Representative Office - China Company Registration & Formation

Although Representative Office Registration in China is generally agreed as the easiest entity for foreigners to form in China, why now so many investors choose not RO but WFOE or Joint Venture (JV)? Basically, there are two major issues that make working with RO is unattractive:

Many clients presumed that they can switch a RO to a WFOE, then they "can start making money" in China. Well, the truth is the Switch actually involves an expensive shutdown and a brand new WFOE incorporation.

Even though RO are not allowed to make profit in China, they are nevertheless subject to taxation. There is a 10% tax on gross expenses of RO, which could be quite high on most cases.

A Representative Office (abbreviated RO) is the resident representative office of foreign enterprises in China to engage in indirect business activities within the territory of China, on behalf of the foreign enterprises within the business scope. While, RO is not an independent legal entity as China WFOE.

Consult BC Partners Now.

Overview

A Representative Office (abbreviated RO or Rep Office) is the resident representative office of foreign enterprises in China to engage in indirect business activities within the territory of China, on behalf of the foreign enterprises within the business scope. While, China RO is not an independent legal entity as China WFOE.

The full name of representative office is foreign representative office,  also called as resident representative office of foreign enterprises in China. It just can take up indirect business activities in China and do operational activities on the business scope on behalf of foreign enterprises, such as contacting, product promotion, market survey and technology communication.

Its daily operation must follow the laws of China, including registration regulations, tax cases, labor laws and other relative supervision regulations. representative office is just an office registration instead of business entity or limited company, its all civil liability is taken on by foreign company (head office). representative office is not a complete business institution, it's just an assistance unit that is sent by head office.

Setting representative office is a good way to enter into Chinese market effectively with low cost. It provides more chances to know Chinese market. representative office can master various useful information by market research, such as consumer behavior mode, market requirement, market custom, local laws and operating cost. At the same time, representative office also can supervise other joint venture enterprises and how them work, so that establish relationship with partners and customers.

Generally, representative office just can take up indirect business activities in China and do operational activities on the business scope on behalf of foreign enterprises, such as contacting, product promotion, market survey and technology communication. Their business scope should be written clearly in the document that needed to be sent to the registration authority, after making sure by the industry and commerce administration authority, so that its business scope will be in certificate of registration. representative office of foreign enterprises just can take up activities in their scope that regulated in certificate of registration.

Important reminder: representative office can't charge any fees or provide any relative contract that can obtain earnings. Although laws don't allow representative office directly engaged in operational activities, that doesn't mean it can't engaged in any economic activities. representative office is allowed to engage in economic activities and sign the contract which is helpful for maintaining operation.

Our Representative Office Registration in China Covers majors cities in China, i.e. Guangzhou, Shenzhen and Shanghai...

Pros and Cons of a Representative Office

Advantages and disadvantages of a Representative Office in China

The Advantages of a Representative Office

• No registered capital is required for incorporation, which means it is accessible for most foreign companies; Low cost for setting up (compared to exclusively foreign-owned enterprise), no lowest limit for registered fund, no requirement for contributed capital;
• RO allows you to engage in market research, publicity activities relate to company product or services;
• The tax calculation is different compared to WFOE and JV on its running expenses. There is a 10% tax on the GROSS EXPENSES of the Rep Office;
• It is easy for accountant to make account.;
• It is helpful to apply for residence permit;
• For the investors who want to invest Chinese mainland, the first thing is doing market survey, then decide whether to do long-term investment or not, so representative office is just like a bridge;
• Foreign investors can set up a representative office first if they want to set foot in field that is forbidden for foreign merchant, because China may alter the foreign investment law of the people's republic of China more freely because of the promise that China made it for joining WTO. Setting up representative office means they can get into Chinese market and get contact resources and know more about market.

The disadvantages of a Representative Office

RO has below disadvantages, but not limit to:

• RO is not permitted to carry out direct commercial activities. Rep office can only engage in market survey, publicity activities relate to company product or services;
• RO cannot sign commercial contract with supplier, cannot invoice or create income, such operations must be done by head office;
• RO has no right to hire Chinese employees directly without authorized intermediary organs of talents;
• Representative office has to employ Chinese mainland employees by authorized recruitment agencies;
• RO may not remit profits out of China;
• Tax declaration for once a month and tax audit for once a year; Tax is calculated by actual expenditure with less controllability;
• There are auditing standards for daily operating expenses and bank's foreign currency account.
• Government policy restrictions, taxation bureau, industrial and commercial administration are strict in supervision.

China Representative Office Requirements

Legal certificate of foreign enterprise

• *Foreign (regional) legal business operation issued by the country or regional authorities to provide proof of the original; if not, shall submit a notarized document, issued by the local notary office or a lawyer issued by the embassy or consulate certification documents.
• *Bank credit certificate of foreign enterprises
• Original, bank official stationery, signed by the bank head and stamped with the bank seal;
• Credit certificate content should include: account name, deposit balance and reputation evaluation;
• Valid within six months of issue;

Letter of appointment of chief representative

• The official stationery is printed and signed by the chairman or general manager;
• In addition to Hong Kong and Macao, other countries (regions) all provide foreign language and Chinese version documents;
• If the chairman and chief representative must be signed by another two directors;

Resume of chief representative

The resume should include name, date of birth, nationality, high school calendar work until now and time is continuous.

Chief representative's identity certificate

• Passport copies should be provided for foreigners;
• Passports and long term residence permits for Chinese citizens living abroad for a long time;
• Chief representative two inch photos 2 pieces;
• If the chief representative is a mainland Chinese, the labor contract should be signed;

Certificates Issued to Representative Office

• Registration Certificate of Representative Office
• Representative card
• Corporate seal
• Open bank account permit certificate