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Regional headquarters may be set up to provide support to group companies within the region. The purpose of regional headquarters is to attract multinational corporations to set up regional or global headquarters in China, and to boost the local economy. The requirements for setting up the regional headquarter and relevant preferential policies may differ from region to region. Here, we focus on the local regulations of Beijing and Shanghai, as being top popular foreign investment destinations, for your consideration.  

Beijing regional headquarters

– What are the requirements to set up regional headquarters in Beijing?

An already established foreign-invested holding company may apply directly for recognition as a Beijing regional headquarter upon approval; or

A foreign-invested management company may apply for recognition as a Beijing regional headquarter subject to fulfilling the following requirements:

  • The parent company’s total assets must be of no less than USD 400 million.
  • The parent company’s total paid-in registered capital in China must be of at least USD 10  million, and with no less than three enterprises inside or outside China that are invested or authorized to be managed by the parent company; OR no less than six enterprises inside or outside China that are invested or authorized to be managed by the parent company.
  • The management company’s paid-up registered capital must be of no less than USD 2  million.
  • The Beijing regional headquarters shall be the parent company’s sole highest operating management entity within China.

– Which activities shall be mentioned for Beijing regional headquarters’ business scope?

Beijing regional headquarters may engage in the following activities within their business scope: group treasury, domestic distribution, import and export, research and development, technical support, logistics operations, shared services among group companies, outsourcing services for multinational companies and overseas companies, and any other operation, management, and services activities, permitted by the law.

– What are the incentives for Beijing regional headquarters?

  • setting up subsidy up to RMB 10 million;
  • financial award up to RMB 10 million when the annual revenue first reaches RMB 1 billion;
  • a 3-year rental subsidy, or a onetime subsidy (RMB 1,000 per square meter) for building or buying an office (subsidized areas shall not exceed 5,000 square meters);
  • government’s assistance in obtaining residence permits for staff; and
  • tax incentives and exemptions on personal income tax.

Shanghai regional headquarters

– What are the requirements to set up regional headquarter in Shanghai?

A foreign-invested company (either holding company or management company or in other forms) may apply for recognition as a Shanghai regional headquarters.

A Shanghai regional headquarter shall meet the following requirements:

  • It is an FIE with an independent legal person status.
  • The registered capital shall be of no less than USD 2 million.
  • The parent company’s total assets must be of no less than USD 200 million.
  • Upon authorization by the parent company, it assumes the functions of a headquarters, such as management decision-making, capital management, procurement, sale, logistics, settlement, research and development, and training, in a region covering more than one country.
  • The status of regional headquarters may be considered if the entity meets the aforesaid requirements and makes outstanding contributions to local economic development.

– What are the incentives for Shanghai regional headquarters?

  • RMB 5 million sets up subsidy for newly established regional headquarters with ten or more employees in Shanghai of a holding company with the paid-up registered capital exceeds USD 30 million;
  • 3-year rental subsidy, or a onetime bonus for self-building or buying an office in subsidized areas;
  • financial award (RMB 5-10 million) when the annual revenue reaches RMB 500 million or more criteria;
  • one-time subsidy (RMB 3 million) if the regional headquarter update with higher level (eg. becoming Asian headquarter, Asian-pacific headquarter or even higher).
  • centralized management of foreign exchange funds;
  • cross-border RMB business;
  • entry-exit formalities for the employees’ visa;
  • custom clearance; and
  • talent introduction.

– What are the regulations for FIEs that fail to meet the standards for being the headquarters of a multinational corporation?

Since February 1st, 2017, eligible WFOEs and their branches that do not meet the standards for multinational companies headquarters but that effectively support service functions may be recognized as quasi-headquarters entities and benefit from the same preferential policies offered for Shanghai regional headquarters if they meet the following criteria (further relaxed since September 1, 2019):

  • It is a foreign-invested enterprise or any of its branches with an independent legal person status.
  • The registered capital must be of no less than USD 1  million; where the entity is established in the form of a branch, the working capital allocated by the parent company shall not be less than US$1 million.
  • The parent company’s total assets must be of no less than USD  100  million.
  • Upon authorization by the parent company, it assumes the functions of headquarters, such as management decision-making, capital management, procurement, sales, logistics, settlement, research and development, and training in a region covering more than one country.

Quasi-headquarters are entitled to the benefits of preferential policies for the following activities:

  • centralized management of foreign exchange funds;
  • cross-border RMB business;
  • entry-exit formalities for the employees’ visa;
  • custom clearance; and
  • talent introduction.

-> This article may also be of interest to you : Arrangements in China : Investment Options

To know more, download our legal handbook related to foreign investment in China…

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