There are three types of Joint Ventures in China, the Equity and the Co-Operative (sometimes referred to as the Contractual) JV and the Foreign Invested Partnerships (FIPs). They can appear similar on the surface but have different implications for the structuring of your entity in China – a point not always understood by some of the more rural local governments, but important for the foreign investor to be aware of.


Should a Foreign Investor choose this option, Klako Group does recommend using a Hong Kong Holding Company for their own personal benefit in the Joint Venture structure. The Hong Kong Holding Company is fully liable for the China investment and protects the existing company. Also, dividends received by the  Hong Kong Holding Company are tax free, but incur a 5% withholding tax in China compared to 10%-20% from other countries and can be used for further investment.

Alternative Solution
An alternative solution to directly establishing a Joint Venture in China is to initially setup the Joint Venture with the Chinese partner in Hong Kong as it would be based on Hong Kong Law. It would be much easier to exit this Joint Venture in the future and it would be advantageous to receive the dividends from China in Hong Kong due to the favorable Hong Kong Tax Laws. From this Hong Kong Joint Venture, a Foreign Invested Limited Company can then be established in China (based on one shareholder which is then your Hong Kong Joint Venture).