Rep Office

1

Formation of a Foreign

Representative Office in China

Professor Shen Wei

Summer 2015

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FORMATION OF A FOREIGN REPRESENTATIVE OFFICE IN CHINA

Introduction

I. Formation of a Foreign Representative Office

II. Procedures for Formation of a Foreign Representative Office

III. Representatives and Employees

IV. Accounting and Taxation

V. Post-registration Matters

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I. Formation of a Foreign Representative Office

A foreign entity’s representative office is permitted to engage in

“indirect operational activities in China” and may represent the foreign

entity within the scope of activities of such entity, which may include

business liaison, product introduction, market research, information

gathering and technological exchange.

The representative office of a foreign entity in China does not have

independent legal person status under PRC law. A foreign entity which

establishes a representative office in China must undertake legal

liability for all operational activities conducted by the representative

office.

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II. Procedures for Formation of a Foreign Representative Office

Registration with Local AIC

Generally, there is no capital requirement for a foreign company to set up a

representative office.

The establishment of a representative office of a foreign company only

requires the registration of the representative office with the local

Administration of Industry and Commerce (“AIC”). The registration

process is fairly straightforward. However, the local AIC may look more

closely on new companies without an operating history, and support and

explanation may be needed.

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II. Procedures for Formation of a Foreign Representative Office (cont’d)

Agent

A licensed agent shall be appointed to submit the application documents

and conduct the registration formalities on behalf of the applicant with the

local AIC.

If required, the agent will also assist in the completion of the post-

registration matters.

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Documentation

A Checklist of the Application Documents for the Formation of a Foreign

Representative Office will be provided at the end of this presentation as

Annex A.

Local AIC requires that all the required documents be accompanied by a

Chinese translation if they are in a language other than Chinese.

Legal Address

The representative office must have a legal address before it can be

registered.

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Timing

The timing of the registration process depends on how quickly the

application package can be prepared and submitted in a form acceptable to

the local AIC.

If the application documents are satisfactory to the local AIC, the local AIC

will complete the registration and issue a Business Registration Certificate

for the representative office within ten (10) working days of its receipt of

the application documents.

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III. Representatives and Employees

A Foreign Representative Office must designate and register a chief

representative. The Representative Office may choose to designate

one or more representatives for the representative office.

There is no restriction on the nationality of the chief representative or

other representatives. However, if the Representative Office wishes to

designate a PRC citizen who is not an overseas permanent resident to

be the chief representative or a representative, it must entrust a local

foreign enterprise labor service company to employ such individual.

More specifically, representative offices in China are generally required

to hire local staff through a labor service company.

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IV. Accounting and Taxation

Accounting Units

Under PRC law and practice, each representative office in the PRC is

treated as an independent accounting unit.

Taxation

The representative office is subject to the corporate income tax and

business tax in China. The representative office shall register with and pay

tax to the local taxation bureau.

In addition, individuals who act as representatives and who are “resident”

in China will be subject to individual income tax in the PRC.

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V. Post-registration Matters

Once the Business Registration Certificate for the representative office

and representative certificates for the representatives have been

obtained, the following additional registrations and administrative

matters must be handled to enable representative office to commence

its operation:

Office Seal

The representative office must obtain an approval for an office seal from

the local Public Security Bureau (“PSB”). With the local PSB’s approval,

the office can make the seal at an authorized location.

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V. Post-registration Matters (cont’d)

Organization Code Certificate

As the next step, the representative office shall apply with the Technology Supervisory Bureau for an Organization Code Certificate. The office will be required to present the Organization Code Certificate in the subsequent post-registration formalities.

Statistics Certificate

The representative office shall apply for a Statistics Certificate with the local Statistics Bureau.

Bank Account

The representative office is permitted to open foreign currency and Renminbi accounts. To open foreign currency accounts, the office must apply for a Foreign Exchange Account Use Certificate with the local Administration for Foreign Exchange.

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Tax Registration

The office must make tax registrations with the local Tax Bureau and obtain

Tax Registration Certificates.

Customs

The office must register with the local Customs Office. The office will be

issued a customs certificate, which must be presented whenever

conducting transactions with the Customs.

Once the office has this certificate, it can prepare the customs declaration

forms necessary for import of equipment and supplies for the office and for

its representative personnel.

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Representative Personnel

Employment Permit. If the chief representative or any other representative is an

expatriate, he or she must apply for an Employment Permit at the local Labor Bureau.

Visa. Each expatriate representative must obtain a visa in order to live and work long

term in China.

Health Certification. Expatriate representatives must go to the local Health and

Quarantine Service (the “HQS”), as soon as possible after entering China to obtain

the health certification.

Residence Permit. Each expatriate representative must apply for a Residence Permit

at the local PSB. In the application, the chief representative or the representative

must present his or her passport with a valid visa and health certification issued by

the HQS as well as the representative certificate and registration certificate.

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Annex A:

Documents Checklist for Registration of a Foreign Enterprise’s

(the “Applicant”) Representative Office

No Document Title Original Copy Document Contents & Requirements

1. The Applicant’s Certificate of Incorporation Notarized and

authenticated

original or copy

1. The original or copy of the applicant’s certificate of

incorporation shall be notarized in the jurisdiction

where the Applicant is established to be an

authentic document, and be authenticated by the

embassy or consulate of PRC in that jurisdiction.

2. The certificate in a foreign language shall be

accompanied by a Chinese translation which the

Applicant’s corporate seal should be affixed to or

where the Applicant does not have a corporate

seal, signed by the Chairman of CEO of the

Applicant.

2. Signature specimen of the Chairman or CEO

of the Applicant who will execute application

documents for the purpose of establishment of

the representative office.

Notarized and

authenticated

original

1. The specimen shall be notarized in the jurisdiction

where the Applicant is established, and be

authenticated by the embassy or consulate of PRC

in that jurisdiction.

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(the “Applicant”) Representative Office (cont’d)


3. Bank Reference Letter Notarized Original 1. The execution of the bank reference letter shall be

notarized in the jurisdiction where the Applicant is

established, and be authenticated by the embassy

or consulate of PRC in that jurisdiction.

2. The letter in a foreign language shall be

accompanied by a Chinese translation which the

Applicant’s corporate seal should be affixed to or

where the Applicant does not have a corporate

seal, signed by the Chairman of CEO of the

Applicant.

3. The letter shall state the name and address of the

Applicant, the date of the Applicant’s opening

accounts with the bank, the account number and

(positive) comments on the Applicant’s

creditworthiness.

4. A signature of the authorized bank officer and a

bank stamp are required.

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4. Appointment Letter to appoint the Chief

Representative and, if applicable other

representatives

Original 1. The letter should be signed by the Chairman of the

Board or the CEO of the Applicant, whose name

and position and the date of the appointment shall

be stated.

2. If the Applicant has a corporate seal, the letter

shall be affixed to such a seal.

3. The Appointment Letter shall be executed in both

Chinese and English if the Applicant is not

established in Japan, Hong Kong SAR, Macao

SAR or Taiwan.

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5. Documents relating to the

Representative(s)

Resume Original 1. The resume shall be provided in a prescribed form

and signed by the Chief Representative.

Identification

Documents

Notarized Original 1. The identification documents shall be the passport

(including the visa page) for a foreigner, the ID

card and mainland entry pass for a Taiwan, Macao

or Hong Kong resident, or the PRC passport and

the overseas permanent residence document for a

PRC national having the status of overseas

permanent resident.

2. Where the representative is a foreigner, the copy

of his/her passport shall be notarized in the

jurisdiction where the Applicant is established to be

a true copy, and be authenticated by the embassy

or consulate of PRC in that jurisdiction.

Photo Original One, one or two-inch, photo.

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6. Documents for Office Premises Original The lease term shall be no less than one year,

and the Office Lease Contract shall bear the seal

of registration affixed by the local Real Estate

Leasing Administrative Department

7. Power of Attorney to authorize the registration

agent to handle the application

Two Original The Power of Attorney is in a prescribed form

and should be executed by the Chairman of

Board or the CEO of the Applicant.

8. Application Form for Establishment of

Representative Offices of Foreign Enterprises

Original 1. The application shall be in a prescribed

form and will be completed by the

registration agent.

2. The completed application form shall be

signed by the Chairman of Board or the

CEO of the Applicant and by the Chief

Representative on the specific pages.

Notes:

1. The official letterhead of the Applicant should indicate the Applicant’s name.

2. All the documents notarized and authenticated shall be prepared in no less than two sets.

3. Unless otherwise indicated, only one set of the above documents shall be submitted.

4. The registration authority may request the Applicant to supplement documents to support the application.