Defining the business scope of your company can really make a difference between approval and rejection of the project by MOFCOM. Indeed, a company can only conduct business within its business scope. With China’s accession to the WTO, more and more business are opened to FIEs.
What does the business scope refer to?
In the application documents, the business scope is a list of business activities that will be carried out by the FIE in China. For classification purpose, the major business activity will define the overall nature of the FIE, the type of invoices to be issued by the company and the applicable taxes for example.
How should the business scope be drafted?
The FIE business scope shall be precise, leave no room for interpretation, and comply with the Foreign Investment Catalogue. A vague business scope can lead either to rejection by MOFCOM or to the wrong classification of the FIE. As a consequence, the local Chinese Tax Bureau will refuse to process the FIE tax registration.
For example, tax treatments between manufacturing FIEs and consulting FIEs are different.
-> This article may also be of interest to you : How to change the business scope in China ? – Setting up a New Business Structure
To know more, download our legal handbook related to setting up a business structure in China …
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