For many WFOEs operating in China or foreign investors that want to set-up a legal entity in China, the registered address is a sensitive and potentially risky corporate compliance element. According to the PRC Company Law, every company must have a registered address and the registered address needs to correspond to a legal entity separately.
The virtual office prevalent in Hong Kong or other zones in the world could have a big compliance risk in China, which is mainly reflected in the company’s inability to complete the on-site inspections requested by the AIC (Administration for Industry and Commerce) or Tax bureau. If the company cannot complete the on-site inspection or does not work at the registered address, it will be blacklisted by the relevant authority and required to complete the registration transfer to the real business address within a time limit. Companies on the blacklist will be prohibited from proceeding any change of registration information or company governance, such as: change of directors, shareholders, company name changes, etc.
In this case, many co-working spaces or business centers have launched virtual office services that require a high maintenance cost. The virtual office they provided is often a separate closed office physically and leased to the company as a registered address in the legal sense. The office space can usually only accommodate one person to work with the minimum area to meet the need for a registered address. In terms of cost, companies need to pay the landlord a monthly rent ranging from 3,000 to 5,000 CNY.
If your company in China does not have any physical office needs and you don’t want to sustain the fixed cost from the business center, or with the development of China’s business, the company may need to change its office address continuously in a short period of time, is it feasible to avoid the time and cost of changing the registered address continuously in some way?
The answer is Yes. Monx can complete a fully compliant virtual office address registration through some specific registered addresses, also known as a Centralized Registration Place.
What is a Centralized Registration Place
According to Article 7 of the Shanghai Municipal Government’s 2015 Shanghai Office of the Office of the People’s Republic of China (2015) No. 15 “Administrative Measures for the Registration of Enterprise Residences in Shanghai”:
The district (county) people’s government or its authorized unit may designate one or more non-residential premises as a Centralized Registration Place for enterprises in the district (county) that do not disturb the residents, do not affect the surrounding environment, and public safety…
At the same time, according to the actual management measures implemented by each district:
“Centralized Registration Place refers to the non-residential housing provided for entrepreneurs who do not yet have office conditions or do not need physical office conditions at the initial stage of business start-ups to apply for residence registration”
Restrictions on the use of Centralized Registration Places:
Generally speaking, those who use Centralized Registration Places are legal entities that do not require a physical office. If an enterprise is undergoing or planning to proceed a specific business activity that requires a physical operation space, the enterprise cannot be permitted to be located in the Centralized Registration Place.
These business activities often refer to activities with special administrative approval items, including but not limited to:
Food and beverage trading business, retail, freight forwarding, ICP services, etc.
There are several common business activities that do not fall within the scope of business activities that restrict the use of Centralized Registration Places:
General trading, import and export (no export tax rebate), general consulting
Cost of using Centralized Registration Place:
The cost of using a centralized registration site is determined by the administrator. of the address.
The administrator, established by the local government, to support the needs of attracting investment, usually quote a quite low cost of using. Generally, they will charge a fee of about RMB 2,000 per year for the use of the registered place, which is much lower than the normal rent.
Compliance of Centralized Registration Place
Since the centralized registration address is supported and encouraged by the local government, various government offices like AIC, tax bureau can accept the Centralized Registration Place as a legal registered address and the company, in this case, will be exempted from the request on-site verification.
The only thing that may cause some trouble is bank account opening. According to the latest requirements of the People’s Bank of China in November 2020 to against telecom fraud, banks must conduct strict KYC checks before accepting the opening of bank account, which includes the visit of the actual business address of the company for inspection. However, the requirement of KYC of banks is much more flexible than compared with the government request, as long as the company has an actual place of business, even if it is located in a co-working space, it can be accepted by banks.
Additional benefits of using Centralized Registration Places:
Out of the need to attract investment and taxation, local governments could also give tax incentives to companies that use Centralized Registration Places, which usually reflect as refunding a certain percentage of taxes paid.
In addition, if the company is it is an industry encouraged by the government, the management will additionally assist in applying for government subsidies.
How Monx can help me in this case?
Monx is an established provider of company registration and outsourced overall corporate services in Hong Kong, China, and other Asia countries, providing market entry, legal, accounting, tax, HR, and operational advisory to international investors.
We are committed to providing a seamless service facilitated by technology and delivered by devoted account managers.
If you are interested in moving your company into a low-cost registration address in China, or you would like to know more about the registered address related information, contact us now!