Set Up A Foreign Enterprise Representative Office In China

General requirements

(1) The foreign enterprise has to be incorporated in its resident country for at least one year.
(2) Registered capital is no less than HK$100,000.
(3) Enjoy high business reputation; and
(4) Foreign enterprise shall provide true and reliable papers as requested.

Business scope

A representative office ("RO") of a foreign enterprise shall be operated within the scope of permitted activities (i.e. conducts market research, provides commercial information and conducts other business liaison, consulting and services activities for its head office and does not receive any business or service revenue).

Application

According to relative regulations, the foreign enterprise shall go to some designated undertakers for submitting application. The undertakers will submit all the materials to the government organization and undergo formalities for foreign enterprise. For instance, in Shenzhen, Shenzhen Foreign Trade and Economy Service Centre is one of the authorized undertakers.

Documents required for application:-

(i) application form for RO registration;
(ii) certificate of incorporation;
(iii) identification of the foreign enterprise's credit status issued by the bank of its resided country;
(iv) letter of authorization of chief representative; and
(v) document indicating the RO's business address in the PRC (i.e. tenancy agreement).

Time required
Around 6 weeks.

Tax Compliance Requirements on Representative Office

Representative offices shall comply with the following tax requirements:

(a) Tax registration

Registration with the tax authorities is required regardless of whether the RO is subject to PRC taxes. The RO of the company shall have registered with the tax bureau in the respective locations within one month after the first business registration certificate is received from the State Administration for Industry and Commerce.

If the RO fails to undergo tax registration with the tax authorities within the prescribed time limit, the tax authorities may impose a fine on the RO.

(b) Applicable Taxes

The following taxes will be charged:-

Business Tax ("BT"). This tax is calculated based on deemed gross revenue* at the rate of 5%.

Foreign Enterprise Income Tax ("FEIT"). This tax is calculated based on the deemed net profit* of the representative office at a flat rate of 33%, inclusive of 3% local tax (concession rate apply if it is situated in Special Economic Zones).

* Deemed gross revenue x Deemed profit rate

(c) Tax return filing and payment

When a RO is subject to PRC taxes, it shall file its provisional FEIT and BT returns on a monthly basis in accordance with the tax regulations. However, the tax bureau will usually accept, upon application, quarterly filing whereby the tax returns shall also be submitted to the tax bureau at the same time as tax payment.

Please contact our firm by phone at 2956 3333 or by email at enquiry@cwcccpa.com for more information