Setting up a trading company in Hainan Island, China can be a rewarding venture. This guide provides a comprehensive overview of the process, requirements, and opportunities available for foreign investors interested in retailing, wholesaling, franchising, or commission agency activities.
Understanding Foreign-Invested Commercial Enterprises (FICEs)
Foreign-invested commercial enterprises (FICEs) in Hainan Island engage in various activities, including retailing, wholesaling, franchising, and commission agency activities. Let’s delve deeper into each of these activities:
Retail FICE in Hainan Island
Retail FICEs are involved in selling goods through various channels such as fixed venues, television, telephone, mail order, internet, and vending machines. They can also import goods dealt in by the FICE itself, purchase domestic products for export, and engage in other relevant ancillary businesses.
Wholesale FICE in Hainan Island
Wholesale FICEs in Hainan Island primarily focus on selling goods to retailers, industrial, commercial, and other customers. They can also engage in commission agency activities, import and export goods, and conduct other relevant ancillary businesses.
Basic Set-up Requirements for FICEs in Hainan Island
Before establishing an FICE in Hainan Island, foreign investors need to meet certain criteria:
- Good Reputation: Foreign investors must have a good reputation with no history of violating Chinese laws, administrative rules, or regulations.
- Registered Capital: The registered capital is the amount of money or evaluated substances that the shareholder commits to investing in the company. For a wholesale company, the minimum registered capital is RMB 500,000, and for a retail company, it is RMB 300,000. The competent authority may require a higher amount depending on the situation.
- Investment Ratio: The required ratio between registered capital and total investment should be met.
Limitations for FICEs in Hainan Island
Certain limitations apply to FICEs dealing with specific products such as books, periodicals, newspapers, pharmaceutical products, agricultural chemicals, and more. If a foreign investor has more than 30 retail stores in China and distributes these products from different brands or suppliers, their share in a retail enterprise is limited to 49 percent.
Specific Considerations for Retailing in Hainan Island
When applying to open a shop concurrently with the establishment of the FICE, the proposed shop must conform to the urban and commercial development plans of the city. Additionally, larger stores (above 3,000 square meters) require additional documentation such as the certification document for the right to use the land or premises lease agreement.
Franchising Opportunities in Hainan Island
Foreign investors interested in franchising should comply with the Administrative Regulations on Commercial Franchise. This regulation governs the authorization of trademarks, trade names, and operation models for remuneration or franchise fees.
Operation Term, Business Scope Expansion, and Application Process
FICEs in Hainan Island generally have a term of operation that should not exceed 30 years, with exceptions for those in the central and western regions. If an existing FIE wishes to expand its business scope, it needs to follow legal procedures, amend relevant documents, and specify the distribution method and product list.
The application documents for establishing an FICE include
- a written application form,
- feasibility study report,
- contracts,
- bank credit and registration certifications,
- audit reports, and more.
These documents ensure the transparency and legality of the business.
Here are some things to keep in mind:
Foreign investors are strongly recommended to retain a Chinese entity that is authorized or permitted by relevant authorities to directly submit the application documents.
The Chinese entity that acts as a sponsor is responsible for submitting the application documents to the relevant authority and following up on the application process. The sponsor will also be responsible for providing the foreign investor with the necessary assistance, such as translation and interpretation services.
The following are some of the requirements for a Chinese entity to act as a sponsor:
- The entity must be a legal entity registered in China.
- The entity must have a good credit record.
- The entity must have the necessary experience in setting up foreign funded companies in Hainan.
If you are a foreign investor who is interested in setting up a Free-Trade zone company in Hainan, you should contact a professional service provider who can assist you with the process.
- The Hainan Free Trade Port (FTZ) is a special economic zone within China that offers a number of benefits to foreign investors, including lower taxes, relaxed visa requirements, and simplified customs procedures.
- To set up a trading company in the Hainan FTZ, foreign investors must first obtain a business license from the local government. The application process can be complex, so it is advisable to hire a local attorney or consultant to help.
- Once the business license is obtained, the foreign investor must then open a bank account and register for taxes. The tax rate for trading companies in the Hainan FTZ is 15%, which is lower than the standard corporate tax rate of 25% in China.
- Foreign employees working in the Hainan FTZ are also eligible for a number of tax breaks, including a reduced personal income tax rate of 15%.
Conclusion
Establishing a trading company in Hainan Island, China, offers foreign investors lucrative opportunities in retailing, wholesaling, franchising, and commission agency activities. By understanding the basic set-up requirements, registered capital, limitations, and expansion options, investors can navigate the process successfully. For more information, contact Business@tropicalhainan.com.
Related Article: Documents and Process for Registration of Foreign-Funded Companies in Hainan Island, China
