Open a Representative Office in China
Set-up a physical presence in China without risks and at a low cost.
Representative Office Registration
A representative office (often shorted to rep office or RO) is the simplest and fastest option for overseas businesses to set up an operation in China. In simplest terms, it allows a foreign company to engage in market research or business operations in China, but not to make a profit. In a country where it is typically expensive and time-consuming to establish a new company, this easier setup route is appealing to many companies. For some, this will suit their operations fine (at least initially) and could save significant time and money. For others, it may be clear that a full WFOE setup is required from the outset.
At FDI China we have experience helping many overseas companies to open a representative office in China. We find this structure is popular in several areas: Early-stage market exploration, particularly smaller companies with restricted budget and resources. Activities such as market research, publicity, and marketing are permitted. Companies looking to make investments in the Chinese market but need to explore/research further beforehand. Companies which only need a simple local presence to carry out activities such as liaising with suppliers, or for quality assurance.
Non profits
Market research
Customer support
Sales representative
Rep. Office Registration Procedure
01.
Name & Address
Getting you a registered address & preparing documents.
02.
Business License
Your business license and corporate chops are issued.
03.
Corporate Accounts
Opening of your corporate bank account & tax accounts.
04.
Ongoing Support
Monthly tax & accounting reports for compliance.
05.
Additional Services
Opening of your corporate bank account & tax accounts.
For companies providing services in or from China.
A consulting WFOE is the most simple foreign-owned legal entity to set up. No additional licenses or certificates are needed.
For companies importing into or exporting out of China.
Trading WFOEs are essentially consulting WFOEs armed with an import/export license and other licenses for specialty products. Trading companies can take advantage of Free Trade zones in Shanghai & Guangdong.
- Retail product trade
- Food & beverage trade
- Alcohol trade
- Medicine trade
- Baby formula trade
- Other products
For companies conducting manufacturing operations in China.
A manufacturing Wholly Foreign Owned Enterprise is a highly specialized WFOE that has passed safety and environmental government examinations in order to manufacture products in China. Ideal for assembling final or intermediate goods.
- Semiconductors
- Electronics
- Furniture
- Chemicals
- Other products
For companies conducting nonprofit activities.
A representative office is ideal for a nonprofit operation such as on-site customer support for existing clients, field research and/or marketing.
- Marketing
- Research / prospecting
- Customer support
- Humanitarian causes
- Other nonprofit activities
For companies with foreign and Chinese shareholders.
A joint venture (JV) is a company with both foreign shareholders and Chinese shareholders. As of 2021, there is no % ownership limitation of any party in the JV. JVs are able to operate in more restrictive and sensitive business sectors within China.
- Education
- Telecommunications
- Medical institutions
- Oil & gas exploitation
Our Working Process
01.
Consultation & Proposal
We (can) advise you on the best solution for your business model and send you our comprehensive proposal.
02.
Signing & Payment
After reviewing the proposal, we sign the service contract and receive your payment.
03.
Preparing Documents
We send you an application form as well as the list of documents we need from your side.
04.
Take a Break
Sit back, relax and let us take care of everything from here on out. Your Rep. Office will be ready in roughly one month.
Rep. Office in a Nutshell
The rep office advantages of a slightly more affordable solution is offset with severe limitations. Critically, a representative office cannot issue invoices in RMB or make any profit from its activities in China. A representative office also cannot directly hire staff, and instead must place them with a local agency in China.
The alternative to a representative office is to open a more substantial WFOE. In contrast, this permits full business operation in China, can invoice clients and make a profit, and can directly hire staff. It is though more time consuming and expensive to set up (both from a direct setup cost and need for capitalization), and carries more responsibility for owners. A good analogy is to view a rep office as a cost center of the foreign parent, whereas a WFOE is a fully operating subsidiary.
Recent simplifications to the process for establishing a WFOE have certainly made them more appealing to many clients. But there still remains a strong difference and choice to be made when choosing a WFOE or a representative office. As with any business process, the key here is in understanding the details, differences and requirements.
How to Setup a Rep. Office
We provide here an outline of the steps required to open a representative office in China. This is not a challenging process, but it does involve liaison with several different Chinese authorities. The procedure here is based on our extensive experience working with many different clients.
-
Obtain approval for company name
The first step in opening an office in China is to choose a name. Company names are strictly regulated for all types of company. A proposed name should be checked for availability, and that it does not contradict any rules regarding special characters or words. This is then submitted to the local AIC (Administration of Industry and Commerce) for verification and approval.
-
Sign rental lease for office space
It is a requirement for representative office application that an appropriate rental agreement is provided. This must be in the city of registration, of at least 12 months duration, and be in an approved commercial (non-residential) property. FDI China can provide this address for administrative purposes at a friendly fee!
-
Make application to AIC for registration
The application form and all required documentation are submitted to the local AIC. Provided everything is in order, a business registration certificate usually takes around 2 weeks to be issued. At this point, the representative office is fully licensed and established.
-
Carve company chops
Chops, or seals, are used for a representative office just as they are for any Chinese company. These represent the highest level of company authorization. Separate chops are needed in different areas and are obtained through the Public Security Bureau (PSB).
-
Register for tax payment with the local tax bureau
Tax will need to be paid from the date of registration, usually calculated as a percentage of total expenses.
-
Obtain visas for foreign employees
Application is made via the PSB, and visas will be needed for the rep office chief representative and any other foreign employee (up to 4 in total).
-
Open Chinese bank account
A basic Chinese RMB account is needed for company day to day spend. If foreign exchange is required, we can also apply for a foreign exchange registration certificate.
Frequently Asked Questions
A rep office is taxed even though it derives no profit. This is usually based on the expenses of the rep office, and has risen in recent years from 10% to closer to 15%. A WFOE of course is taxed instead on its actual income / profit.
China Representative Office required documents
The documentation required for representative office registration is much less cumbersome than what is needed for a WFOE. There are strict requirements however, and it is best to start preparing documentation as early as possible.
In general the following documents will be needed, but this can vary for different company types or operating location.
- Representative office application form.
- Passport copies, photos, CV and appointment letter for the rep office chief representative.
- Office rental contract (in city of registration, must be in commercial building and valid for at least one year).
- Certification, registration and articles of association of the parent company.
- Bank reference letter for parent company (showing time with bank and good standing).
Note that all of these documents relating to the parent company will need to have a Chinese translation, notarized by the Chinese embassy.
A rep office can hire staff in China, but this is not as flexible as permitted for a WFOE. Staff will need to be hired and managed using an employment agency (FDI China can assist with this) rather than directly by the company. There is also a limit on foreign employees of 4, including the chief representative.
Note that (following rule changes in 2010) the parent company of a rep office must be at least 2 years old. In addition, the law states that rep office registration is only valid if the parent office remains registered. This limits the use of SPV or holding company structures as is common with WFOE setup.
We provide here an outline of the steps required to open a representative office in China. This is not a challenging process, but it does involve liaison with several different Chinese authorities. The procedure here is based on our extensive experience working with many different clients.
Obtain approval for company name
The first step in opening an office in China is to choose a name. Company names are strictly regulated for all types of company. A proposed name should be checked for availability, and that it does not contradict any rules regarding special characters or words. This is then submitted to the local AIC (Administration of Industry and Commerce) for verification and approval.
Sign rental lease for office space
It is a requirement for representative office application that an appropriate rental agreement is provided. This must be in the city of registration, of at least 12 months duration, and be in an approved commercial (non-residential) property. FDI China can provide this address for administrative purposes at a friendly fee!
Make application to AIC for registration
The application form and all required documentation are submitted to the local AIC. Provided everything is in order, a business registration certificate usually takes around 2 weeks to be issued. At this point, the representative office is fully licensed and established.
Carve company chops
Chops, or seals, are used for a representative office just as they are for any Chinese company. These represent the highest level of company authorization. Separate chops are needed in different areas and are obtained through the Public Security Bureau (PSB).
Register for tax payment with the local tax bureau
Tax will need to be paid from the date of registration, usually calculated as a percentage of total expenses.
Obtain visas for foreign employees
Application is made via the PSB, and visas will be needed for the rep office chief representative and any other foreign employee (up to 4 in total).
Open Chinese bank account
A basic Chinese RMB account is needed for company day to day spend. If foreign exchange is required, we can also apply for a foreign exchange registration certificate.
Despite the major limitation of not making a profit in China, there are many good reasons to open a representative office in China. For many companies, this lighter option is the best to go for.
- Although it cannot make a profit, a rep office can carry out any non-profit doing business activities in China.
- As the simplest form of Chinese company for non-residents to set up, a representative office has the lowest cost.
- No capitalization is needed. Although a WFOE in theory now requires no minimum capitalization, in practice capital injection is needed and is hard to extract once made. A rep office does not need this, lowering cost and risk.
- Much faster setup time and complexity than for a WFOE. A representative office can normally be set up in several months less than a WFOE.
- Much lower tax and HR administration burden than for a full WFOE.
- A representative office can hire both local and foreign staff, with employment and payroll handled by an accredited Chinese agency… like FDI China!
It is a legal corporate office address intended to be used for administrative and bank account opening purposes only.
You cannot physically use the virtual address.
You cannot physically use the virtual address.