Introduction to China Resident Representative Office
Representative Offices (ROs), also known as Permanent Resident
Offices, are established by foreign companies to engage in business
liaison, product promotion, market research, exchange of technology
and other permitted activities in China.
ROs are not allowed to directly engage in operational activities.
The AIC usually specifies in the Business Scope, as shown in the
Business License of ROs, that a RO should not engage in direct
operational activities. Therefore, ROs are not a form of foreign
investment in China. However, some ROs are engaged in operations in
a lawful or tacitly permitted way and constitute one of the direct
foreign Investment forms in China.
The tacitly permitted way is applicable to those industries that do
not require special material conditions or environment for their
operations. For example, a consulting business does not need
manufacturing equipment and raw materials. It only needs offices,
employees and office articles. These physical conditions are
necessary for other ROs as well. In practice, many ROs that are
established by foreign consulting companies directly engage in
consulting activities. Chinese government does not prohibit them in
practice and this is reflected by the fact that the tax authorities
collect business tax from these Representative Offices (RO).
The lawful operational activities engaged in by Representative
Offices (RO) refer to those business activities permitted pursuant
to the bilateral treaties between China and other countries. In the
event that a bilateral treaty provides that certain types of
Representative Offices (RO) are permitted to engage in operational
activities, these bilateral treaties should prevail over Chinese
domestic law. For example, according to the Sino-US Civil Aviation
Transportation Agreement, ROs established by American civil airlines
may sell civil air transportation services provided by American
civil airlines, as well as engage in administration, inquiry and
other business activities.
It should be noted that up to now, only Representative Offices (RO)
of foreign airlines are allowed to engage in direct operational
activities in China under bilateral treaties. No other ROs of
foreign companies are so permitted.
Representative Offices (RO) are important means by which foreign
companies conduct business liaisons or engage in business and
operational activities in China. In this respect, foreign companies
refers all companies incorporated outside China, and those
incorporated in Hong Kong, Macau and Taiwan.
Representative Office Registration Procedures
The procedures for establishing a Representative Office (RO) vary
slightly in different areas of China and also vary in accordance
with the places where the foreign companies are located. However,
the basic procedures are much the same. The procedures for the
establishment of a Representative Office (RO) consist of three
steps:
Step 1: Examination and Approval
Foreign companies is now allowed to directly submit the application
documents to the relevant authority. However, it is common and
advisable for foreign companies to engage a corporate services
provider to handle the whole registration process. The corporate
services provider will submit all documents to the examination and
approval authority on behalf of the foreign enterprise. This step is
completed when the approval authority issues an Approval Certificate
for Representative Offices of Foreign Enterprises.
Step 2: Registration and Post-establishment Registrations
After the foreign enterprise obtains approval from the relevant
authority, documents must be submitted to the relevant AIC for
registration of the Representative Office (RO). This step is
completed when the AIC issues a Registration Certificate for
Representative Offices of Foreign Enterprises.
Step 3: Post-establishment Registrations
After a Representative Office (RO) is registered with the AIC, it
must handle registration and other procedures with banks, customs
office, tax authorities, public security bureau and other
authorities.
Detailed Registration Procedures...
Some Important Issues Related to Representative Office
Business Scope of Representative Office
ROs will have the authority to engage in economic activities and
sign economic contracts which are necessary to maintain its
existence and functions, and it should also carry out its activities
within the
business scope as set forth on Registration Certificate.
More...
Legal Status of Representative Office
Chinese laws do not expressly provide that Rep Offices should bear
liabilities independently with their own assets (i.e. limited
liability), ROs may be deemed to be part of the foreign parent
enterprise. As a part of the foreign enterprise, the foreign
enterprises should bear liabilities of the Representative Office
(RO) with all its assets.
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Authority of Chief Representative
Chinese laws do not clearly specify the limitation of the
authorities of a chief representative or a
representative. Therefore, foreign enterprises should clearly
set forth the authorities of the chief representative and
representatives of a Representative Office (RO) in order to avoid,
to the greatest extent possible, situations in which the acts of a
chief representative or a representative have binding force upon the
parent foreign enterprise.
More...
Representative Office Registration Costs |
