How to set Up a Representative Office in China

15 Mar 2012 by in Company Formation
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How to set Up a Resident Representative Office in the People's Republic of China

Our overview briefly sets out the law and procedures relating to the registration and operation of a resident representative office ("representative office") by a foreign enterprise in the People's Republic of China ("PRC" or "China"). The information contained herein is based upon our Beijing lawyer working experience with and understanding of relevant PRC legislation which is publicly available as of 1 March 2012.
 
This overview is not intended as an exhaustive discussion of the establishment and operation of a representative office in the PRC, but rather to provide general information for reference purposes. As Chinese law is evolving rapidly, readers are advised to seek further information and legal advice when considering the establishment of a representative office in the PRC.

Advantages of a China Representative Office
1. Although a China representative office cannot directly carry out business in the country, it can help its parent company create income from sources inside China.

2. A China representative office can function as a liaison between the parent company's headquarters and related industries in China.

3. A China representative office can conduct market research and analysis and prepare for the parent company to enter the Chinese market.

4. Registering a China representative office is usually quicker and less complicated than incorporating a Wholly-Owned Foreign Enterprise (WOFE).

5. Unlike a China WOFE there is not a minimum registered capital requirement for a China representative office.

Disadvantages of a China Representative Office

1. A China representative office is an inefficient body with which to trade within China. Most clients now prefer to set up a China WOFE, which does not require a 'middleman' like a China representative office.

2. A China representative office is required to have a real office address. A lease agreement (minimum term one year) must be presented to the authorities.

3. A China representative office must have at least one Chief Representative, who can be of any nationality. Appointing a new Chief Representative is complex and time-consuming.

4. A China representative office can be set up as a legal entity for a maximum of only three years. However, for certain offices such as insurance agencies and banks, the term may be longer.

5. Setting up a China representative office is time-consuming and complicated, requiring large amounts of paperwork and visits to authority offices. The offices to be visited include the Administration of Industry and Commerce (AIC), the Public Security Bureau, the Institute Code Centre, the Foreign Currency Bureau, the State Tax Bureau and local State Tax Office, the Local Tax Bureau and Local Tax Office, the Bank, the Statistics Bureau and Local Statistics office and Chinese Customs.

Other Information on a China Representative Office

1. Foreign enterprises that want to set up a China representative office in China must be a legally registered business in their home country.

2. A China representative office can open both foreign currency and RMB corporate bank accounts. The foreign currency account is used for receiving funds from the representative office's parent company in its home country. The RMB account is used for expenses in China. Beneficial banks for a China representative office to use include HSBC, Standard Chartered and Citibank in China.

The following is the text of the related law regulating how to set up a representative office in China.

MEASURES FOR ADMINISTRATION OF REGISTRATION OF RESIDENT OFFICES OF FOREIGN ENTERPRISES
(Approved by the State Council on March 5, 1983, promulgated by the State Administration for Industry and Commerce on March 15, 1983)

Article 1
In accordance with the Interim Provisions of the State Council of the People''s Republic of China Concerning the Control of Resident Offices of Foreign Enterprises in China (hereinafter referred to as "the Interim Provisions"), these Measures are formulated to carry out the registration administration of resident offices in China of foreign enterprises and other economic organizations and to enable them to conduct their legitimate business activities.

Article 2
Resident offices of foreign enterprises in China and other economic organizations (hereinafter referred to as "resident offices of foreign enterprises"), which have been approved in accordance with Article 4 of the Interim Provisions, shall go through the registration procedures prescribed in these Measures.

Article 3
Resident offices of foreign enterprises shall be understood as those engaging in non-direct-profit-making operations. But, for those provided for in the agreements between the Chinese government and the governments of their countries of origin, they shall be dealt with accordingly.

Article 4
The State Administration for Industry and Commerce of the People''s Republic of China is the organ for the registration of resident offices of foreign enterprises. It shall empower the administrative departments for industry and commerce in the provinces, autonomous regions and the municipalities directly under the Central Government to handle the registration procedures.

Article 5
The main items to be registered for the resident office of a foreign enterprise are: name of the office, address of residence, number of representatives and their names, business scope and period of residence.

Article 6
Foreign enterprises and other economic organizations shall go through the prescribed registration procedures at the administrative departments for industry and commerce in the provinces, autonomous regions and the municipalities directly under the Central Government where the said offices are to be located within 30 days from the date when their applications for setting up resident offices within the territory of the People''s Republic of China are approved by the approving authorities.

Article 7
A foreign enterprise or an economic organization shall submit the following documents in applying for the registration of a resident office:
1. the approval document issued by the approving authorities of the People''s Republic of China;
2. the documents and data as listed in Article 3 of the Interim Provisions.

Article 8
If the documents submitted by a foreign enterprise or an economic organization for registration are established as conforming to these Measures through examination, the registration office shall grant permission to register and issue a certificate of registration and certificates for the representatives after the registration fee is paid. The resident office of a foreign enterprise shall, on the strength of the document of approval, certificate of registration and certificates for the representatives, register with the public security organ, banks and the Customs and tax authorities and other departments for residence permits and other related matters.

Article 9
The resident office of a foreign enterprise is deemed as formally established from the date of its registration and the legitimate activities of the said office and its representatives shall therefrom be protected by the laws of the People''s Republic of China. A resident office that has not been approved and registered shall not proceed with its business activities.

Article 10
In engaging the service of Chinese personnel, the resident office of a foreign enterprise must follow the provisions prescribed in Article 11 of the Interim Provisions and promptly report this to the registration authorities for the record.

Article 11
The registration certificate for the resident office of a foreign enterprise is valid for a period of one year. The said office must, upon the end of the period, renew the aforesaid document if it wishes to continue its residence.
To renew its registration, the resident office of a foreign enterprise must, within 30 days before the date of the expiry of its certificate of registration, submit to the registration authorities an annual report of its business operations (in Chinese) and an application for renewal. In case where the term of residence approved for a resident office expires, the document of approval for renewal issued by the same authorities must also be submitted at the time of renewing the registration and a form for renewal shall be filled out. After examination by the registration office, the original certificate shall be turned in and a new certificate of registration shall be issued.

Article 12
When the resident office of a foreign enterprise wishes to make alterations with regard to the name of the office, the number of representatives and their names, the scope of business and the address of the resident office, an application for alterations shall be filed with the registration office together with the document of approval issued by the approving authorities before going through the prescribed procedure for alterations. Where there is a change of representatives, a power of attorney issued by the foreign enterprise or economic organization shall be submitted together with the resumes of the new representatives.

Article 13
If the resident office of a foreign enterprise desires to terminate its business operations upon or before the expiration of the term of residence, or the enterprise represented by the office declares bankruptcy, it shall go through the deregistration procedure at the registration office. In going through the deregistration procedure, documents issued by the tax authorities, banks and Customs to certify the clearing up of taxes, liabilities and other related matters shall be produced before approval is granted for the deregistration and the cancellation of the certificate of registration. Should the said office leave any matter unsettled, the foreign enterprise or economic organization the office represents shall be held responsible for the settlement of that matter.

Article 14
The State Administration for Industry and Commerce of the People''s Republic of China and the administrative departments for industry and commerce in the provinces, autonomous regions and the municipalities directly under the Central Government are entitled to supervise and check on the business activities of the resident offices of foreign enterprises in accordance with the stipulations in these Measures. In carrying out the check-up and supervision, the staff members of the said departments shall present identification cards specially issued for that purpose. The resident offices must report honestly and provide such information and data as required. Refusal to report or holding back information shall not be allowed.

Article 15
Any of the following violations of the provisions in these Measures shall be punished by the State Administration for Industry and Commerce according to the seriousness of the case:
1. The resident office of a foreign enterprise proven to have engaged in direct profit-making operations in violation of the provisions of Article 3 of these Measures shall be ordered to stop its business operations and be punished concurrently with a fine of 20,000 yuan (RMB) or less.
2. The resident office of a foreign enterprise proven to have altered any item registered without going through the required procedure or failed to deregister when it ought to shall be given a notice of warning which is to be circulated. For more serious cases, a fine of up to 5,000 yuan (RMB) or less shall be imposed or even the registration certificate be revoked. When the resident office of a foreign enterprise is found to have engaged in speculation, frauds and other unlawful activities, all the proceeds and properties thus obtained shall be confiscated in addition to a fine or even the revocation of the registration certificate on the merit of the case. Cases that violate the Criminal Law of the People''s Republic of China shall be dealt with by the judicial organs according to law.

Article 16
A foreign enterprise or other economic organizations engaging, without authorization, in business operations only allowed for resident offices shall be ordered to stop such activities and a fine of 10,000 yuan (RMB) or less shall be imposed in addition.

Article 17
These Measures also apply to foreign enterprises and other economic organizations applying for accrediting their resident representatives within the boundaries of the People''s Republic of China.

Article 18
Companies and other enterprises run by overseas Chinese or by compatriots from Hong Kong and Macao, when applying for the establishment of resident offices, shall go through registration procedures with reference to these Measures so as to obtain registration certificates for the resident offices of overseas Chinese enterprises and enterprises in Hong Kong and Macao.

Article 19
Chinese-foreign equity joint ventures operating outside China which have been approved to establish resident offices in China shall also go through registration procedures with reference to these Measures.

Article 20
These Measures shall go into effect as of March 15, 1983.

Read 1862 times Last modified on Thursday, 15 March 2012 17:53
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