Setting up RO in China

A representative office (RO) is an office of a foreign parent company, set up in China for business liaison activities carried out on behalf of its parent company. An RO is an observation gallery for a foreign company before it makes an actual investment in China and is not considered to be an independent legal entity.

 

Advantages of RO :

- An RO can handle market research, sourcing, project investigation for parent company. It does not need a registered capital injection.

- The parent company can enter into contracts with its suppliers /customers in China in its own name. 

 

Disadvantages of RO :

- An RO may not carry out direct revenue earning business activities. For example, it cannot enter into purchase/sales contracts and cannot receive payments for services, issue invoices or repatriate monies overseas.

- Local staff can only be hired via government admitted agents.

- Expenses still attract tax liability despite of not making revenue. The Tax Authority normally deems "taxable income" base on expenditure amount of the RO. The estimated effective tax base of RO is approximately 15% of its expenses.

 

Apply for Registration Certificate, Chief Representative Certificate, General Representative Certificate(s).Unlike a foreign investment entity, usually RO is not required to apply for  Approval Letter and Approval Certificate from Shanghai Foreign Economic Relation and Trade Commission. RO needs to register and apply for three certificates from Shanghai Administration of Industry and Commerce (SAIC). They are:

(1) Registration Certificate

(2) Chief Representative Certificate

(3) General Representative Certificate(s).

 

Application Documents :

- Certificate of Incorporation of the parent company;

- Bank reference letter of the parent company;

- Articles of Association of parent company;

- Appointment letters and resumes of all representatives;

(all above docs should be certified by the Chinese Embassy or Consulate in your country)

- A written application for the establishment of the proposed RO;

- Rental contract and the landlord’s rental permit.