Representative Office (RO)

A Representative Office (RO) can represent the interests of a foreign investor by acting as a liaison office for the parent company but has decreased inpopularity due to its many restrictions. ROs are permitted to conduct market research and to develop partnerships and business channels, but all business transactions, including the issuance of invoices, must be managed by the parent company. An RO is taxed on its expenses and cannot generate revenues.

  • The parent company must have existed for at least two years in order to be eligible to set up an RO in China;
  • ROs may not hire local employees directly and must rely on a government-authorised employment agency;
  • An RO is limited to four foreign employees;
  • There is no investment requirement because ROs are not classed as a legal entity in China;
  • The registration process takes around four months to complete, depending on location.


An RO may be suitable for businesses looking to establish a short-term presence in China with no need to generate revenue, or for very limited sourcing ventures. However an RO should not be regarded simply as a way for new entrants to China to minimise their exposure in the event of failure because, in most cases, ROs do not provide the optimum platform for success and have the following disadvantages:


Taxation of a Representative Office in China

Taxation of a Representative Office in China

ROs (except for those engaged in legal or accounting services) are not permitted to generate revenue, so their tax base for CIT and VAT is presumed on the basis of their expenses. In Shanghai and Beijing, a minimum presumed profit rate of 15% is used for the CIT calculation but this could be determined elsewhere on a case-by-case basis. For VAT the tax is based solely on the amount of expenses incurred.

This method of calculating tax liability for ROs is applicable in Shanghai and Beijing. It is possible that the minimum presumed profit rate could be determined on a case-by-case basis.

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