What is the China Representative Office?
A representative office in China, abbreviated as a representative office, refers to the local office of a foreign company in China.
In China, it is legally prohibited for representative offices to make profits, issue invoices, and engage in trade, which is the main purpose of wholly foreign-owned enterprises or joint ventures. However, representative offices are still an ideal choice for foreign headquarters in China to organize business meetings, implement quality control, promote products or services, and conduct market research.
Setting up a representative office in China is a relatively cost-effective solution that can represent the headquarters and bring benefits to its global performance. Establishing a representative office is also very simple and fast, taking only about 2 weeks from registration to running with Simon’s help.
Advantages and disadvantages of representative offices
As a foreign company, you may have established close relationships with Chinese suppliers. However, this may also cause some trouble for you, as representatives from both sides need to fly over various countries during joint meetings or presentations. In this case, if the transaction is directly established with a foreign headquarters, setting up a representative office in China for foreign countries may be an ideal choice. One of the representatives can be stationed in China to represent foreign companies in organizing meetings, exploring markets, showcasing products, and conducting liaison activities at any time, while enhancing their confidence in your professionalism when clients visit your office.
In addition, the representative office will also provide:
- By locating your office, achieve a real presence in China
- Enhance brand building capabilities with market changes
- Detailed local market research and exploration
- The organizational and land-based activities of foreign headquarters in China
- The company’s bank account that receives operating funds from overseas companies
- Directly hiring local employees from foreign representatives or third-party organizations
- No registered capital requirement
However, as a representative office, it is only the representative of foreign companies in China. Therefore, it is not allowed to:
- The representative office is only the representative of foreign companies in China. Therefore, it is not allowed to:
- Carry out any commercial activities aimed at profit
- Sign business contracts for overseas companies
- Representing any company outside of the headquarters
- Purchase any property or assets in China
- Import and export goods
- Receive service payments and issue invoices to local customers
- Store any product in China
If your operation involves any of the above activities, it is not suitable to establish a representative office. Establishing a wholly foreign-owned enterprise or joint venture is a better choice for you.
From our previous blog
Requirements for Establishing a Representative Office in China
To open a representative office for an overseas company in China, your overseas headquarters needs to provide proof of operation for two years.
Has it reached the standard? Simon’s Chinese gold experts will assist you throughout the entire process of establishing a representative office in any city you consider, including Beijing, Shanghai, Shenzhen, Guangzhou, and Hainan, while fully complying with local laws and regulations. Our services cover everything, including:
- Assist in selecting office locations
- Sign labor contracts with local employees
- Application for Employment Residence Permit for Foreign Employees
- Monthly bookkeeping and reporting
Simon China Representative Office Establishment Plan
There is no need to get involved in the complexity and trouble of setting up a representative office. Let Simon’s gold expert help you save time, so you don’t have to worry. Just relax until everything is perfectly and effectively completed.
In addition to the establishment services of the representative office, we also recommend including the following services in your service package to help you overcome the difficult entrepreneurial stage:
- Assist local employees in signing labor contracts and registering social insurance
- Bookkeeping and accounting services, including journal entries, income statement, balance sheet, cash flow statement, cash reconciliation, personal income tax declaration, annual audit report, and license updates
Simon is always willing to provide any internal legal, financial, and human resources services, which is the best way for you to maintain the compliance of your representative office at all times during operations.
Are you considering opening a representative office in China? Just click the button below to have a free consultation with Simon and discuss your plans today.
Why choose Simon?
Rapid Processing
With experienced team members, we can handle your project faster than others.
Unsuccessful, no charge
Simon promises that we will only charge after your project is successfully completed.
Tailored services
We will provide the most suitable business plan based on your situation.
Traceable process
Simon has an online system for you to track any updates to the project.
Frequently Asked Questions
Do you have any further questions? don’t worry! We are happy to answer!
What is the legal status of the representative office in China?
A foreign enterprise representative office is an unincorporated entity that represents foreign headquarters in China for liaison purposes. The representative office shall not engage in business activities, issue invoices, sign sales or procurement contracts, nor shall it obtain income from the services provided. However, it can serve as a joint finalist and initiator for the headquarters.
How do I name my representative office in China?
Usually, the naming structure of a representative office in China is: the country name of the registered head office+the company name+the city name+the representative office.
The income distributed by the legal partner from the joint venture shall be included in the total annual income of the partner and declared and paid to the competent tax authority in the place where the legal partner is registered.
Who can be appointed as the chief representative of the representative office?
The chief representative is the legal representative of the Chinese representative office appointed by the foreign headquarters. There is no restriction on the nationality of the chief representative, and he does not need to stay in China during the operation period.
Do representative offices have to pay taxes in China?
yes. Whether a representative office needs to pay taxes and the content of taxes that should be paid depend on the nature of the industry in which the foreign headquarters is located.
Foreign government agencies, non-profit organizations, and representative offices of certain international organizations (such as the United Nations) do not need to pay taxes, but they require approval from the Chinese tax bureau.
Representative offices of foreign law firms, accounting firms, and auditing firms providing consulting services through their parent companies in China shall pay corporate income tax, value-added tax, and personal income tax based on the contract income generated by the representative offices.
Representative offices of foreign companies engaged in trade, advertising, tourism and other businesses are also required to pay corporate income tax and value-added tax, and withhold and pay personal income tax based on the operating expenses of the representative office.
How can the representative office hire local employees in China?
The representative office shall entrust local foreign affairs service agencies designated by the Chinese government to hire Chinese employees in accordance with Chinese laws and regulations. Usually, representative offices sign service contracts with local external service agencies. According to the service contract, the local foreign affairs service agency agrees to provide services, and the representative office pays the service fee for hiring Chinese employees. After establishing an employment relationship, the local foreign affairs service agency will pay social insurance on a monthly basis.
Can a representative office open a bank account at a bank in China?
yes. Representative offices can open foreign currency accounts and RMB accounts. Foreign currency accounts are used to receive funding from foreign headquarters, while RMB accounts are used to pay for daily expenses. In practical operation, most representative offices only open RMB accounts, which can accept funds from foreign headquarters and also pay for daily operating expenses. The bank account of the representative office cannot accept funds from any other source.
What should be included in a credit report issued by a bank?
The credit report should include the following content:
The time when the company opened an account in the bank, and the evaluation words such as good operating conditions, normal business, no bad records, as well as the deposit amount, should be indicated.
If the bank letter of credit is in a foreign language, a translation must be submitted and stamped by the translation company.