What is Representative Office in China?
Representative Offices (RO) is a not a separate legal entity from its owners in the law of People’s Republic of China (PRC), it represents its parent companies that is not registered in PRC. Its function is for the parent companies to liaise with business partners like customers and suppliers in China, conducting direct businesses is strictly prohibited.
Therefore, PRC’s RO cannot perform any direct and indirect income collection and its related services such as issuing invoice on its own.
Why setup a Representative Office in China?
Representative Offices (RO) can perform all sort of liaison functions and non-transaction operations on behalf of its non-PRC parent company with businesses and industries in China, like conducting market research, promoting services and products and performing preparatory activities for future development.
Setup a RO is considered a perfect vehicle to enter into the China market as the first step by oversea entrepreneurship. Its establishment is easier than setup of a company in China which generally requires heavy capital injection into China, bureaucratic workload, long processing lead-time and reliable local resident. (Details: China WOFE formation service)
PRC’s RO is not allowed to perform sales but is less regulated and easier to setup. Therefore, RO is an alternative to company only if liaison with China’s industries is needed.
Characteristics of China RO:
- No requirement of share capital
- Less burden on procedure of setup
- Allowable of foreign currency & Renminbi (RMB) exchange
- Hiring local employees via government qualified agents
- Simple regulations on structure of company and accounting books
- Non-separate legal entity
- No trades
- No invoicing
- Perform expense-only services
- High tax rate
- Parent company must be at least 2 years old.
Practical usage of China RO for overseas trades:
RO can do:
- activities related to market research and survey in China
- liaison with business contacts in China
- as a coordinator on behalf of its parent company with clients in China
- to prepare agreements for parent company and clients in China
- employing local employees via China government recognized HR agency in China
RO cannot do:
- to conduct transactional business operation in China
- to sign contracts on behalf of parent companies
- to receive payments from clients in China
- to invoice in China for any performance
- to purchase of any properties such as real estate and equipment for business operation;
- to hire local labors directly
Requirement of RO Setup:
- Minimum number of representative manager: 1
- Personal identification document must be certified by China embassy or consulate overseas
- One office address in commercial building in China
- Incorporation document or equivalent document certified by China embassy or consulate overseas
- Notarized parent company’s bank reference letter
- Preparation of applicant document and application letter
- Administration of Industry and Commerce Registration in PRC
- Obtain Certificate of Approval from the Foreign Trade Bureau / Bureau of Trade and Industry
- Obtain Certificate of Registration from the Administration of Industry and Commerce
- Registration with PRC authorities
- Preparation of representative office stamp
- Obtain Enterprise Code Certificate
- Application of China VISA for chief representative
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