Representative Offices

What is a Representative Office?

A Representative Office, normally we call it as a ‘RO’ in short or a Resident Representative Office of Foreign Enterprises in China in full is basically a resident representative office of a foreign legal entity and operating inside China. To engage in indirect business activities in Mainland China on behalf of the foreign headquarter, RO is able to carry out indirect business activities in China and carry out operational activities related to headquarter, including the communication, product promotion, market surveys, and technology assistant, market sourcing, etc. The RO is not allowed for any direct business activities including signing direct business contract or labor contract or any other contract relations that direct to business nature, also the RO is not allowed for any direct income or profit. 

It is important to note that a RO is just an office registration instead of a legal entity or limited company, in which means all liability of the RO is taken on by the foreign headquarter. A RO is just an assistance unit that is used by the head quarter. Its main goal is to help the head quarter to enter Chinese market and assisting the activities in China, it is nondependent.

 Why setting up a representative office in China?

Setting up a RO in China is an easy way for foreign enterprises to enter Chinese market quickly with a comparably low costing. The requirements and legal procedures are much less compare with the limited company registration. It provides foreign headquarter with more chances to carry out market research and get familiar with market requirements and try the possibilities before setting up a big investment in China. After some time of trying, the RO will get to know the local laws and know how to gain legal profitable access to the business.

What is important to know before setting up a Representative Office in China?

A Representative Office is not allowed to charge any fees or provide any relative business activities that may obtain earnings and incomes. However, while laws do not allow RO to engage directly in operational activities that does not mean a RO cannot be involved in any economic activities, for example, the RO is allowed to participate in assisting activities and helping overseas headquarter for the coordinating activities and market research, survey and communications.

What are the Representative Office's Pros and Cons

The advantage of a Representative Office

n      A real presence in China , enhanced brand-building capabilities by being where the customers are (assuming that the foreign headquarter is selling within China)

n      The tax calculation is comparably simple; it is base on the total expenditure of the RO.

n      Allowed for indirect business activities, publicity activities that relate to the overseas headquarter.

n      No registered capital required

n      Low cost for the set up.

n      The foreign representative can apply for the foreign employment permit and resident permit.

 The disadvantage of a Representative Office

--RO is not permitted to carry out direct business activities, not allowed for business of any kind which results in profit..

--RO can not sign a commercial contract directly with Chinese suppliers, not allowed to collect any payments of any kind.

--RO can not issue official invoice or gain income or profit.

--RO has no right to hire Chinese employees directly; needs to employ through qualified intermediary human agent (FESCO).

--RO official bank account can only receive international transfer from overseas headquarter.

 What are the Requirements for Setting up a Representative Office in China?

1.      Legally Practice Certificate (Business License): One duplicate copy; issued from overseas where the main company locates, this business license copy has to be attested by the Chinese Embassy overseas stating this copy is authentic.

If main company is registered in Hong Kong, Macau or Taiwan, two duplicate copies of Company Incorporation and the Business Registry Certificate, NAR1, M&A, have to be provided, and these copies have to be attested by Chinese governmental appointed local Law Firm or Notarization Firm. English is preferred language.

2.      Capital Credit Standing Certificate for the main company (financial status – BANK REFERENCE LETTER issued from its original country): One original set; issued by local opening bank overseas; stating open date, members of directors, authorized people for signature, revolving capital amount and current saving amount or general estimate to the main company. English is preferred language. Shall get attested from Chinese Embassy overseas(if it is from Hong Kong, then it shall be attested from the Chinese governmental appointed local Law Firm)

3.      Memorandum and Article:  to show the head company structure and power of each position. To be attested from Chinese embassy overseas. (if it is from Hong Kong, then it shall be attested from the Chinese governmental appointed local Law Firm) 

4.      Identity Card or Passport details copy, and detailed resume (education details and working experience) for the representative members; 6 recent color photos sized in large 1 inch. The representative shall hold valid business visa or Chinese resident permit while submitting the application.
(If the representative is not in China at the time of submitting the application, he shall attest his passport copy from Chinese embassy in his country).

5.      Employment Certificate: employment certificate for authorizing the representative to take up post in this office shall be attested from the Chinese embassy overseas (if it is from Hong Kong, then it shall be attested from the Chinese governmental appointed local Law Firm).

6.      Authorization Letter for the authorized signer: proves who the authorized signer is signing on behalf of the head company (to attest from Chinese embassy overseas). (if it is from Hong Kong, then it shall be attested from the Chinese governmental appointed local Law Firm) 

7.      Rent contract and related information for the office address:

TWO Original rent contracts (this contract has to be already recorded in the Housing Management Bureau, and the rental period has to be at least one year valid). Property right certificate copy and the landlord ID copy shall be signed by the landlord. Please refer to separated file for required details.

 Necessary Time

10 working days after complete documents are provided and signed.