (SAIC) without application for Certificate of Approval by local Ministry Of Commerce. However, if a FIPE’s business scope falls into some special category, for instance, manufacturing, finance, it needs to obtain a pre-approval as well.
· Name Registration with local State Administration for
Industry and Commerce (SAIC)
· Pre-approval from local government authorities concerned
if business scope entails such pre-approval.
· Apply for temporary Business License with local SAIC
· Chops made by Public Security Bureau (PSB)
· Organization Code License by local Bureau of Quality and
Technical Supervision (BQTS)
· Tax Certificate by Taxation Bureau
· Registration and Approval with State Administration of
Foreign Exchange (SAFE)
· Open Foreign Currency and RMB bank account
· Inject Capital from investor’s overseas bank account
· Capital Verification Report by Certified Public Accountant
(CPA)
· Applying for Permanent Business License with SAIC
· Financial certificate Registration with Ministry of Finance
· Statistics license Registration with local National Bureau
of Statistics
For individual investor as partner, certified photocopy of ID and residency
For individual investor who is living in China need not fulfill ID certification
3. 2x Bank Reference Letters from investor’s bank to declare a good standing
4. Investors using RMB as capital contribution need to provide a letter of approval from SAFE
5. FIPE legal representative's CV and 8 photos
6. Registered office address
For company landlord, 2x photocopy of lease, ownership certificate and business license
For individual landlord, 2x photocopy of lease, ownership certificate and landlord ID
7. Additional documents when business scope entails approval of government authorities concerned
Tommy China Business Consulting has direct connections in the local government, Since 2006, TCBC has been focusing on consulting services for our clients to invest in Guangzhou. Foreign Invested Partnership Enterprises (FIPE) Setting Up in Guangzhou is a big project by itself, which requires financial and time commitments, business management knowledge and China expertise. Identifying a competent agent to manage the complex process will be a cost and time effective way to avoid potential pitfalls
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