How to Incorporate a Representative Office in China
Registering a China representative office is the simplest solution for foreign investors who want to gain insight into the potential of the Chinese market before making an investment.
It’s important to note that establishing a representative office in China will not legally constitute an independent entity. This means that a completed registration only grants the foreign business a presence in the local market, so it is important to be knowledgeable on the specific functions of a representative office:
A China Representative Office (RO) allows a foreign company to hire staff in China through their own legal entity, for the sole purpose of company representation. It is designed for businesses for hiring staff and monitoring the employment internally.
The RO solution does not allow foreign companies to perform any direct business activity in China. Those actives must be performed directly by the parent company abroad, via the support of a local partner in China upon necessity.
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General setup procedure
In order to establish a China Representative Office, it is necessary for the overseas company to have been incorporated and operating for more than two years, which means that there are specific requirements needed to fulfill the pre-registration requirements.
Collection of the China documentation from the office’s landlord:
- Originals of the office rental agreement with a minimum lease term of twelve months (x2)
- Copy of Certificate of Real Estate Ownership
- Copy of ID
- Copy of Certificate of Incorporation, or equivalent, indicating a minimum of two years of existence following establishment
- Copy of Articles of Association, or equivalent
- Letter of Authorized Signatory from the director of the parent company authorizing him/her to be a signatory person of the RO
- Letter of Authorization from the director of the parent company authorizing an additional representative in China to be signatory
- Copy of passport(s) of the RO’s Representative(s)
- Appointment Letter of the RO’s Chief Representative
- Bank Reference Letter
All documentation must be certified by a Chinese embassy or consulate in the parent company’s country of incorporation.
Collection of the required documentation from the RO’s Representatives:
- 6 photos
Definition of the scope of activity of the parent company abroad and its RO in China.
There are specific measures companies must take in order to successfully register their company in the Chinese market:
- Registration with the local Administration for Industry and Commerce
- Approval and obtainment of the Business Registration License
- Registration Certificate application
- Fabrication of the company stamps
- Organization Code License application
- Registration with the local tax bureau and the statistical bureau
- Bank Account opening
The above steps involve communication with China’s State Administration of Industry and Commerce, the Public Security Bureau, the Technical Supervision Bureau, and the State Administration of Foreign Exchange.
Required Investor Information
In addition to getting the company documents notarized and translated into Chinese, the other incorporation documents to be prepared include:
- The CVs of the official representatives involved in the Representative Office must be appointed by the board of directions of the parent company.
- Photographs of the chief representative and general representative.
Once the local authorities process the required documents, it will usually take approximately 30 days to deliver the registration certificate to the company representatives.
The standard timeframe of incorporating a China representative office is 3-4 months.
Companies are required to have at least two years of operation in their parent company abroad, as well as having an existing address in ChinaAt least two years of existence of the parent company abroad.
- Individual Income Tax declaration
- Corporate Income Tax declaration (10-12% of all the RO expenses)
- Financial Statements Audit
- Annual Check
Purpose, benefits & features
- Conducting business meetings
- Promoting a brand, products or services
- Performing markt research
- Operating marketing activities
- Exchanging technology for permitted activities in China
- Hire local staff through your own subsidiary
- National presence can be achieved by adding remote employees under the PEO model (labor dispatch agencies)
- Be responsible for the entire staff employment and payroll management
- Reduce the cost of international business trips to visit partners and clients
- No investment required
The RO is one of 2 market solutions exclusively designed to set up a local presence in China, along with the PEO model. While the PEO model in China is referring to the use of a local partner for employment (the Employer of Record), the RO has been designed for businesses looking for hiring employees and monitoring the employment compliance internally (via its own legal and HR department).
Contrary to a WFOE or Joint Venture models, the RO solution doesn’t allow foreign companies to perform any direct business activity in China. In other words, this form of legal entity is unable to invoice customers or clients, and cannot make any profit locally on behalf of its parent company abroad. In practice, local specialized partners are required for business purposes, such as distributors with licenses, regional logistics providers, importers, local agents, etc.