Set Up A Rep. Office In Beijing-- Why And How

I. Expenses for setting up a Rep. Office in Beijing:

1. Official Registration Fee: around 2000 RMB in total

2. Office Rent: around 3-14 RMB/ m2 / day for an office in "office building for aliens" of CBD area

3. Salary: average local salary 3000 RMB in Beijing

4. Tax: tax paid based on the Actual Expenditure each Quarter for the operation of Rep. Office
Revenues = Actual Expenses/1-10%-5%
Business Tax = Revenues *5%
Income Tax = Revenues *10%*25%

5. Individual income tax: personal income would be taxable when foreign employees stay in China for more than 90 consecutive days. Rate: 5%-45%

6. Other administrative cost and fees, like water, power, office facilities, telephone, business trip, and etc.

7. Assistance Fee for registering a rep. office by Sino-Link Consulting: around 15 000 RMB (for further information, pls feel free to contact us Sino-Link Consulting Tel. 0086-(0)10-85325600)

II. Restrictions
There are some very limiting restrictions on the type of activities that an RO may engage in. For example, an RO may NOT:

1. Conduct direct business activities: An RO's activities must be confined to product promotion, market research, liaison, and the like, and it may neither charge fees for its services nor engage in profitable activities such as direct sales or manufacturing (although they are subject to taxation under certain circumstances).

2. Directly invoice clients or sign contracts: These activities must be handled by the parent company.

3. Directly hire employees: It must utilize an authorized human resources agency that will refer suitable candidates to the RO in exchange for a certain percentage of employee salaries. Some Rep. Offices make an end run around this system by directly recruiting and negotiating with employment candidates and sending their names to the authorized human resources agency so that it can then 'refer' these candidates back to the RO. While this practice doesn't seem to have caused many problems with the Chinese authorities so far, the formalities of referral and salary deduction must be complied with.

III. Benefits
In light of these restrictions, why bother establishing an RO at all?
1. A company might want to conduct market research in order to decide whether or not to make a future investment in China.

2. A company might wish to establish an RO in a business sector in which foreign investment is currently forbidden in anticipation of future liberalization of Chinese foreign investment law in line with its WTO commitments. In the meantime it can establish a presence, make local connections, and learn about the market.

3. A company might already be doing a modest amount of business with China from its home country but lack the market penetration or resources to justify a direct investment. Once the company attains greater market share it can always upgrade to a joint venture or wholly foreign owned enterprise.

4. Sectors of certain industries such as insurance and finance require foreign investors to operate an RO for at least two years before making a direct investment.

5. A company might want to use an RO to hire local employees to help them find Chinese suppliers and sales channels.

6. A company might establish an RO with the aim of exceeding its legal restrictions, and thereby establish the functional equivalent of a joint venture or wholly foreign owned enterprise while avoiding much of the expense and inconvenience.

VI. Requirement for setting up a Representative office of foreign manufacturing enterprises
Required documents:

Application letter* to be signed by the president or the general manager of the head office with their printed names
(The following items should be mentioned: the name of rep office, location, business scope, name of chief representative and representative, term (3 years), introduction of parent company(including address, telephone No., business scope, name of president and general manager)

Certificate of incorporation(original)
(If the original certificate can not be provided, it should be notarized by notary office or law office and attested by consulate at its host country if necessary)

An original bank letter to be issued by the bank of the head office
(Creditability letter issued by company's banker or related finance institution)

Appointment letter* to be signed by the president or the general manager of the company to appoint the chief representative of Beijing office (original)

Resume of the chief representative or the representatives

Copy of ID card or passport of the chief representative or the representatives

And 5 2-inch photos

Copy of the office lease contract
(The office to be rented must be located in "office building for aliens" authorized by Chinese Policy bureau)

Ownership certificate with the seal of the owner (or copy of office purchase contract, copy of purchase receipts and the sales permit of the developer with his seal on it if there is no ownership certificate)
*The consulting service by Sino-Link for setting up a Rep. Office comprehends providing the English samples for those letter or document, and translating them into Chinese.

All above submitted material, or paper documents in foreign languages should be attached to the Chinese translation thereof. (The consulting service provided by Sino-Link Consulting for setting up a Rep. Office comprehends this translation service)