The Chinese authorities are trying to simplify administrative procedures and to reduce bureaucratic hurdles with the aim of developing a market-based economy and “promoting mass entrepreneurship and innovation”. Therefore, they have instituted administrative reforms simplifying China’s business establishment and registration procedures.
In October 2015, the “Three-in-One” business license has been implemented, a single integrated business license instead of three separate certificates (i.e. Business License, Organization Code and Tax Certificate) when registering.
In October 2016, it is the “Five-in-One” business license, which is including the Social Security and Statistics Bureau Certificate, has been implemented and shall replace the previous ‘Three-in-One’ business license.
With the “Three-in-One” business license three of the certificates were combined into one, three different applications to three separate government departments became one application to one department (AIC). It combines: (1) the Original business license, (2) the Organization code certificate, (3) the Tax registration certificate. Companies had to do multiple trips to each of the different offices, submitting each time very similar sets of dozens of supporting documents. Several weeks could be used with these procedures. Thanks to the “Three-in-One” business license companies only need to submit one set of approximately 13 documents to the Administration of Industry and Commerce Office and can receive the license in supposedly three days (and pay administrative fees only once). In practice, however, this can differ per district, province and city the company is established.
With the “Five-in-One” business license the Chinese government have went further, and combined five certificates into one, submitting the required materials and information to one department (AIC) will automatically transit the data to 4 other departments. This new license combines: (1) the Original business license, (2) the Organization code certificate, (3) the Tax registration certificate, (4) the Social Security registration certificate, (5) the Statistics registration certificate.
Each of these applications are known for taking 2 or three working days, this new license should save around one week in the application process, but there are still a range of other applications that foreign companies may have to apply for (FX settlement approval, Company chops, VAT invoice machine, Import & export license, Food & drink permit…). This business license also contains a QR code which can be scanned by smartphones to get all relevant company information.
Advantages of the “five-in-one” business license:
- Simplify the social insurance registration process for new enterprises.
- Start-ups can complete commercial and industrial registration procedures and register for social security at the same time.
- Ease the banking formalities, there is no need to provide bank account information while registering.
- In December 2016, the time it takes to set up a Wholly Owned Foreign Enterprise takes off approximately 1 month from the 3 months’ company registration process in Beijing.
All business entities including wholly foreign owned enterprises, branch offices, and representative offices (excepted self-employed individuals) established before October 1, 2015 had to obtain the “Five-in-One” business license before the end of the transition period, December 31, 2017. Companies that did it are not required to submit a new application for the “five-in-one” business license (their information will be automatically sent to relevant departments, and a new license will be issued).
This article has been prepared by Moore Stephens Consulting, a professional service firm based in China and member of Moore Stephens International. Moore Stephens Consulting provides full financial services to foreign companies active in China and Hong Kong. For more information regarding this article, please do not hesitate to contact us at email@example.com or visit their website to be updated on news about China.