Setting up a Representative Office (RO) is surely the simplest way to show presence in China. This kind of representation allows you to maintain indirect business relationship. It is a platform for networking activities. However, Chinese law does not allow to close a contract as well as to make any profits for RO. RO is a non-legal entity operating which representing its parent company and financed through the foreign parent company. Setting up a RO, a registration from the local authorities has to be obtained.
The establishment procedures described here are based on the assumption that the RO to be set up is not subject to approval by a competent approval authority. Under current rules, most ROs, in particular ROs of foreign companies that are engaged in manufacturing, trading, consulting, exhibition and procurement fall in this category.
Pros & Cons
No share capital is required
Setup is less procedure
Can exchange foreign currency into RMB
Can hire local staff via government admitted agents
Simple company and financial structure
Not business entity
Tax rate is high
Must be investment in company
Mother company needs to be at least 2 years old
ROs can be generally used for the following purposes:
Conducing market research
Introduction of products
QC facilitation or monitoring purchasing activities
Marketing and sales administration for sales conducted between China and your parent company
Administration for Group activities elsewhere in China
The name of the RO should be in the form of “Country + Name of the Enterprise + Name of the City + Representative Office”. For example, British ABC’s office in Shanghai is officially known as British ABC Consulting Co.,Ltd. Shanghai Representative Office
Hiring of Staffs
ROs are required to hire all of their local Chinese personnel, including any local Chinese appointed to the position of chief representative or ordinary representative, through Human Resource service companies designated by the government. Service companies approved by the Shanghai government to provide Chinese employees to ROs.
Foreign representatives approved by the relevant authorities receive a work and residence permit as well as the corresponding work visa.
Setup Key Points
Company applying for set-up RO has to be at least two consecutive years old
Takes around 1.5 months to apply
AC can undertake the one-stop service for basic registration to post-registration handling
Rep office shall not exceed four representative persons (including the Chief Representative)
Representative office's business registration certificate shall be inspected each year