Introduction to China Resident Representative Office
A Representative Office (RO) is an office of a foreign
enterprise that is set up in China to liaise with Chinese
businesses and customers on behalf of the RO's home
company. Establishment of an RO is subject to approval
by the relevant authorities under Chinese law.
Although ROs are not allowed to directly conduct business,
there are still certain benefits that foreign enterprises
can gain from setting up and legally registering a Representative
Office. Perhaps the most important reason is that an
RO can help its home company to generate income from
sources inside China. Other possible benefits of setting
up an RO include: ROs can function as a liaison between
the home office and related industries in China; ROs
can conduct market research and do preparatory work
for their home company to possibly directly enter into
the Chinese market. Other benefits include ease of obtaining
Chinese visas for employees, easier direct communications,
Since China first started allowing the establishment
of trading WFOEs, some foreign enterprises, especially
those that conduct trade with China, have elected to
set up a trading WFOE instead of an RO. From a total
business operations standpoint, setting up a WFOE to
directly conduct business in China is much more efficient
than merely having an RO acting as a middleman in China.
We can discuss the options with you to determine which
type of business registration makes the most sense for
your specific situation.
Compared to registering a WFOE, registering an RO is
relatively faster and easier because there are fewer
approval authorities involved and there are fewer documents
required. The main benefit of registering an RO compared
with a WFOE is that for an RO, there is no Registered
Capital requirement, whereas a WFOE must have physically
deposited a minimum amount of registered capital in
a Chinese bank (currently RMB100,000; RMB30,000 after
January 2006). The total registration fees for an RO
are around RMB1000, which includes carving the RO's
company chops (seals).
Key Points of Registering an RO
Requirements for foreign enterprises
- Foreign enterprises that want to set up a Representative
Office in China must be an officially registered business
in its home country or region. A copy of the official
Registration Certificate issued by the foreign enterprise's
home country is required in order to prove that it is
properly registered in its home country. The Chinese
government removed the regulation that formerly required
the home-based business to have been in existence for
no less than one year in April 2004. Now even a foreign
enterprise that is newly registered in its home country
can register an RO in China.
- A bank reference letter is required from the country
or region where the enterprise headquarters is based.
The bank reference letter should state the name of the
foreign enterprise, that the foreign enterprise has
maintained bank accounts with this particular bank,
and that the foreign enterprise is in good standing
with the bank (e.g. no large outstanding debts, etc.
Requirements for the RO
- A Chief Representative must be designated for the
RO. An appointment letter that specifically designates
someone as the RO's chief representative will be required.
The chief representative can be an expatriate or local
- An office site in China is required for the RO. A
lease agreement and the landlord's official documents
will be required. The lease term must be for no less
than one year.
Representatives of the RO
- There must be at least one Chief Representative appointed
for an RO.
- All other foreign employees of the RO can be designated
as "representatives". A formal appointment
for each representative will be required. Expatriates
can only be representatives; local Chinese can either
be designated as representatives or as local employees.
- All expatriate representatives are required to apply
for Working Cards and Work Permits from the relevant
- New representatives can be added after the initial
RO registration has been completed.
Lifespan of an RO
An RO may register for existence as a legal entity for
between one and ten years, depending on the needs of
the foreign enterprise. (The maximum lifespan was only
three years prior to changes in the law in April 2004.)
RO Bank Accounts
An RO is allowed to open both a foreign currency account
and an RMB account. The foreign currency account is
used for receiving funds from its parent company in
the home country. The RMB account is used for expenses
in China. Normally all money deposited into the RMB
account must come from its foreign currency account
via a bank transfer, i.e. the RMB account cannot receive
any money from any other sources.
To fully and legally register an RO in China, visits
to about ten different governmental bureaus and agencies
are required and some of them will require numerous
visits. A tremendous amount of complicated paperwork
and physical footwork is involved. Each bureau has its
own specialized documents that are required, and only
Chinese language documents or certified translations
are accepted. It could take 4~6 weeks for completion
of the full registration process. Below is a list of
the bureaus or agencies that must be visited during
the registration process:
Administration of Industry and Commerce (AIC).
The AIC is the first authority to be visited in the
registration process. This authority will issue a Registration
Certificate for the RO and working cards for all representatives.
The Registration Certificate is the most important document
that indicates that your RO is approved and certified
by the Chinese government.
Public Security Bureau. This authority will issue
two documents: a PSB Registration Certificate that is
used to apply for visas for the RO's employees; and
a Notice of Chop Carving, which allows the RO's representative
to go to the appointed RO chop-carving shop to obtain
the official company chop. The "chop" is the
official company seal that is used to stamp all official
company business documents, much like a corporate "signature".
Institute Code Center. Here the RO will obtain
the Code Certificate and the IC Card. The IC Card and
the Code Certificate are very important, similar to
a person's ID card and ID number. They will be used
in the following registration procedures and in the
future operations of the RO.
Foreign Currency Bureau. This authority issues
the RO a formal permission notice for use in opening
the company's foreign currency account. The permission
notice contains information about the bank where the
RO must open its foreign currency account, the denomination
of the foreign currency that the account will contain
(e.g. USD), usage limitations on the account (only for
receiving overseas funds for ROs), etc.
State Tax Bureau and local State Tax Office.
This bureau will issue a State Tax Registration Certificate
to the RO. The Local State Tax Office will interview
the person that the RO has designated for handling its
tax affairs, check the nature of the foreign enterprise
in order to determine the tax calculation method to
be applied, set a tax payment schedule and the method
of reporting taxes paid, etc.
Local Tax Bureau and Local Tax Office. This office
is similar to the State Tax Bureau and Local State Tax
Office. The only difference is that the State Tax Bureau
handles the Enterprise Income Tax and Business Tax that
is levied on the RO, while the Local Tax Bureau handles
the Individual Income Tax that is levied on employees
of the RO.
Bank. The RO can open both a foreign currency
account and an RMB account in the bank suggested by
the RO and subject to be approved by the Foreign Currency
Statistics Bureau and Local Statistics office.
This authority issues a Statistics Registration Certificate
to the RO. The Statistics Office will interview the
representative of the RO to give he/she a lesson on
the importance of reporting statistics figures to the
office and set up a schedule for reporting the appropriate
Customs. This authority issues a Customs Registration
Certificate to the RO. The Certificate will be used
when employees of the RO have personal belongings, office
equipment, samples for exhibitions, samples of goods
from overseas, etc. that need to go through Chinese
Customs. If the RO has none of these items, this step
can be deleted.
Whether your RO is subject to paying taxes and what
taxes will be applied will depend on the nature of the
ROs of foreign governmental agencies, non-profit organizations,
and agencies of certain international organizations
such as the U.N. are non-taxable, but this is subject
to the approval of the China Tax Bureaus.
ROs of foreign law firms, accounting firms and auditing
firms are subject to paying the Enterprise Income Tax
(EIT), the Business Tax (BT), and the Individual Income
Tax (IIT) for their employees. The EIT and BT will be
determined according to the contractual income generated
by the ROs through the providing of consulting services
in China on behalf of their parent firms.
ROs of foreign enterprises engaging in trading, advertising,
tourism, etc., are also subject to paying EIT, BT, and
IIT. The EIT and BT will be determined by the operational
expenses of the RO. Roughly speaking, EIT and BT together
total nearly 10% of the total amount of the RO's expenses.
For foreign enterprises that do not fit into any of
the above categories, EIT and BT will be levied only
when the ROs assist their parent companies in earning
income from sources inside China; otherwise they are
free of EIT and BT. IIT will be levied the same as on
the other types of foreign enterprises.
Among the different methods of computing EIT and BT,
the method that determines taxes based on total expenses
could be the most expensive method. If the RO cannot
provide the proper documents that indicate the true
nature of its parent office (law firm, advertising company,
etc.), the computation method will most likely be determined
by the tax officials. We assist our clients in proper
registration with the tax bureaus, but even more importantly
we help our clients to negotiate with the tax officials
to get the best possible treatment on the applicable
taxation method imposed on our clients. For more details
on your specific business situation, please contact
See also: Methods of Taxation of Representative Offices
Working Documents and Visas
For the RO to employ expatriate representatives that
can legally work and reside in China, in addition to
the Working Card that will be obtained during the registration
process, the expatriate representatives will also be
required to obtain a Work Permit and a Residence Permit.
Expatriate representatives from Taiwan, Hong Kong and
Macau will only require a Work Permit; foreign representatives
will also require a Residence Permit.
Both Work Permits and Residence Permits are normally
good for one year, and can be renewed by submitting
the appropriate documents to the Labor Bureaus and Public
Security Bureaus respectively.
Residence permits also function as multiple-entry visas,
which are very useful for those expatriate representatives
who need to travel in and out of China frequently.
An RO may also have foreign clients that wish to visit
their office in China. An RO is allowed to issue Invitation
Letters that will allow their clients to obtain Chinese
business (F) visas so that they may legally enter China.
Our company assists in obtaining these working documents
for your expatriate representatives and we can also
help with obtaining official invitation letters for
See also: Working Visas, Business Visas
Changing the Registration of a RO
In the event that certain changes are necessary for
the RO, for example, office relocation, the appointment
of a different Chief Representative, the addition of
new representatives, etc., the RO will need to go through
the proper formalities with all of the same authorities
that were involved in the original RO registration process.
The RO will have to return all of the original certificates
and documents that were issued before the authorities
will issue the new certificates and documents.
Changing the Chief Representative can be problematic
so special attention must be paid to always keeping
the proper records and documentation for the Chief Representative
and tax payments. Under the regulations, to change the
Chief Representative, the RO must first present all
documents showing that the current Chief Representative
has paid his/her IIT for the previous three years. If
any of the required documents are missing, the RO could
be forced to re-pay the taxes or pay a fine. This is
just one example of why it is crucial that the RO maintain
proper management and filing of its business documents.
Changing the official office address may become another
problem in some situations. The problem often originates
with the legality of the new office site location. It
is very important that RO representatives do not sign
a lease with a landlord (both those that manage office
buildings and those that own an apartment) if the landlord
cannot provide the official property ownership certificate
for the building. For some newly built office buildings
or apartment buildings, the landlord may not yet have
the property ownership certificate; in this case it
may be acceptable if they can provide relevant documents
that prove that the office site in question is truly
their property and that they are merely waiting to receive
their official certificate. The RO representative must
be able to determine whether the landlord’s documents
will be able to be used to register the new office location
with the proper authorities. Our office can assist you
with ensuring that the landlord’s documents are
legal for the re-registration process, as well as any
other problems that may be associated with changing
the RO’s registration.
For questions regarding above or further information,
please contact us.