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A China representative office (RO) is an office of a foreign enterprise set up in China for liaison with Chinese businesses and customers on behalf of its parent company. A RO is not considered to be a separate legal entity. It must be emphasized that a representative office may not carry out direct revenue earning business activities. For example, it cannot enter into purchase/sales contracts and cannot receive payment for services, issue invoices nor repatriate moneys overseas. However, a RO can open bank accounts and employ staff to maintain liaison with customers and suppliers. Its head office can also 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 foreign investment enterprises (FIEs) such as equity joint venture, cooperative joint venture or a wholly foreign- owned enterprise, it could first set up a representative office to test the Chinese market. 
The simplicity and short time required for establishing a RO is the main reason for its popularity in the China market. Unlike foreign investment enterprises ("FIEs"), representative offices are not required to meet stringent requirements for items such as capital contribution. The strong points to establish a RO are as follows:
- Least capital injection required (currently around RMB100,000).
- Can handle market research, sourcing, project investigation for mother company, who in turn to execute trading function.

  1. Can hire local staff to work.

RO is not considered to be a separate legal entity.  So it only works as liaison purpose,
The restrictions are as follows:
- Limitation in activity. No trading or invoicing is allowed.
- Local staff should be hired via government admitted agents.
- Although not profits, cost expenses still attract tax liability


To establish a RO is therefore largely a matter of complying with the prescribed application procedures. Once all the necessary documents for application are ready for submission, government approval can be had within 25-45 working days.
In China, the maximum duration approved for a representative office is three years (five years for insurance companies and six years for banks.) The duration date is calculated from the date on which the approval document is issued by the authority. If the representative office wishes to continue its operations after the expiry of the registration certificate, it must renew its registration by submitting an annual report of its business operations and its application for renewal 30 days prior to the expiry of the existing registration certificate. 
In General a RO is subject to foreign enterprise income tax (FEIT) and Business tax (BT) under the PR China FEIT Law and the PR China 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:
- Chief Representative and local staff’s Individual Income Tax (IIT) ,rating from 5% to 45%, IIT depends on salary amount. Presently starting point is RMB1500.
- Cost Expense Taxes base on monthly operational expenses (CET) ,rating from 5% to 10%,
In accordance with the relevant Chinese tax regulations, a RO may claim for tax exemption if it satisfies certain criteria stipulated in the regulations. Suppose the head office take responsibility of all the expenses incurred from the representative office, no tax is levied.
1.    Investors' business licenses & certificates of incorporation;
2.    Bank reference letter for the foreign investors, issued within 6 months & in both English and Chinese language and certified by the Chinese Embassy or Consulate in your country.
3.    Copies of passport and China entry permit of all the legal representatives and 4 photos of the chief representative; Appointment letters and resume of the chief representative
4.    Copies of lease agreement and title deed sealed by Housing Authorities.
5.    Documents evidencing the details of shareholders and directors for investors (e.g. annual return for a HK company);
6.    Certified true copied of incorporation of applicant’s company certified by the Chinese Embassy or Consulate or notary agency in your country.

  1. Minutes of Board Meeting to authorize Chief Representative ,Minutes of Board Meeting to setup RO

8.    Last annual return to Company Registry and to Tax Department

- Takes around 1 month to apply.
- A Chief Representative (CR) is to be appointed
- Company applying for setting up RO has to be at least 1 year old.
- Company should be able to present bank reference letter showing 6 digit average balance in past 6 months (in HK$ terms).
- An office premise rental agreement (or ownership document) which is valid for foreign investor use. The term should be at least 12 months long.
- In case the rental agreement is not signed by the Chief Representative, this can be ratified by a Letter of Authorization
-RO license has to be applied again once permit is expired. Maximum 3 years approval will be granted and depends on rental lease terms.
-The tax filing has to be done on monthly, quarterly and annual basis. Moreover, there are statutory audit on the expenses account and foreign currency bank account.
 -A budget of not less than RMB10,000 should be made for those accounting, tax filing and audit work for a single staff RO.  










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