Representative Office, also known as Registration of Resident Offices of Foreign Enterprises in China, is a liaison institute to represent parent company in China. Therefore, Representative Office is not a independent Legal Representative entity.
Generally, Representative office can only undertake non-directly-business activities including domestic liaison with clients, product promotion, marketing research ，technology communication etc. instead of directly-profit-making commercial activities For instance: Ro cannot sign any purchase and sales contract; cannot accept income from service; cannot invoice and transfer foreign currency to overseas. Headquarter can sign contacts with RO’s clients and vendors on behalf of headquarter not RO. Therefore, before foreign enterprise want to build up joint venture or whole foreign own enterprise (WFOE), it’s very necessary to set up representative office to explore China market.
No requirement on the capital for the establishment of a RO
The RO may open account in bank and accept the payment from the parent companies overseas. However, the remittance can only be used for the day-to-day expenses.
A RO is subject to both Business Tax (BT) and Enterprise Income Tax (EIT) in China, without going into boring detail amount to a liability of approx. 7% of the total expenses of your RO. This should be calculated, filed and paid on a monthly basis. As most of these are fixed costs, it's easy to budget for, but do take advice and care to work out a sensible tax structure to legally minimize this. Tax Exemption can be claimed if you can prove your parent company is in manufacturing.
Here is an often case: A RO in Shenzhen provides liaison and marketing services for head office, and able to provide supporting evidence for its expenses. The total expenses happened was RMB50,000 in this month. Accordingly, the EIT and BT payable by the RO will be as follows:
= total exp / (1- BT rate - Deemed profit rate) × BT rate = RMB2,941
= total exp /(1-BT rate - Deemed profit rate) × Deemed profit rate × EIT rate = RMB 882
Cannot employ the staff directly, which must be processed through a third-party intermediate agencies with relevant qualifications
Investors with good credit, No bad record
Foreign Enterprises have been set up over 2 years.
With stable office in China
RO ONGOING SUPPORT