[ R O - Representative Office ]

• Pros & Cons

• Setup key points

• Documents required

• Tax implications

• Setup cost

• Maintenance cost

• Pros & Cons

Pros

- Least capital injection required. As RO is not a legal entity, actually no minimum share capital is required.

- Can handle market research, sourcing, project investigation for mother company, who in turn to execute trading function.

- Can hire local staff.

Cons

- Limitation in activity. No trading or invoicing is allowed.

- Local staff should be hired via government admitted agents.

- Although not profit center, cost expenses still attract tax liability

• Setup key points

- 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.

• Documents required

Applicant companyˇs

- Certificate of Incorporation

- Membersˇ Register

- Directorsˇ Register

- Last filed return to Company Registry

- Last filed return to Tax Department

- Company / business profile and reason of setting up RO

- Minutes of Board Meeting to setup RO

- Minutes of Board Meeting to authorize Chief Representative

- Bank reference letter

Chief Representativeˇs

- Passport copy

- Photos

- Resume

Application letter

- To Foreign Economic Relations & Trade Commission

- To Administrative Council of Industry & Commerce

Chandler Partners provides hassle free services for setting up of China presence. We offer sample document as well as advice in document preparation. Please talk to our professional staff who knows local rules as well as international practice. [ Back to top ]

• Tax implications

Although a RO is not to conduct business, it attracts tax on

- Chief Representative and local staff＞s Individual Income Tax (IIT)

- Business Tax base on monthly operational expenses (BT)

- Income Tax base on annual operational expenses (IT)

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IIT above depends on salary amount while BT & IT roughly amounts to 10% of annual operational expenses.

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Rough elaboration:

Business Tax = Deemed Turnover x 5%

Deemed Turnover x 90%= Total Expenses

Deemed Turnover = Total Expenses / 90%

Business Tax = (Total Expenses / 90%) x 5% 

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Income Tax = Deemed Profit x 33%

Deemed Profit = Deemed Turnover x 10%

Deemed Turnover = Total Expenses / 90%

Income Tax = (Total Expenses / 90%) x 10% x 33%

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Business Tax + Income Tax = (Total Expenses / 90%) x (5% + 10% x 33%)

Business Tax + Income Tax = (Total Expenses / 90%) x 8.3%

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Business Tax + Income Tax = Total Expenses x 9.2%

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• Setup cost

Varies according to client's situation and requirement. Our service ranges from basic registration to post-registration handling.

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• Maintenance cost

License renewal

RO license has to be applied again once permit is expired. Maximum 3 years approval will be granted and depends on rental lease terms.

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Accounting, tax filing and auditing

The tax filing has to be done on monthly and annual basis. Moreover, there are statutory audit on the expenses account and foreign currency bank account.

Service fee for monthly accounting and tax filing starts from Rmb 2,500 while annual audit starts from Rmb 5,000.

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