Shenzhen is China’s technology capital, and for a foreign technology company entering China, Shenzhen is the natural first choice. The city has the engineering talent, the supplier ecosystem, the venture capital, and the government incentives that a technology company needs. The company registration process in Shenzhen is efficient by Chinese standards — the city has invested in its digital government infrastructure, and the Administration for Market Regulation processes company registrations faster than most other Chinese cities.
Here’s what a foreign technology company needs to know about registering a WFOE in Shenzhen.
Why Shenzhen for Technology Companies
Shenzhen’s technology ecosystem is unrivaled in China. The Nanshan District — Shenzhen’s technology corridor — hosts the headquarters of Tencent, DJI, and hundreds of technology startups and scale-ups. The Huaqiangbei electronics market in Futian District is the world’s largest electronics components market — a foreign hardware technology company can source virtually any electronic component within a few hours of its Shenzhen office.
The talent pool is deep. Shenzhen attracts engineering graduates from China’s top universities — Tsinghua, Peking, Zhejiang, and the Shenzhen-based Southern University of Science and Technology — and the city’s reputation as an opportunity city attracts experienced engineers from across China. A foreign technology company that establishes a development center in Shenzhen can recruit the hardware and software engineers it needs, and the cost of engineering talent — while higher than in second-tier Chinese cities — is competitive with the global technology hubs.
The Shenzhen government actively supports technology company establishment. The government offers a range of incentives for technology companies that register in Shenzhen — the high-tech enterprise certification, which reduces the corporate income tax rate from 25% to 15%, the R&D super deduction of 200% of qualifying R&D expenditure, the Shenzhen municipal R&D subsidies, and the Nanshan District’s rent subsidies for qualifying technology companies.
The Registration Process in Shenzhen
The Shenzhen company registration process is conducted through the Shenzhen Administration for Market Regulation’s online registration system. The system is integrated with the national company registration database, and the processing is efficient — a straightforward WFOE registration is typically processed within three to four weeks of filing.
The name reservation is the first step. The Shenzhen AMR allows online name reservation, and the system searches the national database for identical names. A technology company should include the technology field in the industry description — “Technology Development,” “Software Development,” “Electronics Technology” — rather than a generic description like “Trading.” The technology-specific description is important for the high-tech enterprise certification and for the government incentives that are tied to the company’s registered business scope.
The registered address must be a physical address in Shenzhen. A technology company that’s establishing a development office can use a serviced office for the initial registration — the serviced office provides the lease contract that the AMR requires — and can move to a permanent office later. A technology company that’s establishing a manufacturing operation must register in an industrial zone — the Shenzhen High-Tech Industrial Park in Nanshan, the Shenzhen Software Park, or one of the other designated technology parks.
The Shenzhen AMR’s document requirements are similar to the other GBA cities — the business license application, the articles of association, the board resolution of the parent company, the parent company’s certificate of incorporation, and the identification documents of the legal representative and the management personnel. But the Shenzhen AMR is more experienced with foreign-invested technology companies than most other cities’ AMRs, and the review is faster because the reviewers understand technology company business scopes.
The Nanshan District Advantage
Nanshan District is the preferred location for a foreign technology company’s Shenzhen registration. The Nanshan AMR processes a high volume of technology company registrations, and the reviewers understand software development, hardware design, and technology consulting as business activities. A company whose business scope includes “software development and technical services” will be processed by a reviewer who understands what that means.
Nanshan District offers rent subsidies for qualifying technology companies — a subsidy of 30% to 50% of the office rent for a specified period, typically one to three years, depending on the company’s technology classification and its registered capital. The subsidy is administered by the Nanshan District Science and Technology Innovation Bureau, and the company applies for the subsidy after the business license is issued.
Nanshan District also offers talent subsidies — the Shenzhen Peacock Plan provides subsidies for high-level foreign talent, and the Nanshan District supplements the municipal subsidies with district-level subsidies. A foreign technology company that’s recruiting senior engineers and scientists should explore the talent subsidy programs and factor the subsidies into the compensation package.
The High-Tech Enterprise Certification
The high-tech enterprise certification — the HNTE certification — is the most valuable incentive for a technology company in Shenzhen. The certification reduces the corporate income tax rate from 25% to 15%, and it qualifies the company for the R&D super deduction and for various local government subsidies.
The HNTE certification requires the company to meet criteria in four areas. First, the company must be engaged in a high-tech field — the eight high-tech fields defined by the government, including electronic information technology, biology and new medicine technology, aerospace technology, new materials technology, high-tech services, new energy and energy-saving technology, resources and environment technology, and advanced manufacturing and automation. Second, the company must own the intellectual property rights for its core technology — patents, software copyrights, or integrated circuit layout designs.
Third, the company’s R&D expenditure must be a specified percentage of its revenue — 5% for companies with revenue below 50 million RMB, 4% for revenue between 50 million and 200 million RMB, and 3% for revenue above 200 million RMB. Fourth, the company’s high-tech products and services must account for at least 60% of its total revenue. The certification is reviewed every three years, and the company must continue to meet the criteria to maintain the certification.
A technology company that’s registering a WFOE in Shenzhen should structure its business activities, its IP ownership, and its R&D expenditure to qualify for the HNTE certification. The certification is not automatic — the company must apply, and the application requires a detailed submission of the company’s technology, its IP, its R&D activities, and its financial data.
The Technology Import and Export
A technology company in Shenzhen may import technology — software, hardware designs, technical specifications — from its foreign parent company, and may export technology — the software or the hardware that the Shenzhen WFOE develops — to the foreign parent company or to customers outside China.
The technology import may be subject to the technology import regulations — the registration of the technology import contract with the Ministry of Commerce or its local bureau — if the imported technology is classified as restricted technology under the technology import and export regulations. A technology that’s not classified as restricted can be imported under a service agreement or a technology license agreement, and the import doesn’t require the registration.
The technology export from the Shenzhen WFOE to a foreign customer is generally not restricted unless the technology is classified as prohibited or restricted for export. A technology company that’s developing software or hardware in Shenzhen for global customers should confirm the export classification of the technology before entering into the export contracts.
