The Representative Office in Mainland China
What it may do, what it may not, and why the tax bill is not zero
A representative office is the lightest legal presence a foreign company can hold in China. It has no capital, no shareholders and no legal personality: it is the foreign company itself, present at an address. That is its strength — and the source of every misunderstanding about it. It may look at the market, it may not sell to it. It may open a bank account, it may not issue an invoice. And although it earns nothing, it pays tax.
What is it?
The governing text is the Regulations on the Administration of Registration of Resident Representative Offices of Foreign Enterprises, State Council Order No. 584 of 19 November 2010, revised on 10 March 2024. The revision did not change the architecture: a representative office is registered, not approved; it is registered in a city, by the local Administration for Market Regulation; and it exists only as an extension of the foreign enterprise that opened it.
Because it is not a company, three consequences follow, and they are the whole of the subject. It cannot own anything in its own name. It cannot contract in its own name. And every liability it creates is a liability of the parent, without limit.
What may it do — and what may it not?
| It may | It may not |
|---|---|
| Carry out market surveys on the parent’s behalf | Sell, distribute or import |
| Display and promote the parent’s products or services | Issue a fapiao, or invoice anything at all |
| Act as liaison for sales negotiated and invoiced abroad | Sign a commercial contract in its own name |
| Liaise on domestic procurement and domestic investment | Collect payment from Chinese customers |
| Open a renminbi bank account for its own running costs | Receive trading proceeds into that account |
| Second the parent’s own foreign staff to China | Employ Chinese nationals directly |
The line is drawn at profit, not at activity. A representative office may be busy — visiting suppliers, running quality control, sitting in on negotiations, keeping a showroom — as long as the money is made by the parent, abroad. The moment an invoice has to be issued in renminbi, the structure has run out and a wholly foreign-owned enterprise is the answer.
Who may open one?
The foreign enterprise must have been lawfully in existence for at least two years. There is no minimum size and no sector list, but the activity must be one the parent genuinely carries on: the registration authority reads the certificate of subsistence and the articles of association, and a representative office cannot represent a business the parent does not have.
One chief representative is compulsory. Up to three further representatives may be appointed. All of them, chief representative included, must declare that they have never been sentenced for harming China’s national security or public interest, and that they were not in charge of a representative office closed down for those reasons within the last five years. The declaration is checked.
The residence term of the office may not outlast the parent. Where the parent’s own registration has a fixed expiry — as many do outside Europe — that date caps everything.
The file, and the three routes abroad
The dossier itself is short: the application form and its three schedules, proof of the parent’s domicile and of two years’ trading, the articles of association, the appointment of the representatives with their curricula vitae and identity documents, a credit reference letter from a bank that actually knows the parent, the lease and the lessor’s title certificate, and the powers of attorney.
What takes the time is not the dossier. It is the authentication of the corporate documents abroad, and here everything depends on where the parent sits.
| Where the parent sits | What it has to do |
|---|---|
| A State party to the Apostille Convention | Notarisation, then an apostille — and nothing more. The Convention has been in force for China since 7 November 2023, and consular legalisation was abolished for those States on that date. France, Germany, Italy, Spain, the United Kingdom, the Netherlands, Switzerland, Singapore and the United States are all parties. |
| A State outside the Convention | The old chain: notary, ministry of foreign affairs, then the Chinese embassy or consulate having jurisdiction. |
| Hong Kong | Neither. The documents are attested by a China-Appointed Attesting Officer practising in Hong Kong, then transmitted under the seal of China Legal Service (H.K.) Limited. |
In every case the documents are filed with a Chinese translation bearing a translation agency’s seal.
What used to be a six-week round trip through a ministry of foreign affairs and a Chinese consulate is now a fortnight. It is also the step most often started too late: the authentication chain runs in parallel with nothing else, and a file cannot be lodged without it.
How long does it take?
Counting from a complete instruction, and running steps 1 and 2 in parallel: about six weeks to registration, and a further three to five weeks before the office is genuinely operational.
Why is the tax bill not zero?
This is the part that surprises people, and it is worth being blunt about it.
A representative office has no revenue. It is nonetheless taxed, because Chinese law does not accept that a presence which supports the parent’s business generates no profit. Under circular Guoshuifa [2010] No. 18 the office is assessed on a deemed profit basis: its expenses are grossed up at a deemed profit rate that may not be lower than 15 %, and corporate income tax at 25 % is charged on the result. VAT applies on top at 3 %, reduced to 1 % until 31 December 2027.
An office spending RMB 1,000,000 a year — some USD 149,000 — is grossed up to about RMB 1,190,000 of deemed revenue. Fifteen per cent of that, RMB 179,000 or about USD 26,700, is deemed profit. Corporate income tax at 25 % comes to roughly RMB 45,000, about USD 6,700, and VAT at the reduced rate to some RMB 12,000, about USD 1,800.
The bill is small in absolute terms, but it is not nil — and it rises with the office’s own spending, which is the opposite of most people’s intuition. Filings are quarterly, with an annual settlement.
Staff
A representative office may not sign an employment contract with a Chinese national. Local staff are engaged through a licensed dispatch agency — FESCO and its provincial equivalents — which employs them and seconds them to the office. The office pays the agency; the agency pays the salary, the social insurance and the housing fund. Add roughly 30 % to 40 % to gross salary for employer charges and the agency’s fee.
Foreign staff seconded from the parent need a work permit and a residence permit. The chief representative obtains a representative card, which is not a work permit and does not replace one.
Living with it
| Obligation | When |
|---|---|
| Annual report to the registration authority | Between 1 March and 30 June each year, supported by a fresh certificate of the parent’s subsistence and a fresh bank reference. Not a formality. |
| Tax filings | Quarterly on the deemed-profit basis, with an annual corporate income tax settlement. |
| Changes of name, address, representative, scope or term | Filed within thirty days. |
| Renewal of the residence term | Before it expires, on the same evidence as the original application. |
| Closure | A deregistration: tax clearance first, then the registration authority, then the bank. |
Because the office is the parent, an abandoned registration is not a dormant shell that can be forgotten. Unfiled returns and an unclosed registration follow the foreign enterprise, and they surface at the worst moment — when it next applies for something in China.
When is it the right answer — and when is it not?
The representative office earns its place in three situations: a company testing a market before committing capital; a company that buys in China and needs eyes on its suppliers; and a company whose Chinese customers are invoiced from abroad and will stay that way.
It is the wrong answer as soon as a renminbi invoice has to be issued, as soon as Chinese staff have to be employed directly and cheaply, or as soon as the activity needs a licence. In those cases the wholly foreign-owned enterprise costs more to set up and materially more to run, and it is still the cheaper option — because a representative office used as a trading vehicle is an unregistered permanent establishment, and that is assessed retrospectively, with penalties.
We say which of the two applies before any document is drafted. It is the least expensive advice we give.