If you’ve registered a company in China, then you also need to know how to close a business in China. PTL Group specializes in company registration in China. We make sure that China company registration is done right, and is supported by extensive operational support for registered entities. This is where our knowledge and expertise really make a difference.
The Beginning of the End
If you thought that company registration in China is difficult, then you should know that the WFOE deregistration process is gradual, complex and time-consuming as well. It requires businesses not only to reconcile with the situation and deal with regulatory mechanisms, procedures and requirements, but also to continue with normal operations until the final shut down. In addition, China’s Foreign Investments Law, which came into effect on January 1st 2020, is affecting foreign companies’ prospects in China in general – and will specifically influence shutdown procedures.
The WFOE deregistration decision
When a decision is made to deregister a Chinese WFOE, it is against the law to simply “clear out”. An abrupt abandonment (leaving behind unfilled reports and unpaid taxes) would lead to a revocation of the WFOE business license. The company would also be blacklisted and publicly humiliated on the State Administration of Industry and Commerce website.
Sudden and quick abandonment of a business is also not recommended for practical reasons. WFOE Shutdown in China is a gradual process in which all business aspects are handled and terminated. During this process, the company still operates, albeit limited, until it is completely shut down. But as long as the company functions, it has to be handled legally. Given the complexity and sensitivity involved in this process, it’s worth knowing that there’s also an avenue of freezing the company instead of a complete shutdown.
Learn more about tax filings and payment deadlines in China.
Schedule
The WFOE deregistration process can take between 9-12 months, which are required for closing tax files (provincial and national). This is the longest and most cumbersome phase of the process, and may last longer if unpaid fines or other irregularities have accrued. At the end of this period, approval for closing will be obtained from the State Administration of Industry and Commerce.
The duration of the deregistration process varies and depends on other factors such as the number of employees hired at the time of the shutdown, location (province, city), etc.
At PTL Group, we specialize in registering and managing foreign-owned entities in China. Get in touch today and let us support your China operations.
Last updated: May 2024
