According to Chinese laws and regulations, foreign Companies may set up a Representative Office (“RO’) in China. However, unless specially approved, the Representative Office of a foreign company is only allowed to conduct indirect commercial activities, such as business liaison/contact, introduction of products, market research, business information gathering, technology information exchange, and other preparatory and auxiliary work, for the foreign company within the company’s business scope. A RO is usually not allowed to conduct direct business activities, such as purchase and/or sale of goods in its own name.
The Government Fees for the Establishment of a RO
The government fees include relevant registrations fees, such as the Industry and Commerce Registration Fee (RMB600), the tax registration fee (RMB30), code registration fee (RMB150). The total amount of government fees is around RMB900 (USD120).
The annual renewal fee for a RO is RMB300 (USD37).
No registered capital is required for the registration of a RO.
Documents Needed for the Registration of a RO
The basic documents needed are as follows:
(1) The original Business Registration Certificate of the foreign company, issued by the local registration authority of the country/region where the company is located. If the said Certificate is a photocopy, it needs to be notarized in the country/region where the company is located, or to be legalized by a Chinese embassy/consulate in the country/region where the company is located.
(2) The original bank reference letter issued by a bank in the country/region where the company is located.
(3) The tenancy contract for the use of an office in China by the RO, with a term of at least one (1) year, which needs to be registered with the local house administration office in China, together with a photocopy of the landlord’s Ownership Certificate. Only houses for business use are allowed to be rented as an office of a RO, houses for residence use are not allowed to be used as an office
(4) The Appointment Letter (to appoint the Chief Representative of the RO) issued by the foreign company, signed by the chairman of the board of directors of the company, and stamped by the company if it has a stamp.
All the above documents shall be in Chinese. If some of them are in foreign language, they need to be translated into Chinese.
We will help our clients to prepare the documents needed. On the above list, documents (3) and (4) could be drafted by our law firm for our clients.
According to the Chinese tax laws and regulations, whether a RO needs to pay tax or not depends on the nature of the RO and the activities it conducts.
There are mainly two kinds of tax which a RO needs to pay. One is called the Business Tax, the other the Corporate Profit Tax.
RO is exempt from taxation if:
• It conducts activities such as business information gathering, liaison and other preparatory and auxiliary work in China for its headquarters to produce goods or sell the goods produced by the headquarters itself; or,
• It conducts activities such as business information gathering, liaison and other preparatory and auxiliary work in China for its headquarters’ trading of the goods owned by the headquarters itself; or,
• It is entrusted by companies in China to be agent for the exports of goods from China.
The Chief Representative of a RO
Either Chinese or foreigner can be appointed by the headquarters.