China is the world’s largest manufacturing and trading nation. Its economy is the second largest in terms of GDP, and it is a prominent economic and technological dominion in eastern Asia. Additionally, the country has the world’s most significant hydroelectric power potential and numerous mineral resources. China continues to attract significant foreign investment, particularly in advanced manufacturing sectors, technology, and renewable energy.
Unlock growth opportunities in China with Cerity Global as your trusted partner. We offer end-to-end support for establishing your legal entity, navigating China’s often complex regulatory landscape with clarity and efficiency.
From company registration to ongoing back-office support, including HR, payroll, benefits, accounting, tax and compliance, Cerity Global simplifies the process so you can focus on growing your business.
Need to hire quickly before your entity is set up? We offer interim EOR services in China, enabling you to onboard talent fast. Once your entity is established, we ensure a smooth transition of your employees from the EOR Structure to your own legal entity, without disrupting payroll or compliance.
Our experts stay ahead of regulatory changes to keep your operations aligned with China’s employment and tax laws, helping you scale confidently and compliantly.
Also known as a Limited Liability Company, this is an entity setup where one or more foreign companies or investors hold the entire ownership and control. In principle, it is an independent entity separate from its foreign parent company.
In this type of entity setup, one or more foreign investors, along with one or more Chinese parties come together to create a new enterprise. Joint ventures are a prevalent way for foreign investors to enter the market and for local companies to access foreign capital, technology, and expertise.
As an extension of the foreign company, an RO is the easiest route for foreign businesses to operate in China. With an RO, a foreign company can engage in market research or business operations but cannot make a profit. They can still incur tax liabilities (e.g. deemed profit tax) depending on operating costs and business scope.
A FICE can be set up as a JV or an LLC and can used for retail, distribution, or franchising operations by foreign investors.
Legal representatives are appointed, however there is no requirement local resident director.
Legal representatives are appointed; there is also a requirement for local resident director.
A chief representative must be appointed.
Legal representatives are required; they can either be foreign or local resident.
In China, a corporate bank account can only be opened after legal entity incorporation and business license issuance. Businesses must register their accounts with the State Administration of Foreign Exchange (SAFE).
Bank Account Setup in China: What’s Possible and When
Before Incorporation:
After Incorporation:
Note:
Chinese banks conduct rigorous KYC/AML due diligence. Account opening can take several weeks depending on the institution and region.
Required documents include business license, tax registration certificate, Articles of Association, lease contract, legal representative’s ID, and in-person verification.
Cerity Global supports companies in their global expansion plans and helps in legal entity setup, registration and ongoing support services. With us, you can quickly set up a legal entity, operate compliantly, and expand globally. The process typically takes a few days to a week, depending on the bank.
Employment in China is primarily governed by the following laws:
In China, written employment contracts are mandatory within one month of employment. The contract must be in Chinese, or it can be bilingual if hiring foreign employees.
Some of the details typically mentioned in the written contract include:
The different types of employment relationships are:
Permanent Employment
The most common type of employment contract, a permanent contract, is one where there is no set end date and full-time employees work 8 hours per day for a five-day workweek and casual employees work less than 24 hours per week.
Fixed-Term Contracts
A fixed-term employment is one where the termination period is specified and is generally full-time.
Job Contract
A job contract is used for seasonal jobs in which the scope of work is clear, and the duration is not stipulated. When the project is finished, the employment relationship ends, and the company must pay the employee severance
In China, a probationary period typically lasts up to six months.
The standard working hours in China are eight hours a day and 40 hours a week on average.
Overtime
Overtime hours generally do not exceed one hour per day and thirty-six hours per week.
Minimum wage rates are updated regularly by provincial governments. The rates shown here may vary by specific municipality within provinces.
An employment agreement can be unilaterally terminated by providing a written notice 30 days in advance.
Severance payments shall be calculated using the local minimum wage standard if the employee’s average pay is less than the local minimum wage standard in the 12 months before termination.
Foreign nationals require a Z visa and must obtain a Work and Residence Permit after arrival.
Work Visa & Permit Options in China
1. Z Visa (Work Visa)
Ideal for skilled professionals and full-time employees.
Often used for standard hires and foreign employees hired by Chinese companies.
2. Intra-Company Transfer (ICT) Work Permit
Designed for multinational companies transferring employees to China.
3. Foreigner’s Work Permit for High-End Talent (Class A)
Fast-track work permits for top-tier.
4. Foreigner’s Work Permit for Professionals (Class B)
For professionals with bachelor’s degree and 2+ years of work experience.
5. Digital Nomad or Remote Work (Not Officially Recognized)
Currently there is no specific visa category for digital nomads. Foreigners may not legally work remotely from China for a foreign company under a tourist or business visa. However, remote work under a tourist/business visa may violate immigration policies and lead to penalties.
Key Notes:
Employees in China receive annual leaves based on their years of employment:
According to China’s Labour Law, female employees are entitled to at least 98 days of maternity leave, which can be extended by 15 days under special circumstances.
There is no unified paternity leave legislation, and provincial or municipal family and population planning regulations implement paternity leave policies.
All provinces in China now support paid paternity leave and the duration is 10 to 30 days, depending on the province or city, with most provinces providing 10-15 days of paid leave.
It is usually up to the employer to decide how many paid sick days they want to give to their employees. It is, however, stricter with the recuperation period, a type of sick leave when the employer cannot terminate the employee for non-occupational illness or injury and must pay a proportion of his or her salary. Recovery periods are regulated locally, and they differ from province to province.
The following statutory national holidays are observed in China:
The most common length of the pay period is monthly.
Bonuses are common but not mandatory in China. However, the 13th-month bonus is paid around the month of the Chinese New Year or Spring Holiday, based on employer practice or contract, and it is not a legal obligation.
Employees in China must pay Social Security taxes, which contribute to Social Security benefits.
The mandatory and statutory benefits in China are:
Both employers and employees must contribute to the social security system, which covers the following:
Accounting standards must adhere to the Chinese Accounting Standards (CAS). The CAS is based on two standards:
Annual financial statements and corporate income tax filings are required.
Statutory audits are mandatory for all foreign-invested enterprises (FIEs) in China, regardless of their size or revenue. Audits must be performed by a China-licensed CPA firms registered in China. Audit findings must be submitted to:
There are no exemption thresholds. Even dormat companies must complete an annual audit report and submit filings accordingly.
The standard corporate tax rate is 25%.
However, the law establishes lower rates of 15% for qualified enterprises (e.g. Tech Enterprises and certain integrated circuits producers).
The VAT rate in China is 13%. It applies to most taxable goods and services.
The reduced VAT rates are 9% and 6%.
For annual CIT filing, the filing date is May 31 of the following financial year.
Tax authorities may impose fines for delayed tax payments, including additional penalties that can go up to five times the unpaid tax amount or confiscated property.
China follows OECD Transfer Pricing Guidelines with local adaptations and enforcement by the State Taxation Administration (STA).
China has implemented CbC reporting in line with OECD BEPS Action 13.
Transfer pricing documentation is mandatory for companies that exceed certain thresholds.
Master File
Local File
Deadline: To be prepared and made available by June 30 of the following year and retained for 10 years. Submission is not automatic but must be provided within 30 days upon request by tax authorities.
Enacted on August 20, 2021, the Personal Information Protection Law (PIPL) came into effect on November 1, 2021, and is a comprehensive privacy law that aims to protect the personal information of individuals located in China. It is the equivalent of the General Data Protection Regulation (GDPR).
AML law in China has been amended to align with the Financial Action Task Force (FATF) standards, and the revision reflects China’s commitment to strengthening its domestic AML framework.
Obligated entities: Banks, security firms, law firms, accountants, real estate companies, etc.
Key requirements:
Penalties: Fines, revocation, and criminal charges
Reasons you should setup legal entity in China:
Cerity Global ensures your business expansion in China is fast, compliant, and future-ready, so you can focus on growth while we manage the back-office tasks.
Economic figures are subject to change based on quarterly reports and market conditions.
Cerity Global combines deep local knowledge with proven expertise to make your China business establishment effortless and compliant. Whether you’re looking for legal entity setup and registration or ongoing support, we’re your trusted partner for sustainable global expansion in China.
Disclaimer – The information provided is for informational purposes only and does not constitute legal, business, or tax advice. Entity setup requirements, tax rates, and economic data are subject to change and may vary by location.
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