If they are not satisfied with the scope of business written on your new business license, they can refuse to process your tax registration – a vitally important document when going through the complete licensing process in China – which will leave you hanging, unable to operate. In fact the most common challenge to dubious scopes of business generally comes from the local Chinese tax bureau. The issue here is that businesses involved in manufacturing require different tax treatments than say a consulting business, and this is why there is usually a link between the scope of business and finance. Indeed, we have encountered numerous problems of this nature, all requiring a scope of business change on the license.

A clerk who doesn’t spot a cheeky scope of business, and issues the license anyway, doesn’t mean you are home free. This is because registering a business in China involves several government departments. Lazy, or deliberately disingenuous, business scopes – such as only using the phrase “production of (product)” – will not even necessarily qualify you as a production company in the eyes of China’s regulations, even though it apparently suggests you are. The scope of business must in fact be well defined, and leave no large room for interpretation. In certain fields, the business itself must prove that it has the required professional experience prior to a business scope being granted in the desired industry. However, certain activities are linked to an increase in the registered capital requirements, and even to the specific qualifications and numbers of employees you have. Generally speaking, “normal” business activities are fairly easily defined in China and you’re unlikely to find problems. Accordingly, it is vital to determine what you want to do right from the start. Companies can only operate within a business scope approved by the registration and licensing authorities, and if you breach these, your company can either be fined, or in serious cases, have its license withdrawn. 20 – Establishing a business in China does not necessarily mean you can engage in any kind of business activity, as is the case in most Western countries. Having your scope of business written correctly can attract tax and customs treatment benefits

Scope of business activities