Choosing a location to register a new business entity in China is not an easy decision: each city and even each neighborhood might have different requirements related to the type and structure of your business. Furthermore, each city has its own KPIs for economic development, so some of them may offer good conditions for attracting foreign investment, while others do not.

The same goes for the different neighborhoods within the same city. Many foreign companies choose to register in the so-called free trade zones (FTZ) to take advantage of the benefits offered by these special areas.

In this guide we have analyzed one of the most popular areas for the registration of foreign companies, namely the city of Shanghai and its districts.

For more detailed information on the process of forming a foreign company in China, please refer to our guide available here.

For those wishing to setup a foreign company in Shanghai, there are 3 different options regarding the location where to register: the city Downtown, a Rural Area, and a Free Trade Zone. Each of these options carries different benefits and requirements such as the required share capital, the type of office space needed, the corporate tax and incentives, the documentation to be provided, etc.

In order to choose the best solution to the needs of our new Chinese company, there are 3 main factors to consider: these are the Reputation, the Taxation, and the possibility of using a Virtual Office as an official address.

As in other countries, a the official address of a company in China can play an important role in forging an adequate reputation among its customers and partners. Therefore, it goes without saying that an entity registered in the city center will have more appeal than one located in a rural area, entailing at the same time higher management costs related to the leasing of commercial premises and offices.

A particular case is that of free trade zones: in fact, given their large territorial extension, it may happen that within their borders there may be prestigious areas which allow the companies registered there to benefit also from a good reputation as well as from others advantages generally offered by the FTZ.

Taxation is one of the main factors to consider when it comes to choosing where to set up a company in China. As mentioned above, different areas within the same city have different characteristics and among these there are also different possibilities concerning tax returns.

In fact, while for companies registered in the city center no tax return is allowed, better conditions are offered in rural areas, where the tax return is linked to the total taxes paid by the company.

Once again, the situation of the FTZ is variable, given that the possibility of a tax return is linked both to the type of activity that is carried out by the company and to the specific area of the FTZ in where it is registered.

Another crucial point in choosing the location where to establish a company in China concerns the possibility or not of using a Virutal Office as the official address of our new entity. This is particularly important as it can help save some of the initial setup and management costs because, in order to register a WFOE or Representative Office, it is necessary to have a signed lease agreement for the business premises and/or office space.

As for the companies registered in the city center, it is not allowed to have their address associated with a Virtual Office and, if the company will move to another address in the future, it must be changed on the business license.

The situation of companies established in rural areas is different because in some cases it is possible to rent a small space in a serviced office without excessive costs given the wide availability of virtual addresses in those areas.

Finally, in the free trade zones, while it is possible to register the entity at addresses in Virtual Offices, the price to be paid will be slightly high.

Are you looking to register a new company in Shanghai or other cities in China and do not know how to proceed? Do you need more information or clarification on how to enter and succeed in the Chinese market? Send us an email at info@chinalyse.com and we will be happy to help you with anything you need!

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