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Establishing a Representative Office in China

February 17, 2010

If you plan to enter China, but are unsure of the business potential and do not want to invest considerable capital but would rather spend the first few months understanding / scoping out the investment landscape in your industry Representative Offices will be your preferred vehicle of entry into China.

Representative Offices or RO’s are an inexpensive medium that allow companies or trading agents to liaison between their headquarters and suppliers and/or clients across China. Preparatory work such as market research, identifying compatible suppliers and quality checks are some functions that an RO can carry out. In addition, a RO may lease office space, import office equipment and personal items, open bank accounts and represent the headquarters for branding and marketing purposes – by displaying signs and distributing business cards which identify its China representative office

Setting up a RO requires no registered capital and no predetermined enterprise incorporation date. Besides employing local staff, RO’s are allowed to hire foreign staff on visa’s or grant them residential permits, enabling a company’s headquarters to appoint their own Chief Representative.

RO’s are however not permitted to conduct direct business activities as a result official invoices cannot be issued by the RO. The RO can only be considered a cost center, financed on a regular basis by the holding Company.

The procedures for establishing representative offices are fairly simple and take anywhere between two to three months. However do note that regional variations do exist and seeking professional advice is recommended. The requirements and procedure for setting up a RO are as follows:

Requirements:


Sponsor: A foreign company applying to establish a general representative office must entrust a “Sponsor,” i.e., a local company qualified to carry out application procedures on behalf of the foreign company. The Sponsor receives application materials and submits them to the registration authority, Administration of Industry and Commerce (“AIC”).

Documents that need to be submitted to the AIC:

(1) an application letter;
(2) a letter of appointment for the company’s representative(s) in China.
(3) a brief resume of each representative.
(4) photocopies of each representative’s ID document;
(5) a certificate of incorporation and a business registration certificate of the applicant company;
(6) key provisions of the articles of association of the applicant company;
(7) a letter of credit standing from the applicant company’s bank (Bank reference letter)
(8) a standard Application Form that has been filled out;
(9) a lease or purchase agreement for the office, and photocopy of the Real Estate Title Certificate;
(10) power of attorney authorizing the Sponsor to handle the registration.
(11) Supplementary materials that might be requested by SAIC.

Registration Procedure

The above application documents need to be appropriately signed, chopped and submitted according to the AIC online application form. On satisfactorily completing its review of the documents, the AIC will issue the Registration Approval Notification Letter and the Registration Certificate for Foreign Enterprise (Hong Kong, Macau and Taiwan) Representative Office to the applicant company, within 10-30 working days.

With these documents, your company is now an established legal entity in China. However the second half of the procedure needs to be completed in order to make your RO operational.

Post-establishment Formalities: These need to be completed within 30 days of issuance of the Registration Certificate of the RO:

(1) Representative office Chop
Office chops should be carved by local chop makers approved by the Public Security Bureau and the AIC.

(2) Enterprise Code Certificate: Apply to the Bureau of Quality and Technology Supervision for the Enterprise Code Certificate. This will be needed when registering with tax authorities, the customs office and opening bank accounts.

(3) Registration with the Local Tax Bureau, State Tax Bureau

(4) Registration with local Statistics Bureau

(5) Customs Registration: In order to import of certain office facilities, or automobiles for the representative office’s use the company needs to register with the local customs bureau prior to the import.

(6) Certificates that Expatriate Personnel Need to Obtain:

a.Visas

Expatriate representatives should obtain an invitation letter from the representative office’s Sponsor and apply for a single entry visa at a Chinese consulate or visa office abroad. Within 30 days of entering China on this visa, an expatriate must apply to the Public Security Bureau for a multiple entry visa.

b. Conducting Health Examination at a government-designated medical institution

c. Obtaining an Employment Certificate from the local labor bureau

d. Registering with the Public Security Bureau and obtaining a Residence Permit.

(7) Opening a Bank Account with certain banks in China that have been authorized by the currency authority, the People’s Bank of China.

(8) Hiring local employees through local labor bureaus such as FESCO or other licensed HR agencies

Inchin Closer helps multinational companies and SME’s looking at expanding into India and China with setting up RO’s in China and liaison offices in India. We provide foreign companies with 360 degree support services which not only include registration and incorporation of the company, but also tax filing and auditing as well as assistance with obtaining suitable office and residential premises, visa’s, and other ancillary services such as advertising and translation services. Please do write in to us at Contact@inchincloser.com for further details.

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