Supplier for Aviation Industry

Background

Our German headquartered client provides equipment and services for the aviation industry, working closely together with major aircraft manufacturers. With its products, our client is a globally marketed leader. In the past, its Chinese operations were managed only by a Representative Office (RO) in China.

Issue

Due to increased local competition on the Chinese market and a change in the tax system affecting our client’s corporate entity, its Chinese operations needed to be restructured as the current organisation leads to higher costs and limits the clients ability to offer competitive prices to its customers. In addition, instead of only importing their products through a local import/export agent, our client intended to start its own local production in China. We at Ecovis were engaged to advise and implement the new corporate structure in China.

Solution

We analysed our client’s company structure carefully to develop a strategy that best fit the new requirements. As the client intended to start local productions, we advised it to change the corporate entity structure from RO to WFOE (Wholly Foreign-Owned Enterprise). The WFOE enables our client to broaden its business scope, save costs and have 100% control over their China business, as they can work independently through any agent. Due to a new Double Taxation Treaty between Germany and China that comes into effect in January 2015, we recommended the German headquarter that it invest directly in China, instead of choosing a third country as a holding company for the WFOE.