How to Open a Restaurant in China: 3 Critical Permits for Foreign Investors

Key actions:

• Choose entity type:

  A Wholly Foreign‑Owned Enterprise (WFOE) is the most common option. It allows 100% foreign ownership and can include “catering services” in its business scope.

• Get a business license:
  Submit the lease agreement, property certificate, company charter, etc. to the Administration for Market Regulation. Critical requirement: The premises must be commercial (shop or office building ground floor). Residential or industrial buildings are almost always rejected.

• Apply for a Food Operation Permit:
  After the business license is issued. The on‑site inspection is very strict – kitchen layout (raw/cooked separation, pest‑proof drains), sanitation facilities, storage temperature, food safety manager certificate – everything must be in place.

⚠️ Pitfall alert:
Don’t listen to some agents who say “you can soft‑open right after getting the business license”. Operating without a Food Operation Permit results in a fine starting at RMB 50,000.

⏱ Estimated time: 

Business license ~15–20 working days; Food Permit on‑site inspection ~10–15 working days (longer if rectifications are needed).

Many restaurant owners have learned the hard way: they hire a Michelin‑starred chef from overseas, only to be fined for illegal employment – the chef is deported and the restaurant is ordered to close for rectification.

You must obtain both of these permits:

Foreigner’s Work Permit – Issued by the Bureau of Foreign Experts Affairs.
Core requirements: Bachelor’s degree or above + 2 years of relevant work experience (chefs must provide professional qualification certificates).

Work‑class Residence Permit – Issued by the Exit‑Entry Administration.
Requires: Work Permit, health check report, passport, etc.

✅️Correct procedure:
Apply for a “Work Permit Notification” overseas → Apply for a Z visa with that notification → Enter China → Exchange for the Work Permit → Apply for the Work‑class Residence Permit.

❌️ Common mistakes:

• Working on a business visa (M visa) or tourist visa (L visa) → illegal employment. The employer is fined RMB 10,000–50,000 per illegally employed person.

• Skipping the “Work Permit Notification” and applying directly for a residence permit → 90% rejection rate.

Foreign‑funded restaurant taxes are not mysterious, but two main taxes are often overlooked:

Value‑Added Tax (VAT) – Payable regardless of profit

General taxpayer (catering service): 6%

Small‑scale taxpayer (annual revenue below RMB 5 million): 3% (reduced to 1% from 2023‑2027)

• Standard rate: 25%

• Small‑low‑profit enterprise discount: if annual profit below RMB 3 million, effective rate can be as low as 5‑10% (subject to asset and employee count conditions).

• Note: No special foreign‑invested enterprise discount (unless located in a high‑tech zone, which rarely applies to restaurants).

• Surcharges (urban maintenance, education, etc. – about 10‑12% of VAT)

• Individual income tax (must withhold for foreign staff; housing allowance, children’s education may be tax‑exempt)

• Social insurance (foreign employees must pay five insurances; some bilateral agreement countries like Germany, South Korea may be exempt from pension insurance)