At New Horizons we cover a wide range of industries. Our consultants have experienced professionals and there is no market we haven’t touched by this point.
A Representative Office (RO), often called Rep Office, is one of the traditional forms of representation in China. It allows a foreign company to hire staff in China through their own legal entity, for the sole purpose of company representation (e.g. conducting business meetings, business liaison, promoting a brand, products or services, performing market research, as well as operating marketing activities and technology exchange for permitted activities in China).
The RO is one of the 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 staff and monitoring the employment compliance internally (via its own legal and HR department).
Contrary to a WFOE or JV 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.
As under the PEO model, the local representatives cannot directly sign contracts or deals with engaging their company in any business or profit. They cannot collect money or issue invoice in China. Those activities must be performed directly by the parent company abroad, via the support of a local partner in China upon necessity.
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
Collection of the required documentation from the parent company
- 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
- Registration with the local Administration for Industry and Commerce
- Approval and obtainment of the Business Registration Licence
- Registration Certificate application
- Fabrication of the company stamps
- Organization Code Licence 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.
- At least two years of existence of the parent company abroad.
- Having an existing address in China which can be used as the RO business address.
As a legal entity registered in China, all ROs must follow the P.R. of China rules after registration, which are:
On a monthly basis:
- Individual Income Tax declaration
On a quarterly basis:
- Corporate Income Tax declaration (10-12% of all the RO expenses)
On a annual basis:
- Financial Statements Audit
- Annual Check
- 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;
In practice, a foreign company requiring a large number of staff in China based out at the same business address will be interested into opening a RO. For instance, businesses with needs of local support for quality control activities, logistics and suppliers management, marketing coordination, partnership development, etc.
The RO is – along with the Sales Office (business address with staff employment handled by a PEO), the WFOE (legal entity with local profit making capacities) and the JV (merger between a local entity and a foreign entity) – a form a local presence which allow overseas companies to support their strategic expansion in Mainland China.