Fact Sheet: Representative Office
Definition
- Office set up largely to perform liaison work for a foreign company. *
- Has legal person status.
Major Applicable Legislation
- Implementing Rules Concerning the Administration of Resident Representative Offices of Foreign Enterprises (1995);
English: Available Upon Request
Chinese - Administration of the Registration of Resident Representative Offices of Foreign Enterprises Procedures (1983);
English: Available Upon Request
Chinese - Notice on Questions Concerning Tax Administration in Connection with Representative Offices of Foreign Enterprises (2003)
English: Available Upon Request
Chinese
Duration
Generally three years.
Basic Requirements
- Foreign institutional investor with at least one year of operating history
- May be subject to $10,000 registered capital requirement
- Last filed annual returns
- Chinese sponsor
Application Procedure
The following documents must be submitted to the local Administration of Industry and Commerce (AIC) to establish a rep office:
- Application to establish a rep office
- Certificate of Incorporation
- Bank reference stating the company's registered capital and current balance
- Board resolutions approving the establishment of a rep office
The applicant has 30 days to register with the local tax authorities, administration of industry and commerce.
Additional requirements
- Open bank account.
- Follow through on customs and public security procedures.
- Register with tax authorities.
- Fulfill procedures for employing Chinese personnel through FESCO.
- Apply for permanent residence of foreign nationals.
Taxation
- Based on actual or deemed profits depending upon sector. Agency and trading services are taxed on a cost-plus basis. Travel and advertising services are taxed on actual revenues. Law, consulting, tax, and accounting and auditing firms are taxed on actual taxable income.
Advantages
- Quickest and easiest method of establishing a presence in China.
- No restrictions on the type of business.
- Allows company to exercise a certain level of control.
Disadvantages
- All contracts must be signed offshore or by other entities.
- Cannot issue receipts or make deposits into Chinese banks.
- Does not have trading rights: cannot directly import or export goods.
- Rep offices are taxed on deemed profits and loss.
- Greater expenses associated with locations in city centers.
- Chinese employees must be hired through Foreign Enterprise Service Corp. (FESCO), or a similar organization.
* Note: In this Fact Sheet, the term "representative office" applies only to offices established by foreign companies located overseas. It does not include liaison offices established by foreign-invested enterprises or offices established by foreign law firms or foreign-invested financial institutions in China.