When setting up a company in China, one of the requirements is to have an office. You need to submit a document proving that you have a workspace, such as a lease contract or certificate of ownership. However, renting and maintaining a workspace can be costly for many companies in the early stages, especially for startups and small businesses.
One question often asked by our clients is whether they can use a virtual office to register a company in China. Simply speaking, the answer yes; but in some cases, there are restrictions. This article introduces the current regulations and shares the primary considerations when planning to use a virtual office for business registration.
Understanding China's evolving business environment
Historically, having a physical office address was mandatory for establishing a business in China. This ensured that businesses had a legitimate workspace for operations and helped facilitate regulatory oversight. In recent years, however, China has relaxed this requirement as it continues to improve its business environment and simplify the business incorporation procedure.
The concept of “virtual offices”
The concept of ‘centralised company registration areas’, also known as ‘virtual offices’, was introduced by local governments to support small, medium-sized and start-up businesses. This was to develop and enhance the economy in certain areas such as Free Trade Zones, which are typically located far from city centres. Companies can apply for business licenses without the need for a physical workspace.
A ‘virtual office’ refers to a real location within an office building. Although your workspace is not physically located there, the location is stated as your business address on the business license. The virtual office address is approved by the government and is registered with the local authority. This can be used as your company's legally binding address.
Advantages of a virtual office
Virtual offices offer a cost-saving alternative for startups and businesses operating in sectors that do not necessarily require a physical presence. Registering with a virtual office can help foreign investors significantly speed up the incorporation process and eliminate administrative burdens, such as searching for an office in an unfamiliar city, or negotiating the commercial terms with landlords. Using licensed virtual offices that are endorsed by local governments and registered with government departments helps ensure your business remains compliant with local laws and regulations.
Virtual offices vs. physical offices
While a virtual office provides benefits and convenience for businesses, it cannot fully replace a physical office.
Certain sectors and industries, such as finance, education, healthcare, food and beverages and media, still have strict requirements for a physical office due to the nature of their business. Before deciding to use a virtual office, you should conduct thorough research and fully understand the local regulations applicable to the target industry. You must also be careful when selecting a provider offering virtual office addresses, as many of these providers are not officially registered with the Chinese authorities.
In some cases, a physical office is essential when banks and government departments – such as tax bureaus and the local Administration of Market Regulation (AMR) – conduct on-site visits for verification or for a regular inspection or a spot check.
Credibility is important for businesses in China. Although a physical office address may not be mandatory for some industries, having one can add credibility to your business. A modern and well-equipped workspace can help build a professional and reliable image, demonstrating your commitment and confidence in establishing a presence in the Chinese market.
A physical office provides a space for networking and in-person meetings, which is often preferred over video calls and online communications when engaging with local stakeholders. Employees will also have the opportunity to connect with colleagues working in the same office building, promoting better teamwork and collaboration.
Virtual offices are a quick solution offering flexibility and key benefits for foreign investors looking to register a Chinese company, without necessarily having to travel to the country. For long-term business development, however, it is highly recommended that investors consider having a physical office, as doing so provides unique advantages that virtual offices cannot.
Consulting with a local business expert, such as a law firm, accounting firm or a tax advisor, can help you easily navigate the complexities of doing business in China. They can walk you through the process with local knowledge and guidance on the right steps to take.
With over a decade of experience in the Chinese market, our team of multilingual professionals can assist you in selecting an appropriate location and workspace to commence your journey, while helping to ensure your on-going business administration remains compliant with local regulations.