What it really costs to set up and run a company in China

Setup is the cheap part — and the part everyone quotes

Ask five agents what a China company costs and you will get five setup quotes. They are all roughly right and all roughly irrelevant. Business and tax registration in Shanghai runs through the “one-stop” online portal and carries no government fee. What you genuinely pay on day one is a short list: company chops (¥200–600 for the full set), a corporate bank account (free at some banks, up to ¥800 at others), and an agent’s fee if you use one.

Many registration agents will do the formation work at or near cost, because the money is in the bookkeeping retainer that follows. That is not a scam — it is the business model — but it does mean the headline setup price tells you very little. A domestic company can be stood up for a few hundred renminbi. A foreign-owned entity, with its extra filings and translated documents, more realistically lands between ¥6,000 and ¥20,000 all-in depending on how much you hand over.

The annual floor — what you pay at zero revenue

This is the number to budget against. A Chinese company must file tax returns monthly or quarterly whether or not it trades, settle corporate income tax annually, and publish an annual report on the national enterprise registry. Miss those and the company is flagged as “abnormal”, which quietly poisons your bank account, your ability to invoice and your legal representative’s credit record.

A registered address is often assumed to be a fixed cost. It need not be. Several Shanghai districts — Chongming, Jinshan, Fengxian, Baoshan and others — provide a free registered address in an economic park to attract registrations. Your licence address and your actual working location do not have to be the same, so a two-person consultancy working from home can carry ¥0 of property cost legitimately.

The three variables that actually move the budget

• People — by far the largest. Shanghai’s minimum social-insurance contribution base has been ¥7,460 per month since July 2025. Employer contributions (pension 16%, medical 9%, unemployment 0.5%, work injury ~0.2%) come to roughly 25–26% of that base — about ¥23,000 per employee per year, on top of salary, at the statutory minimum. Base it on a real Shanghai salary and the employer add-on scales with it.
• Office. Genuinely optional at the start, as above. Co-working day passes run ¥50–100; a fixed desk ¥1,500–3,000 a month; a small private office ¥3,000–10,000 a month. Signing a whole-floor lease at this stage — with two to three months’ deposit, management fees and fit-out — is the classic way to turn a ¥6,000 company into a ¥300,000 one.
• Tax status. Not a fee, but it behaves like one. Staying a small-scale VAT taxpayer keeps both your rate and your accounting bill down; crossing into general-taxpayer status raises both.

Why small companies in China pay almost no tax right now

China’s headline rates look ordinary — 25% corporate income tax, and VAT at 13%, 9% or 6% under the Value-Added Tax Law that took effect on 1 January 2026. Small companies rarely pay anything close to either, because two concessions currently run to 31 December 2027:

• Corporate income tax at an effective 5%. A “small and thin-profit enterprise” — broadly, taxable income up to ¥3 million, no more than 300 employees and assets under ¥50 million — is taxed at 20% on a quarter of its income, giving an effective 5%.
• VAT that may be nil. A small-scale taxpayer (annual taxable sales up to ¥5 million) is exempt from VAT where monthly sales are ¥100,000 or under, or quarterly sales ¥300,000 or under. Above that threshold, the levy rate is temporarily 1% instead of 3%.

The registered-capital clock nobody budgeted for

Registered capital in China has long been “subscribed” rather than paid in, and foreign founders learned to declare a large, impressive number and never fund it. The Company Law that took effect on 1 July 2024 ended that: shareholders of a limited liability company must now pay their subscribed capital in full within five years. Companies formed before that date get a transition window and must bring their contribution schedule inside five years by 30 June 2027.

Practically, this converts a vanity figure into a dated liability. Register ¥10 million to look substantial and you have committed to funding ¥10 million. For a small consultancy, a modest and honest number — around ¥100,000–500,000 — is almost always the better answer, and can be revised upward later if a licence or a tender demands it.

What foreign ownership adds on top

Since 2008 China has taxed domestic and foreign-invested companies under the same rules, so a wholly foreign-owned enterprise gets the same 5% and VAT concessions as any local firm. The extra cost of being foreign is administrative, not fiscal: an annual statutory audit by a Chinese CPA firm (budget ¥3,000–10,000 for a small entity), foreign-investment information reporting inside the combined annual report, foreign-exchange registration for the capital account, and notarised, legalised or apostilled shareholder documents at formation. Call it ¥5,000–13,000 a year of additional compliance for a small WFOE — real, but not the number that should decide whether you enter.

Quick FAQ

Is it cheaper to set up in a free-trade zone or a development park?

Often, yes — but the saving is in a free registered address and occasionally a local tax rebate, not in the national tax rates, which are the same everywhere. Pick the district for the address deal and the reliability of the park administrator, not for proximity to anything.

Do I need to pay myself a salary through the Chinese company?

Not necessarily, and the decision has consequences on both sides of the border — it triggers social insurance and Chinese individual income tax withholding, and it can affect where your company is treated as tax resident. See tax-residency traps for remote founders before you set payroll up.

What happens if I just stop filing?

The company is listed as operating abnormally on the public registry, fines accrue, the legal representative can be restricted from flights and high-speed rail, and deregistering later becomes far more expensive than staying compliant would have been. If a company has stopped trading, close it properly rather than abandoning it.