Last Updated: Jan. 3, 2017
Information provided below will guide you to:
In Mainland China, there are 4 modes of business presences for foreign investors: WFOE(65%), Representative Office(20%), FIPE(10%), Joint Venture(5%). About 20% of PtC's clients chose Rep. Office as their China business entity since it's cost efficient and it requires no capital investment, , a roughly comparison between these 4 modes, check the Comparison Chart.
Representative Office (RO) is established by foreign companies to engage in business liaisons, quality control, product promotion, market research, exchange of technology and other permitted activities in China.
ROs are not allowed to directly engage in operational activities, RO can't issue official invoices, nor receiving payments from it's clients. State Administration of Industry and Commerce (SAIC) usually specifies in scope of business, as it shown in the Registration Certificate of ROs, that ROs can not engage in direct operational activities. Therefore, it's not a form of foreign direct investment (FDI) 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, for instance: ROs of foreign law firms, ROs of foreign airlines etc.
A Representative Office in China may only engage in non-profit making activities, it can carry out the following functions:
Under no circumstances may a Representative Office do the following in China:
1.1. Legal Status of a Representative Office
The Representative Office is a non-legal entity operating representing it's parent company overseas. A representative office is not allowed to engage itself in business activities, issue invoices on its own, remitting outward, signing sales or purchase contracts, or receiving income from services performed but may act as a liaison and promotion office for its parent company.
The name of the Representative office should be in the form of "Name of the Enterprise + Name of the City + Representative Office".
1.3. Business Address
At the beginning of setting up the Representative Office, it is advised to decide the place and building where office is going to be located first, as the address of the proposed office will have to be mentioned in the application for approval.
Note: the business address must be located in commercial buildings approved by the government.
A new rule on foreign employees’ social security in effect starting October 15, 2011. It is said that if a company hires a foreign employee, the company shall register this employee with the local social security authority within 30 days of the employee receiving their work permit.
1.5 Monthly Cost to maintain a Rep. office in China:
Last Updated: Jan. 3, 2017
To take Beijing as a sample to see roughly how much would it cost monthly to operate a Rep. office in a city like Beijing:
note: this sample is based on one Chief Rep. from abroad, 2 local emploees with 3-10 years working experience) with a 3 working stations office in a serviced office.
|Beijing Representative Office monthly expenses Forecast Sheet|
|No||Running expenses||Amount (RMB)|
|1||Office rental and management fee||12,000|
|2||Salary for Chief Representative||31,000|
|3||Salary for local employee (10,000RMB and 20,000RMB)||30,000|
|4||Social Insurances and Housing Fund of employees||20988.90|
|Pension Insurance (20%)||9475.80|
|Medical Insurance (10%)||4737.90|
|Injury Insurance (0.5%)||236.90|
|Unemployeement Insurance (1%)||473.79|
|Maternity Insurance (0.8%)||379.03|
|Housing Fund (12%)||5685.48|
|5||FESCO fee (a local HR company takes care of social securities)||1,500|
|8||Accounting service fee||2,200|
|9||Annual audit and check fee is 10,000RMB per year||834|
|Total monthly expenses (tax excluded)||RMB 125,012 per month|
|Note: According to the social Insurance rules, when the salary is more than 17,379 RMB per month, the base of calculating Social Insurance and Houding Fund will be 17,379RMB.|
|Period||Beijing Representative Office taxes||Amount (RMB)|
|Monthly||Individual Income Tax for Chief Representative - employee has to pay||12,682 per month|
|Monthly||Individual Income Tax for two employees - employee has to pay||2,477 per month|
|Quarterly||Corporate Income Tax (it is quarterly expenses/80%*15%*25%) employer has to pay||5859 per month|
|Annually||Stamp Duty ( annually office rental *0.1%) -employer has to pay||144|
More information about Rep. Office:
Contact Our Regional Partners in Beijing, Shenzhen, Guangzhou, Shanghai, Ningbo, Hangzhou or Hong Kong for more details: