How To Form A Representative Office In China
Published: 10th January 2017
Foreign companies have different options when they decide to enter the Chinese market. In contrast to establishing a foreign owned enterprise or setting up a joint venture, the registration of a Representative Office (RO) is a fast and convenient way to get started in the most populous country in the world.
The government restricts the business scope of Chinese Representative Offices in the sense that they cannot engage in profit-seeking activities and are not allowed to issue invoices (fapiaos). As in other countries, a RO can only be used to conduct marketing and promotional activities.
These restrictions do not necessarily pose a problem for foreign companies. Many foreign businesses choose to set up a Representative Office because this setup allows them to enter the market quickly and without a full commitment. They prefer an entity that serves as an official liaison and promotion office for its parent company. The most basic ROs can be found in the form of virtual offices in business centers located in first tier cities (Beijing, Shanghai, Guangzhou, Shenzhen) or second tier cities (Chengdu, Chongqing, Nanjing, Hangzhou, Tianjin, Suzhou, Wuxi and other cities mostly situated in the east of the country). However, these virtual offices still need to be connected to a ‘real' (physical) office in the Chinese mainland. CBC-Primasia is specialized on offering complete corporate solutions to multinational enterprises in tier one and tier two cities in China.
The following requirements have to be met when forming a Representative Office: 1.) The parent company has to be established for at least two years; 2.) The business scope is limited to the following activities: Liaison, marketing, quality control, factory visits; 3.) The office has to be located in an office building (some years ago, representative offices and wholly foreign owned enterprises could be set up in a residential building). 4.) Recruiting staff: The RO needs to work with a governmental agency (FESCO) to recruit its Chinese staff. The number of foreign staff on its payroll is restricted.
The setup process for a Representative Office includes the following steps:
- Securing an office for registration
- Preparation of all registration documents
- Online registration through the Administration of Industry and Commerce website
- Apply for the registration certificate and the working card application
- Filing with the Public Security Bureau (includes the creation of the company chop)
- Apply for tax registration certificates at the Local Tax Bureau and the State Tax Bureau
- Open a bank account with all required documents
The registration process can take quite some time. It depends on the city (first tier, second tier) and even on the district within a city. On average it takes between 2-3 months to fully register a Representative Office.
Important note: The Chinese government has recently changed the requirements to set up a wholly foreign owned enterprise (WFOE). For example, under Chinese company law, the minimum capital requirement is now RMB 30,000 (if there are several shareholders) or RMB 100,000 (for one shareholder). Companies considering entering the Chinese market are likely to register a WFOE right away instead of a RO.
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