China Representative Office
How to expand your business to China by setting up a China Representative Office
No Registered Capital Required
Set-up in 30 working days
EXCLUSIVE TO CORPORATION CHINA
China Representative Office Registration
A China Representative Office, also known as Liaison Office, is a commonly used low-cost investment vehicle for mainland China-based businesses. It is designed for businesses wiling to develop a China presence. The registration of a representative office takes about 30 working days to be done.
A China Representative Office registration is popularly used by Chinese business investors to gain positive returns, mainly through testing Chinese market as an insider. It was created for those businesses that wish to promote foreign company throughout China. A Representative Office registration usually takes a month to be completed.
China Representative office rules
A representative office in China merely represent the businesses that exist back home. They are not separate from the main branch (which exists outside of China), but merely a ( rep offices) representative of a China foreign owned company. Moreover, they cannot participate in any activities that cause them to gain returns. According to Chinese law, they can only perform liaison activities. They are not permitted to sign up legal binding documents or charge any customers and cannot charge a sales service fee. Basically, they cannot conduct any direct financial activites, like make any money in China or receive money from Chinese people and businesses thereof, under any circumstances. However, bank branches, insurance firms, accounting and law companies are allowed to participate in activities that would cause them to gain wealth in China. Representative offices in China are good for marketing research, connecting with clients or global networking.
What can a China Representative Office do?
A Representative Office in China can operate an indirect business such as contacting, product promotion, market survey, and technology communication. Is of the best entry channels to test the China market.
China Market Research
A rep office is also known as a ‘liaison office. This means that you will be able to outreach activities in China such as market research, liaising with clients or suppliers, developing a local network, advertising, renting business and personal premises.
Fast Setup
A Rep Office or (RO) is a less expensive, and fast way for foreign businesses to set up in China. Foreign companies specifically use RO for non-direct profit business activities which usually involves product promotion, research and engagement.
Product Promotion
If your final goal is to outreach activities in China then a representative office is considered to be a good solution. Rep office is a specific company type – for businesses who want a presence in China which is not connected to trading.
Test the Market
 A Rep Office opens up a vast opportunity to step up your business and gain further involvement in the China. Companies can test the market to make sure of any investments or strategies before they decide to fully engage in the Chinese market.
WFOE vs Joint Venture
Wholly Foreign Owned Enterprise WFOE is a limited liability company in China that is privately held, and its shareholders are foreigners that wish to do businesses in China, no need for a Chinese partner. Joint Venture is a company that starts in China with a minimum of one foreign and one Chinese shareholder as well. WFOE usually takes about 40 working days to be set up and requires you to specify the scope of your business during the application process. You need to decide which type of business you require: service, trading or manufacturing. The process is broken down into pre-registration and post-registration.
China RO vs Joint Ventures
A Chinese Representative office activities in china is the easiest of the three structures, to both set up and get off the ground. The China RO’s legal entity are subject to being inspected and need to keep all accounting records but the application is still very simple. Once submissions of company documents are made and approved, all that is needed to register company in China, is for it to register with different Chinese government agencies. The process of setting up Joint Venture, on the other hand, is complex. One would need to first find a suited Chinese company to partner with, then discuss the terms of that relationship as in who will be the chief representative. Shareholders and the company involved, need to agree on important matter
WFOE vs China Representative Office
WFOE companies are owned in its entirety by the foreign parent company. All aspects of the business including its day-to-day operations are solely handled by the foreign company. This structure makes it simple for companies to protect their trademarks, secrets of the trade and business processes. WFOE is a completely independent, economic entity, bearing legal liability independently. Wholly foreign owned enterprise biggest advantage is long-term license, generally 15 to 30 years, while Representative office usual existing duration is 2 years, due to legal limitation.
Cost of set up a China Representative Office
Setting up a WFOE used to require a total capital of RMB 100,000. However, this changed in 2014 and now there is no minimum amount. The cost of setting up a representative office in China was affordable but since 2010 they have gotten a little expensive. Now there is a financial burden on the representative office in China and the tax burden has also increased from 9.5% to 11.69%. JV set up costs are subject to the type of JV set up: Equity Joint Ventures and Cooperative Joint Ventures. The minimum amount of capital needed is RMB 30Â 000 for each of the investors, yet, this depends on the shareholders.
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China Representative Office or WOFE?
The decision of which structure you want, in order to expand your business, is an important one. Each of them offers their own benefits and the final decision is up to you, depending on your goals as a business entity. A China RO is a perfect solution for businesses that want to try the Chinese market for the first time. It allows businesses to develop relationships, and create their presence in China, as well as understand how business is done there. WFOE is very different because it allows companies to set up a more real presence from which to trade and conduct business for profit. They also benefit from a lower tax rate and gain full control of the operation. Finally, a JV is a good choice for those businesses that already have existing relationships with companies in China and are suitable in cases where WFOE is not an option due to governmental regulations. You may decide which structure you wish to go with, but you should do further research.
What you need to know about setting up a Representative Office in China
With an RO being one of the most common options for foreign Businesses in China, it opens up a vast opportunity to set up your business and gains further involvement in the Chinese market. With the help of an RO, companies can test the market to make sure of any investments or strategies before they decide to fully engage in the Chinese market.
The main Pros of a Rep Office
- Quick to set up a new rep office
- Registered capital is not a requirement
- Less tax than other types of business setups (no corporate or divided taxes)
- Less expensive solution and easy to use
- Easy to meet up with contacts and factories in China, saving time
- Able to have your own physical presence and office in China
- Can hire foreign and local staff
- Manage product and supply chain from within China
- Quality of product check
- Keep marketing strategies updated.
The main Cons of a Rep Office
- The restrictions of all activities which involves profit (i.e. an RO cannot sell or make money)
- Can only deliver services to its main offices
- An RO may not take part in any contracts with customers involved in China
- May not trade or do business with external entities
- The RO cannot employ staff directly and must make use of an authorized agency
- You must rent an office space for your RO before starting the setup process
Representative office registration
When setting up a China Rep Office in China, there are numerous things to consider and hence it is important to seek appropriate legal help. Corporation China has developed unparalleled expertise in this area and can provide you with everything necessary to set up your representative office. Â Corporation China offers first-class solutions to all of the following requirements.
Location
In China, prospective clients and business partners will often ask you where is your company located in China. Hence, a good location is an asset. At Corporation China, we offer excellent solutions for this through our Virtual Office System China Presence™ or our China Virtual Entity™ system.
Bank Account
Due to existing restrictions on international money transfers in China, your mainland-based clients will only be able to pay you within China. Therefore, a bank account in which local companies can transfer you Chinese RMBs is necessary. Â
China Representative Office Registration
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