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.
The best option for certain types of company
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.
Track Record
Over 65 rep. offices registered
Express Service
2 to 3 month setup time
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services to support you throughout your venture.
Representative office vs WFOE structures
Representative Office
WFOE Formation
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.
Representative Office FAQ
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.
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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.
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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. The responsibility is on the applicant to verify property status properly through the landlord’s documentation.
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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.
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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).
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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.
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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).
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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.