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Xiamen Foreign Representative Offices – Introduction of Xiamen Foreign Representative Offices

Foreign representative offices are established by many foreign enterprises as the first step of these enterprisers’’ 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. Representative offices of foreign enterprises generally need only to be registered with local authorities in order to be established. Prior establishment approval is required for representative offices in certain industries. 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.

Xiamen Foreign Representative Offices – Applicable legislation of Xiamen Foreign Representative Offices

The main legislative provisions governing the establishment and operation of representative offices in the PRC are:

1. The Circular on Further Strengthening Administration of the Registration of Resident Representative Offices of Foreign Enterprises (the “Circular”);

2. The Regulations for the Administration of the Registration of Resident Representative Offices of Foreign Enterprises (the “Regulations”).

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.Xiamen Foreign Representative Offices – Permissible activities of Xiamen Foreign Representative Offices

Representative offices in the PRC in general can only engage in non-profit-making activities. 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.

Xiamen Foreign Representative Offices – Establishment procedure of Xiamen Foreign Representative Offices

The process for setting up a representative office differs depending on the industry sector of the head office. 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. 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 Foreign Representative Offices – Approval process

A foreign enterprise in an industry where prior approval is required must submit the required application documents to the approval authority. Most approval authorities have issued detailed rules on the mandatory application documents. For example, the Measures for the Administration of the Resident Representative Offices in China of Foreign Insurance Institutions prescribe in detail the documents which a foreign insurance company must submit to the China Insurance Regulatory Commission. The documents usually include an application letter signed by the Chairman of the Board or the General Manager of the insurance company, a photocopy of its business license, its Articles of Association and the name list of the members of the Board of Directors, management personnel or principal partners, annual reports of the last three years, a resume of the designated chief representative, etc. Some of these documents need to be notarised or verified by the resident embassy or consulate of the PRC in the applicant’s home country.

If the examination and approval authority approves the application, it will issue an Approval Certificate for the establishment of the representative office (“Approval Certificate”).

Xiamen Foreign 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).

Xiamen Foreign Representative Offices – The Advantage of Setting Foreign Representative Offices in Xiamen

ONE. Exceptional Advantage on Location and Transportation:

Expressway and highway networks will be fully launched into construction so as to establish a “half-day transportation economic circle” on the western coast of Taiwan Straits and a “one-day transportation economic circle” that covers Jiangxi, Southwest Zhejiang, Northeast Guangdong and South Hunan.

And also, according to the Master Plan of Port of Xiamen as approved by the Ministry of Transport, Port of Xiamen is positioned as a shipping and logistics center on the western coast of Taiwan Straits, a key national hub port, a container hub port and one of the main coastal ports of China.

So far, Xiamen Airport has launched 131 air routes into operation, 20 foreign (regional) airline companies have been operating in Xiamen Airport and 22 international cities (including Hong Kong, Macau, Taipei and Gaoxiong) has been opened to navigation. In 2012, Xiamen Airport had a passenger throughput of 17,354,100 person-times.

TWO. Harmonious and Cozy Living Environment

Honored a “gardenlike city on the sea” and the “island of aigrets”, Xiamen enjoys beautiful landscapes and has such famous scenic spots as Gulangyu Island (the Island of Pianos) and South Putuo Temple (the famous Buddhist temple built in the Tang Dynasty). Xiamen has been leading its domestic peers in terms of ecological environmental quality and has developed comprehensively in education, science & technology, culture, sports and various other sectors over the years. Xiamen citizens have had the highest rate of satisfaction over social security conditions in Fujian Province for several years running.

THREE. Open Xiamen

As of December 2012, Xiamen has approved 9706 foreign direct investment projects in total from 86 countries and regions, from which contractually utilized foreign investment is USD 37.69 billion dollars and actually utilized foreign investment is USD 25.64 billion dollars. 55 Fortune Global 500 companies have invested 98 projects with total investment of USD 2.59 billion dollars in Xiamen.

Over the years, 99 projects established by 55 Fortune Global 500 companies in Xiamen have been successively approved with total investment of USD 5.16 billion dollars and contractually utilized foreign investment of USD 2.59 billion dollars.

Thus the foreign enterprises can take foreign representative offices into their consideration in running plans.

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