Jun. 18 – Foreign investors with an existing China WFOE that are looking to establish a presence in another destination, be it expansion or relocation, may wish to consider establishing a branch office.
A branch office is essentially an office of a WFOE located somewhere other than the WFOE’s main office location. Branches are easier to set up and maintain, but are limited in many ways, such as not being able to expand beyond their parent WFOE’s business scope.
Many WFOEs use branch offices to expand their geographic presence. For example, major retail stores in China are generally branches of foreign-invested commercial enterprises (FICE). Branch offices are also appealing if a company needs to hire local employees in the destination city (and therefore submit IIT and social insurance payments on their behalf).
For investors who find relocation to be too much of a hassle, who are unable to relocate for government approval reasons, or who are simply interested in expansion, opening a branch office is also an alternative to WFOE relocation.
In addition, we also discuss another popular expansion option, “converting” a representative office (RO) to a WFOE.
However, ROs have their negatives, including a limited business scope, no ability to issue fapiao and limited hiring ability; local employees can only be hired through government HR agencies (FESCO) and no more than four foreign employees can be hired.
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