Same as WFOE, a representative office is established and fully controlled by foreign investors without Chinese partner participation. However, the business nature of a representative office and its key concept is confined to liaison purposes. Direct trading, manufacturingand receiving business revenue are not allowed. Investors can use a representative office for such activities as marketing products and services, sourcing of suppliers, quality control, market research, logistics control, technology exchange, etc.
Setting up a representative office in China is the cheapest and quickest solution of establishing a presence in China.
A representative office is required to pay business tax and foreign enterprise income tax at a rate of 15% on the total expenses such as rent, staff salary, electricity, management fees,etc. Once a representative office is officially registered, it needs to maintain proper accounting records in accordance with accounting standards in China and report taxes on both a monthly and quarterly basis.
In general, we would suggest our customers set up a Hong Kong company for invoicing to their non-China customers and place orders to China suppliers. A representative office can provide a supportive role and liaison with suppliers in China.
Since January 2010, it is a requirement that the applicant company of a representative office must have been set up for a minimum of two years. In addition, the business registration certificate and bank reference letter of the applicant company must be notarised by the China Attested Officers and legalised by the China Certification Office in Hong Kong or Chinese embassy in the recognised countries. Time for registration will take around 2–4 months, subject to the provincial government and nature of business.