A representative office is the lightest form of establishing an official presence in China. A representative office is not a company or a separate legal person but it represents its parent company and operates on behalf of it. In practice, it means that a representative office cannot sign contracts in its own name but in the parent company’s. A representative office is neither able to hire local personnel directly but must use a local HR company (payroll services) to do this.
A representative office is relatively easy and quick to establish but as always in China there are many details that need to be taken into consideration such as:
- Is representative office really enough or is a company needed?
- Is representative office cost efficient option as it cannot earn any money and on top of that is taxed at 10% rate.
- Only four foreigners can obtain work permits in the name of the representative office.
- A representative office cannot be “upgraded” into a company. Instead, if needed, you need to first close down the representative office and then establish a company, and both procedures take time and money.
And many other issues. If you are considering if a representative office is right for you then we are happy to discuss it.