With the reform and opening up of China more than four decades ago, Chinese companies started selling socks and toys abroad. Today, companies such as Huawei and ByteDance are taking Chinese brands around the world, and emerging companies are going overseas.

However, going overseas is not that simple, how to set up overseas investment structure is very critical, different enterprises have to plan according to the needs. Nowadays, with the globalization of the economy, building a reasonable overseas structure and making a good compliance filing will have a direct impact on the cross-border operation, tax planning and capital operation of enterprises, and a set of reliable compliance system is even more crucial for enterprises to gain a firm foothold in the overseas market.

Today, let's take a look at what are the mainstream architectures used in the process of enterprises going overseas.

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01.Direct Investment ODI Architecture

The direct holding of foreign subsidiaries by the domestic parent company is simple in structure and quick in decision-making.

Suitable for setting up small sales or production subsidiaries in emerging markets such as Southeast Asia and Africa, as well as for making small-scale investments in low-tax regions such as Hong Kong and Singapore.

When operating, it is necessary to complete the project filing with the NDRC, get the certificate from the Ministry of Commerce, and then register with the Bureau of Foreign Trade (BFAT); while outside the country, the company will be registered according to the local laws, for example, registering a GmbH company in Germany and a BOI company in Thailand.

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02.Multi-level holding structure

A typical three-tier structure is for the Chinese parent company to first set up a holding company in Hong Kong or Singapore as a tax hub, then transit through a BVI or Cayman company, and finally invest in an operating entity in Europe and the United States.

This can significantly reduce the dividend withholding tax, for example, by utilizing the tax treaty between Hong Kong and the United States can reduce the tax to 0%; it is also convenient to manage the global funds in Hong Kong or Singapore; at the same time, BVI, Cayman companies can isolate the local political and legal risks.

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03.VIE structure (agreement holding)

Instead of through equity, it relies on a series of agreements linking domestic operations to foreign capital, specifically designed to break through foreign access restrictions.

When setting up, a BVI company is set up outside the country to protect privacy, then a Cayman company is set up as the main body of the listing, and a Hong Kong company is used for transition in the middle; in the country, a Wholly Foreign Owned Enterprise (WFOE) is set up to realize actual control through exclusive technical service agreements, equity pledges, and other means.

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04.red chip structure

There are equity-controlled and agreement-controlled (VIE) types. The former is suitable for industries that are open to foreign investment, such as manufacturing, while the latter is used in areas where foreign investment is restricted, such as TMT.

The standard process is to first integrate domestic assets, then set up offshore structures such as BVI, Cayman, etc., then complete cross-border mergers and acquisitions, then carry out pre-listing financing, and finally realize overseas listing.

Pathways to different national investment architectures

Want to enter the EU or US marketCommonly used "Mainland company → Hong Kong company → Dutch company → target company" Architecture. The Netherlands has a number of tax treaties, a holding company with tax exemptions, and is a member of the European Union, which makes it easy to deal with regulation and reduce the tax burden.

Invest in ThailandGo "Mainland company → Hong Kong company → Thailand company" Route. According to the tax treaty, Thailand's withholding tax on dividends can be reduced by half, and the transfer of shares is also tax-free, coupled with the freedom of foreign exchange in Hong Kong, it is convenient to repatriate profits.

Layout in Vietnam,"Mainland company → Hong Kong company → Vietnam company" More appropriate. With no foreign exchange control, flexible capital deployment and low registration and maintenance costs, Hong Kong is friendly to SMEs and start-ups.

There is no "standard answer" for enterprises to choose investment structure, the key is to fit their own reality. Small scale, want to quickly into the market of enterprises, single-layer structure to save time and effort; large enterprises involved in tax, financing and other complex needs, multi-layer structure to better meet the overall planning. When choosing the path, tax policy, capital flow, compliance risk is a must see, such as Singapore's low tax rate, it is very suitable for tax optimization.

Nowadays, the pace of Chinese enterprises going overseas is getting faster and faster, and building a reliable overseas investment structure is directly related to whether they can stand firm in the international market. Whether it is direct investment, multi-layer structure, or VIE structure, it has to be flexibly adjusted according to the market and policies.

Reasonable structural design can help enterprises save money, improve capital efficiency, and also help cross-border mergers and acquisitions to expand international influence. If you have any questions on overseas planning, please feel free to exchange and discuss, and I hope these experiences can help your enterprise go smoother in the global market!

If you also want to set up an overseas company structure 👉 Sweep the code to add customer service arrangements for expert consultants (micro letter: jxhqcy890 / cell phone: 16625410105) to provide you with overseas company registration + bank account opening + accounting and tax reporting, etc.One-stop solution to help you reduce costs and increase efficiency, and easily go to sea!