sinolink consulting
Virtual address, which has been popular overseas, becomes a hot topic in China recently. At present, in order to reduce the operating costs, many foreign investors, at the early stage of entering into China market, might consider to use the virtual address to complete the industrial and commercial registration. Admittedly, the rental and labor might cost a lot at the initial stage especially for foreign SMEs, so using a virtual address might reduce the initial investments and expenses. However, the situation is not completely true.
According to Chinese law, virtual address is not allowed in the industrial and commercial registration except in some economic zones1. According to industry and commerce administrative regulations, the business license registered with virtual address is illegal without the approval of relevant departments. As for the enterprises which have acquired licenses with virtual address, their licenses and incomes will even be revoked or confiscated. For the registration of business license must base on real, valid and specific addresses confirming to local administrative planning.
Even though sometimes, foreign investors successfully get registered with a virtual address, it brings possible problems in their future business operation. Possible problems might come when:
1.Opening bank account
Believe or not, it brings difficulty for you to open bank account as the opening banks normally will verify the company addresses. If the registered office is not real or valid, the bank might refuse to open an account for the enterprise.
2.Registering with the tax authority and purchase the invoice machine
Enterprises still need to deal with the tax registration and obtain the Tax Registration Certificate even if they have got the business license. The investigations and examinations from tax authorities are stricter: they require not only office telephone number, and in most cases, go to the registered address themselves to verify the company. And every company (except for the Representative Office which is not allowed to issue invoice) will need to purchase an invoice machine from the tax authority. The tax officer will visit the company at the registered address before they can sell the machine to the enterprise.
3.Applying for working visa
Any foreign employees relocating to China and work in any Representative Offices, JVs or WFOEs shall need to apply a working visa. The public security bureau will definitely check the registered address of the foreign company before they might issue any working visa for the foreign staff. Even if the company is lucky enough with aforementioned bank account opening and tax registration, the good luck will not help when applying for the visa. The public security officer will check on every applicant before they issue the visa.
Therefore, although the virtual registered address does bring immediate benefits to many foreign investors at the early stage, yet the hidden dangers and risks are buried for their future developments, expansions and even their normal operations.
For foreign companies who hire limited staff at the initial stage might consider to rent smaller office or use business centers. The business centers will provide legal address for the company registration and also provide basic business services like receiving phone calls, receive fax or couriers etc.
So, this article aims to remind the enterprises and foreign businessmen intending to register company with virtual address: look before you leap. Don't just look the immediate benefits yet hinder the future development. Before register companies or Representative Offices, it is suggested you consult with local China professional consultant who will safeguard your company formation in the legal and cost-effective ways.
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1.Registering business license with virtual address is a preferential policy of government to attract investments in some areas, but the prerequisite is to get the official approval from the local government authorities.
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