Representative-office-in-China

Advantages

  • Least capital injection required. As RO is not a legal entity, actually no minimum share capital is required
  • Can hire local staffs
  • Can handle market research, sourcing, project investigation for mother company, who in turn to execute trading function

Disadvantages

  • Limitation in activity. No trading or invoicing is allowed
  • Local staff should be hired via government admitted agents
  • Although not profit center, cost expenses still attract tax liability(ies)

Setup Requirements

  • Takes around one (1) month to apply
  • A chief representative (CR) is to be appointed
  • Company should be able to present bank reference letter showing 6 digit average balance in past 6 months (in HK$ terms).
  • An office premise rental agreement (or ownership document) which is valid for foreign investor use. The term should be at least 12 months long.

Documents required

Applicant company

  • Certificate of Incorporation
  • Member register
  • Director register
  • Last filed return to company registry
  • Last filed return to tax department
  • Company/Business profile and reason of setting up RO
  • Minutes of board meeting to setup RO
  • Minutes of board meeting to authorize chief representative
  • Bank reference letter

Chief representative

  • Valid Passport copy
  • Photos
  • Resume

Application letter

  • One to Foreign Economic Relations & Trade Commission
  • Another one to Administrative Council of Industry & Commerce

Tax Implications

Although a RO is not to conduct business, it attracts tax on:

  • Chief representative and local staff’s individual income tax (IIT)
  • Business tax base on monthly operational expenses (BT)
  • Income tax base on annual operational expenses (IT)
  • IIT above depends on salary amount while BT 7 IT roughly amounts to 10% of annual operational expenses.

Maintenance Cost

  • License renewal – RO license has to be applied again once permit is expired. Maximum 3 years approval will be granted and depends on rental lease terms.

Accounting, tax filing and auditing

  • Tax filing has to be done on monthly and annual basis.
  • Moreover, there are statutory audit on the expenses account and foreign currency back account
  • Service fee for monthly accounting and tax filing starts from RMB 2,500 while annual audit starts from RMB 5,00
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