ROs with a head office engaged in business advisory, tax advisory, law, accounting, auditing or other types of consulting services are required to maintain complete accounting records and evidence of properly calculated revenue and taxable income. Their tax liabilities will be based on actual revenue and profit

ROs of entities that engage in agency or trading activities perform business activities on behalf of the head office. Since such ROs do not enter into agreements with their customers directly and since income attributable is normally collected by the head office, revenue of these ROs is determined on a cost-plus basis

Any RO that does not fall into the above two categories, but still carries out taxable activities, will be taxed according to the actual revenue generated, including amounts received by head offices outside of China and attributable to the RO. If no revenue is generated then annual activity reports must be filed with the tax bureau within one month of the year-end