A WFOE (Wholly Foreign-Owned Enterprise) is a company established in China in accordance with Chinese laws and wholly owned by one or more foreign investors. This type of company is ideal when the employer seeks to take positions in the Chinese market or install productive units or services in China.
A WFOE can obtain benefits and issue local invoices in RMB to its clients, which is crucial, since the invoices are the basis to obtain the tax deductions in China. Compared to a joint venture, a WFOE has greater freedom and independence, and can protect its intellectual properties better. It can also hire local staff directly without the agency services.
Since 2010, China offers a new form of investment by which foreign companies can partner with other foreign companies or with Chinese companies. This legal form is Association for the Company with foreign investment (FICE), this type of association does not pay taxes on the profits of the global company, but each partner is responsible for the taxes on his part of the company.
The advantage of this type of company is greater flexibility in the distribution of profits and a strong governance structure. However, this corporate form only allows the marketing of goods.