Establish Representative Office ( RO)
Establishing a representative office, which can service a liaison between the foreign company and its local customers, is often the first step in gaining a foothold in the Chinese market.
Pros & Cons
Documents need for applying for set-up RO
Set-up key points
Taxation of RO
Tax Exemption of RO
Tax of RO
1. Pros & Cons
Pros
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As RO is not a legal entity, there is no minimum capital required
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Permitted activities include establishing and arranging contacts, rendering advice, products introduction, preparing market studies and collecting general information
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RO can hire local people but need to throught an hr agent such as FESCO.
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Cons
· RO is not allowed to be engaged in direct business activities, and must not issue the invoices
· Although RO is not profit centre, the cost expenses still attract tax liability
· Staff who are citizens of the PRC may only be recruited through local service agencies
· At present, only banks and insurance companies are allowed set-up branch offices in China
2. Documents need for applying for set-up RO
· Application letter
· Resumes of the Chief Representative and Representative
· Copies of passport of the Chief Representative and Representative
· Certificate of Registration and Testimony for the applicant company ( must nortarization in China embassy)
· Bank reference letter for the applicant company (with manager sign must use BLACK INK PEN)
· Leasing agreement of the office premises in local
3. Set-up key points
l Takes around 3 weeks to apply
l Hongda can undertake the one-step service for basic registration to post-registration handling
4. Taxation of RO
n ROs with a head office engaged in business advisory, tax advisory, law, accounting, auditing or other types of consulting services are required to maintain complete accounting records and evidence of properly calculated revenue and taxable income. Their tax liabilities will be based on actual revenue and profit
n ROs of entities that engage in agency or trading activities perform business activities on behalf of the head office. Since such ROs do not enter into agreements with their customers directly and since income attributable is normally collected by the head office, revenue of these ROs is determined on a cost-plus basis
n Any RO that does not fall into the above two categories, but still carries out taxable activities, will be taxed according to the actual revenue generated, including amounts received by head offices outside of China and attributable to the RO.
5. Tax of RO
RO with taxable activities is subject to Business tax (5%) and Enterprise income tax (25%)
Changes, Renewal, Closure
The approval and registration authorities must be notified of changes, such as a new address or chief representative, and have the right to approve such changes
Accounting Service
We offer full accounting service for your company, for more details refer to our Accounting Service page()
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