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Representative offices are established by many foreign enterprises as the first step of these enterprises’’ entry strategy into China. Through a representative office, a foreign enterprise can engage in a limited range of activities which may form the basis for the enterprise to become further involved with China.
A representative office is not a separate legal entity. It does not possess registered capital and only requires the injection of minimal funds at the outset. Furthermore, unlike in many other jurisdictions, representative offices in China are usually not tax exempt.
Additional rules apply to representative offices of foreign enterprises which engage in particular industries or business sectors such as financial institutions, insurance institutions, and securities organizations. These State-level provisions have further been supplemented by local regulations and practice.
Permissible activities of China Xiamen Representative Offices
Representative offices in the PRC in general can only engage in non-profit-making activities. Profitable activities are not allow. A representative office may be ordered to rectify the matter, confiscated of its illegal income and tools, equipment, raw materials, products and other related properties, fined or its Registration Certificate may be revoked if it engages in profit-making activities in violation of the Regulations.
Pursuant to Article 14 of the Regulations, a representative office may engage in the following activities relating to the foreign enterprise’s business: market survey, exhibition and publicity activities relating to the foreign enterprise’s products or services; and liaison activities relating to the foreign enterprise’s product sales, service provision, domestic procurement and domestic investment.
Establishment procedure of Xiamen Representative Offices
The process for setting up a representative office differs depending on the industry sector of the head office.
1) If the representative office is established by a trading company, a manufacturer, a contractor, a consultancy company, an advertising company, an investment company, a leasing company, a rail freight operator, a freight forwarder, a tobacco company or other economic and trade organisation, the applicant company can directly proceed to the State Administration of Industry and Commerce or its designated local bureau (collectively referred to as the “registration authority”) to register the representative office.
2) If the applicant company is a financial institution, an insurance company, a securities institution (such as investment bank, merchant bank, securities company, fund management company, etc.) an air or sea transportation company, a sea transportation agent, a travel agent, etc. the applicant company must first apply to the PRC authority in charge of its industry for approval to establish the representative office. Only after the approval authority has issued an approval document may the applicant register with the registration authority.
Xiamen Representative Offices – Registration
In the case of representative offices which require prior approval, the applicant company must apply for registration within 90 days of the date on which the Approval Certificate is issued. Failure to do so may result in the revocation of the Approval Certificate.
In the case of representative offices which do not require prior approval, the applicant company can proceed directly to the registration authority without having to obtain an Approval Certificate. A prescribed set of documents should be submitted to the registration authority for the purpose of the registration. It should be noted that pursuant to Article 23 of the Regulations, one of the required application documents is the proof of the foreign enterprise’s domicile and proof of lawful business operations evidencing that it has been in existence for at least two years.
The documents should be submitted by authorized staff of the applicant company or an authorized registration agency. If satisfied with the documents submitted, the registration authority will issue a Registration Certificate for the representative office (“Registration Certificate”), upon which the representative office is officially established. The registration authority will also issue a Chief Representative Certificate to the Chief Representative of the representative office as well as a Representative Certificate to each of the other Representatives (if other Representatives have been appointed).
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