Representative Office (RO) are established by foreign companies to engage in business liaison, product promotion, market research, exchange of technology and other permitted activities in China.
ROs are not allowed to directly engage in operational activities. The AIC usually specifies in the Business Scope, as shown in the Business License of ROs, that a RO should not engage in direct operational activities. Therefore, ROs are not a form of foreign investment in China. However, some ROs are engaged in operations in a lawful or tacitly permitted way and constitute one of the direct foreign Investment forms in China.
The tacitly permitted way is applicable to those industries that do not require special material conditions or environment for their operations. For example, a consulting business does not need manufacturing equipment and raw materials. It only needs offices, employees and office articles. These physical conditions are necessary for other ROs as well. In practice, many ROs that are established by foreign consulting companies directly engage in consulting activities. Chinese government does not prohibit them in practice and this is reflected by the fact that the tax authorities collect business tax from these Representative Office (RO).
The lawful operational activities engaged in by Representative Office (RO) refer to those business activities permitted pursuant to the bilateral treaties between China and other countries. In the event that a bilateral treaty provides that certain types of Representative Office (RO) are permitted to engage in operational activities, these bilateral treaties should prevail over Chinese domestic law. For example, according to the Sino-US Civil Aviation Transportation Agreement, ROs established by American civil airlines may sell civil air transportation services provided by American civil airlines, as well as engage in administration, inquiry and other business activities.
It should be noted that up to now, only Representative Office (RO) of foreign airlines are allowed to engage in direct operational activities in China under bilateral treaties. No other ROs of foreign companies are so permitted.
Representative Office (RO) are important means by which foreign companies conduct business liaisons or engage in business and operational activities in China. In this respect, foreign companies refers all companies incorporated outside China, and those incorporated in Hong Kong, Macau and Taiwan.
A Representative Office may only engage in non-profit making activities, It can carry out the following functions:
- Conduct research and survey for its parent enterprise in the local market;
- Liaise with local and foreign contacts in China on behalf of the parent enterprise;
- Conduct research and provide data and promotional materials to potential clients or trading partners;
- Act as a coordinator for the parent enterprise's activities in China;
- Make travel arrangements for parent enterprise representatives and potential Chinese clients;
Under no circumstances may a Representative Office do the following:
- Directly engaged in any business for profit;
- Sign contracts or deals on behalf of the parent enterprise;
- Represent any firm other than its parent enterprise;
- Collect money or issue invoice within China for services or products;
- Buy property or import production equipment.
Features of a Representative Office
1.1. Legal Status of a Representative Office
The Representative Office is a non-legal entity operating representing its parent company. A representative office is not allowed to engage itself in business activities, issue invoices on its own, remitting outward, signing sales or purchase contracts, or receiving income from services performed but may act as a liaison and promotion office for its parent company.
1.2. Name
The name of the Representative office should be in the form of "Name of the Enterprise + Name of the City + Representative Office (or Office)".
1.3. Business Address
At the beginning of setting up the Representative Office, it is advised to decide the place and building where office is going to be located first, as the address of the proposed office will have to be mentioned in the application for approval.
Note the business address must be located in commercial buildings approved by the government.
Documents required for application
Below are the documentation of Foreign Representative Office setting up in China, Item 1-5 should be prepared before bring to China:
(1) 1x Certificate of Incorporations or Equivalent document certified by Chinese embassy or Chinese consulate overseas [ Sample ]
(2) 1x Bank Reference Letter from investor's bank to declare a good standing [ Sample ]
(3) A brief summary of the operations and business of the parent company, such as the principal business activities, registered address, contact phone number, fax, name of the parent company; director of parent company's passport copy
(4) China Chief Representative: Resume [-Sample-] ; 6 photos [2 inch size] ; passport copy.
(5) If there is(are) Representatives to be stationed in China in addition to the Chief Representative, the resume, 2 pictures, passport copy;
(6) Documents provide by landlord of Office in China: 2x original leasing contracts [ Sample ] of the office premise to be used by the Representative Office; the lease term should be at least 12 months; , 2x certificate of real estate ownership [ Sample ], and 2x landlord identification [ Individual, Company ]
IN SHANGHAI:
i. the lease constract should be notarized by local notarty public first, after that applying for registration certificate of real estate from local real estate bureau
ii. Rep. office should be in a Grade A building: [- Grade A building database of Shanghai -]
Registration and Post-registration Procedures
A. Pre-registration
Before commencement of registration procedures stated in Section B and C stated below, all the documents and information listed above must be ready.
B. Registration Procedure
The first step is to apply for registration with the Administration for Industry and Commerce in Shanghai, Beijing or any other cities. Once the application is approval and Business Registration Licence issued, the post-registration procedures as listed in Section C then need to be performed.
C. Post establishment Registration Procedures
Upon the issuance of the Registration Certificate, we will then perform the post-establishment registration procedures, including:
- Apply for the Representative Office 's Registration Certificate with State Administration of Industry and Commerce (SAIC)
- Chops made by Public Security Bureau (PSB)
- Apply Organization Code License by Technical Supervision Bureau (TSB)
- Register in Local Taxes Bureau
- Arrange the bank account certificate and Certificate OR card of State Administration of Foreign Exchange (SAFE)
- Open Foreign Currency and RMB bank account
- Register in Statistical Bureau
- Financial Registration
Fee for Representative Office Registration in China
For Service of Representative Office registration in Shanghai, Beijing and other cities of China
(1) Service fee : RMB 12,000. A detailed breakdown is provided below:
| No. | Steps | Costs (RMB) |
| 01 | Preparation of registration application documents | 1000 |
| 02 | Application for Business Registration Licence | 3000 |
| 03 | Apply for the Representative Office 's stamp(Office Seal) | 1000 |
| 04 | Apply for the Enterprice Code License | 1000 |
| 05 | Register in China Statistical Bureau | 500 |
| 06 | Arrange bank account certificate, Certificate of Foreign Exchange | 1000 |
| 07 | Register in China Taxes Bureau | 1000 |
| 08 | Obtain Health Certificate for the Chief Representative | 1000 |
| 09 | Application for the Working Permit for the Chief Representative | 500 |
| 10 | Application for the Residence permit for Chief Representative | 1500 |
| 11 | Register in China Custom | 500 |
(2) Our service fees stated in Section 1 above also do not cover any official registration filing fees which are estimated to be around 3,000 RMB(~USD$450). The official registration filing fees will be billed separately by client with official government receipt.
Maintenance of Representative Office in China
Once the Representative Office is officially registered. It's required to maintain properly accounting records in accordance with accounting standards in China and report taxes in both monthly (for business tax) and quarterly (income tax) basis. The late submissions will face penalty and surcharges.
Representative offices must register with the local tax authority for tax reporting method. After negotiated, the tax reporting method will be fixed (for instance: the cost plus method).
Our part time accountant could assist you and negotiating with your local officer to use the proper tax reporting method for your Rep. Office. And submit the tax reports on your behalf. We could also advice you with tax planning opportunities this might help Rep. Office reduce the burden of tax of Rep. Office and it's staff.
We can also advise you of tax planning opportunities that might help mitigate the tax costs of the representative office and its staff.
The details of our services are set out below and our fee schedule is set out in "Form A"
(1) Update the books in accordance with the Chinese Accounting Standards;
(2) Prepare monthly financial statements for tax filing purpose;
(3) File monthly Business Tax Return and Individual Income Tax Return;
(4) File Corporate Income Tax Return quarterly
(5) Audit of Financial Statements
Detailed Breakdown of Fees
The figures shown in the table below are estimations and actually costs will be discussed after review of the actual operation of the representative office
Form A:
| No. | Services | Period | Separate Costs | Package Cost |
| 01 | Update the books of accounts | Monthly | 1500RMB/Month | 22000RMB/Year |
| 02 | Business Tax Filing | Monthly | ||
| 03 | Individual Income Tax Filing | Monthly | ||
| 04 | Corporate Income Tax Filing | Quarterly | ||
| 05 | Audit of Financial Statements | Annually | 4800RMB/Year |