China Representative Office

Introduction

Setting up a representative office is the most inexpensive entry form for foreign enterprises to enter the Chinese market. The role of a representative office basically is to serve as a liaison office between a foreign company and its business partners in China, and to coordinate the parent enterprise activities in China (travel arrangements, promotion etc.). Representative offices are applicable for many industries: trading, shipping, consulting, etc.

Pros & Cons

Using a representative office as China entry form has the following advantages:
-Affordable: no paid capital required, government and service fees are usually lower than what is needed for WFOEs.
-Quicker registration process (usually within one month or so)
-Less paperwork required for application (compared to wholly foreign owned enterprises)

However, there is a certain number of disadvantages as well:
-Does not qualify as a legal entity
-The inability to sign contracts, issue invoices and generate revenues in China
-Potentially higher tax weight (tax is collected on a monthly basis as a percentage of operating expenses)
-Lower flexibility in terms of office selection (In Shanghai for instance, only A-grade building i.e. more expensive ones, are acceptable for use when registering a representative office)
-To hire employees, representative offices needs to go through government-designated agencies (such as FESCO in Shanghai)
-Representative office licenses are valid for a limited time only (usually 1~3 Years) and need to be reapplied again upon expiration.

Documents Required

-Copies of incorporation documents of parent company (business license, certificate of incorporation, business registration certificate and/or any applicable document)
-Original bank reference letter attesting of the parent company's good financial status
-Minutes of the board of directors deciding of the establishment of a representative office in China and nominating the Chief Representative
-Detailed summary of parent company business operations and corporate profile
-Last annual report of parent company (to company registry and tax department)
-Appointment letter of Chief Representative
-Resume of Chief Representative (with work experience & relevant qualifications)
-Photos (8) and copies of passport and current valid visa of Chief Representative
-Contact number & address of Chief Representative
-Originals (2)of lease agreement (minimum 12 months) and copy of title deed of rented office (should be at an approved location, such as grade A building for Shanghai representative offices)
-Representative set up application letters (2)

Depending of the country of incorporation of the parent company, some documents (such as incorporation documents, bank reference letter, passport of Chief Representative) need to be certified/legalized for authenticity by the local Chinese embassy or consulate

Registration Procedure

Sinovantage International helps proceed clients representative office applications through the following steps:
-Checking up the documents and preparing the legal forms
-Applying and obtaining the registration certificate from the local Administration of Industry and Commerce.
-Obtaining the representative office seal
-Applying for the enterprise code license
-Registering with the local bureau of statistics
-Obtaining the bank account and foreign exchange certificates
-Registering with the local tax bureau
-Obtaining the health certificate for the Chief Representative
-Obtaining the working permit for the Chief Representative
-Obtaining the residence permit for the Chief Representative

Representative Office Fees

The service fee for incorporating a representative office is RMB12,000. This does not include the government fees that usually amount to RMB3,500~4,000 (official receipts will be provided to justify those fees at the end of registration). Additional charges may apply for multiple representatives, or special industries.

Please remember however, when you budget for your representative office for the first year, to include operating fees such as office rent, salaries for employees, and most importantly, monthly taxes (10% of expenses in Shanghai) and annual audit. We can provide you some additional guidance to make needed adjustments to your business plan and getstarted with the right foot from the very beginning.