Legal terms and taxation
A representative office is only functioning in liaison and research in the country and has no right to sell anything. However, the deal can be established via the rep office, and the transaction should be done between the mother company and the Chinese clients/suppliers. That's why the rep office only has expenses but no profitable income and cannot issue invoice. The representative office belongs to the mother company in abroad. Individual persons cannot set up representative offices in China. No initial capital is required.
Possible business scope: liaison, marketing research, quality control, follow-up, etc. That means a rep office can be involved in business operations but cannot engage in transactions like sales, import & export, and so on.
A representative office cannot employ people in China directly but it can be done via a certified HR agent.
A rep office shall pay two types of taxes: business tax and income tax. Please refer to the below formulas:
Business Tax
Explanation: Normally the business tax is based on turnover/sales, but as a rep office you won't have any turnover. So it's assumed that your turnover is equal to your total expenses/85%. The business tax rate is 5%. That's why your business tax = expenses/85%*5%
Income Tax
Explanation: The income tax is based on the gross profit, but as a REP office you won't have any profit. So it's assumed that your profit is equal to your turnover * 10%. The income tax rate is 25%. That's why your income tax = expenses/85% * 10 * 25%.
Office
Before the application, you need a real office to show you have a place to work. The office must be located in a commercial building, and cannot be the residential apartment. Company registration department will judge this based on the property certificate of the room.
You need a lease contract with the landlord (or the property certificate if you buy the office). In some cities the contract is required to be certified in the notary office. And in some cities (like Shanghai) the office must be located in the Grade A buildings. HRO China provides service of helping our clients to locate their offices.
Procedure of the setup
The procedures can be quite different among different Chinese cities. The following procedure is a basic flow that most cities adopt. However, there might be more requirements on certification or registration in some places other than below mentioning. The time consumption is also quite different (could be from 1 month to 4 months city by city, case by case). Please consult us for details.
- to fix the Chinese name
- to apply Business License from Administration of Industry & Commerce
- to get the organization code certificate
- to apply for foreign currency registration certificate
- to get the certificate from Tax Bureau
- to open an RMB bank account
Corporation Types
- RO Accountant Enterprises Registration
- RO Advertising Company Registration
- RO Air Transport Enterprise Registration
- RO Authentication Agency Registration
- RO Broadcasting and Film Company Registration
- RO Consulting Firms Registration
- RO Contracting Enterprise Registration
- RO Convention and Exhibition Corporation Registration
- RO Copyright Organization Registration
- RO Finance Agency Registration
- RO Freight enterprise Registration
- RO Inspection and Appraisal Agency Registration
- RO Insurance Corporation Registration
- RO Invested Enterprise Registration
- RO Manufacturing Enterprise Registration
- RO Leasing companies Registration
- RO Logistics Enterprises Registration
- RO Non-business Economic Organization and For-profit Economic Organization (from countries having no diplomatic relationship with China)
- RO Operator and International Maritime Transportation Company Registration
- RO Personnel Agency Registration
- RO Pharmaceutical Enterprise Registration
- RO Press and Publishing Organization of Foreign Countries and HK, Macao and Taipei
- RO Road Transportation Enterprise Registration
- RO Security Institution Registration
- RO Training Institution Registration
- RO Telecommunication Enterprise Registration
- RO Travel Agency Registration
- RO Trade Enterprise Registration
- RO Urban Planning Services Enterprise Registration
Contact us with your requirements and we will get back to you within one business day.