Guangzhou Representative Office Registration (RO)
1. Concept of RO
A Chinese representative office (RO) is an office of the foreign enterprise established in China for communication with Chinese businesses and customers on behalf of its parent company.
A RO is not considered to be a separate legal entity. It can not directly engage in operational activities. However, its parent company can enter into contracts with its supplier/customers in China in its own name, but not in the name of its RO. Therefore, before a foreign investor establishes its presence in China using wholly foreign owned enterprise, equity joint venture and cooperative joint venture, it could first set up a representative office to test the market.
2. Representative Office Name
The format of the RO Name is: country(area) + parent company name + Guangzhou Representative Office
3. Functions of RO
a. Can handle market research, sourcing, project investigation for parent company, who in turn to execute trading function.
b. It cannot enter into purchase/sales contracts and receive payment for services, issue invoices.
c. A RO can open bank accounts and employ staff(via agent) to maintain communication with customers and suppliers.
d. Can apply for working VISA
e. RO is not considered to be a separate legal entity, so it only works as communication and research purpose.
f. Limitation in activity. No trading or invoicing is allowed.
g. Local staff should be hired via government admitted agents.
h. Although not profits, cost expenses still attract tax liability
5. Documents Required
1. Parent company's original copy of business licenses, certificate of Incorporation & stamp;
2. Two original copies of bank reference letters for the parent company, stating a 6-digits bank balances, issued within 6 months & in both English and Chinese translation and certified by the Chinese Embassy or Consulate in your country;
3. Lawyer’s legalization or notarization; the whole set of company documents (including business licenses, certificate of Incorporation, documents showing information of shareholders and directors; M&A; annual return report) should be notarized by the organization which is recognized by the P.R.C. Ministry of Justice: If the parent company is abroad, the above mentioned documents should be notarized by the local Chinese Embassy or Consulate);
4. Original copy of identity certification, 2 color photos and one copy of resume of the chief representative (CR);
5. Two original copies of lease with signature and sealed by Housing Management Authority. (The signing party should be in the name of general representatives and rent for more than one year. In the meanwhile, the purpose must be for commercial use only).
6. License and certifications of RO
a. Business license original and duplicate;
b. Registration license of National & Local Administration of Taxation;
c. Seal carving registration card;
d. Organization Code License & card (IC card);
e. Three stamps(company, finance & chief representative).
7. Registration Time Needed
Once all the necessary documents for application are ready for submission, government approval can be got within 20-30 working days.
In General a RO is subject to foreign enterprise income tax (FEIT) and Business tax (BT) under the PRC FEIT Law and the PRC Provisional Regulations of BT. There are different ways in which a representative office may be taxed but the most common basis is the cost-plus-basis. As at April 2002, the total tax burden under this assessment method is approximately 5-10% of the operating expenses incurred by the representative office. The FEIT and BT for a RO should be filed on a quarterly basis within 15 days after the end of each quarter.
Although a RO is not to conduct business, it attracts tax as stated below:
1. Income Tax (FEIT)= expenses/(1-15%) × 10%(as profit) × 25%(rate).
2. Business Tax = expenses/(1-15%) × 5%.
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