Structuring your JV – General issues

Some of the issues you need to consider apply to all types of foreign entities in China, while others relate specifically to JVs.

  • business scope ? what should yours be?
  • registered capital requirements ? these may vary depending on the industry and the location. It is also absolutely critical that you do not simply put in the minimum because the regulations say you can ? you may find the business is under-capitalised if you do so. This is an operational judgment for you, not the bureaucrats.
  • Are you manufacturing 100% for export, or part for export, part for domestic sales? Where are your clients located? Do they require an official local invoice? Would they require you to sell your goods to Hong Kong or other off-shore jurisdictions? ? they all have a fundamental impact on how you structure the business!
  • Agreement, Contract and Articles of Association ? these need detailed work by you to ensure you cover all the bases. You are setting up a company with a 10-15 year life span and you need to be sure you know what you are getting into.

We will now explore these in more detail.

Business scope

Having set up a limited company does not necessarily mean you can engage in any kind of business activity, as is the case in some Western countries. Like other entities in China, JVs can only be operated within the business scope approved by the authorities. Other activities are subject to further approval. So it is vital to determine what you want do right from the start.

Lazy, or deliberately disingenuous, business scopes, such as only using the phrase ?production of (product)?, will not necessarily qualify a JV as a production company. You will also fail to qualify for tax holidays, even if the local government approves it, as the tax bureau may require a more detailed and specific explanation. We have encountered numerous problems of this nature, all requiring a scope of business change on the licence before the tax bureau is satisfied with exemption status. You need to ensure your business scope is accurate. Attempts to fool the tax bureau into thinking you are one thing, while in fact you are another – even if you can get it past the approvals process – inevitably end in failure. Play the game and say what it is you are really doing.

Next :
Specific JV structural issues


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

0 comments

Add your comment

Commenting is allowed only for registered users.

Other articlesgo to homepage

Trends in the Chinese Online Education Industry

Trends in the Chinese Online Education IndustryComments Off

The Increase of China on the net Training Market place Income of online training sector in China achieved 84 billion Yuan in 2013, with a 19.9%-growth from 2012, based on the 2013-2014 China On-line Education Report unveiled by iResearch. The huge Potential of China on the internet Education Market place The 3 key engines are

US$1.8 Trillion : the Chinese Consumption by 2021

US$1.8 Trillion : the Chinese Consumption by 2021Comments Off

Luxurious manufacturers in China have had to deal with down a slowing financial system for many time, but a brand new report by Boston Consulting Group (BCG) and Alibaba Group’s study section, AliResearch sheds a more constructive light-weight on China’s purchaser economic system. By 2021, Chinese people are envisioned to add US$1.8 trillion in new

China Structure – Joint Ventures

China Structure – Joint Ventures(0)

Forming a joint venture in China can be a successful endeavor as long as each side?s goals, contributions and responsibilities are mutual and understood.

China Structure – Foreign-Invested Commercial Enterprises

China Structure – Foreign-Invested Commercial Enterprises(0)

Foreign-invested commercial enterprises are capable of conducting the following activities: Import, export, distribution and retailing Retailing ? selling goods and related services to individual persons from a fixed location, as well as through TV, telephone, mail order, internet, and vending machines Wholesaling ? selling goods and related services to companies and customers from industry, trade

China Structure – Wholly Foreign-Owned Enterprises

China Structure – Wholly Foreign-Owned Enterprises(0)

The wholly foreign-owned enterprise has become the investment vehicle of choice for the international investor wanting to manufacture, service or trade in China.

read more

Contacts and information

Social networks

Most popular categories

Real Time Analytics