Representative Office versus Limited Company
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Welcome to ChinaInvest.biz Magazine - June 2011 Issue

Klako Group presents ChinaInvest.biz - a monthly magazine providing insight into investment, tax and operational issues for foreign companies entering and expanding throughout China.

With the new regulations for Representative Offices having been issued and implemented it has become increasingly clear that Representative Offices have fewer advantages as compared to before and as a result may no longer be an optimal solution for foreign investors. In this issue we aim to highlight how Limited Companies can be more effective in legal as well as tax perspectives and can be more beneficial in the long-term.

We hope this information can assist foreign investors in their decision-making process when entering the China market.

Labor Law is a relatively new phenomenon in China, with the first comprehensive law passed
in 1994. The new law, adopted by the National People’s Congress (NPC) on 29th June 2007,
looked to redress some of the poor working conditions found in China, particularly for the
average worker. Prior to the passage of this law, most Chinese employee’s in small-medium sized
firms lacked employment contracts. Morever, they were short-term, giving employers the flexibility to
frequently bring in a new, often cheaper hires whenever they saw fit.


Representative Office versus Limited Company - A detailed Comparison

The changes in the Representative Office (RO) regulations have altered the operational and financial effectiveness of using ROs in China. In China, over 50% of all foreign investors use the vehicle of ROs to be operational, but in light of the new regulations many have been forced to close down and operate as Limited Liability Companies. In addition it can be seen that in the future ROs, being formerly a cheap way to setup a China presence is going to end. In summary the changes include, an increased tax burden which cannot be offset, restrictions on activities, restrictions on employees and more government maintenance procedures on an annual basis.

A foreign investor has solutions in this regard, in terms of establishing a legal presence in the form of a Limited Liability Company, which can have the business scope related to trade, manufacturing and/or services. In the below article we would like to highlight the differences between a RO and a Limited Liability Company to show how they can be advantageous to foreign investors.

To read the full article, please click here to view the magazine (PDF file)


If you require assistance with the above subject, please contact us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

All information in this report is verified to the best of our ability and is assumed to be correct at time of release; however, Klako Group does not accept responsibility for any losses arising from reliance on the information provided within.


Free Consultation with China and Hong Kong Legal & Tax Advisors


The directors of Klako Group will be travelling throughout the year to meet with partners and clients and to participate in trade and tax-related events. Should readers or clients of the firm wish to meet our directors face to face during their trips to discuss matters concerning China, Hong Kong and/or Singapore business investments, please contact us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Appointments will be made on a first come, first serve basis. The visits of our directors provides an excellent opportunity to all our readers to discuss first hand their own investment potential, opportunities and legal/tax updated for China, Hong Kong and Singapore in detail.

 

Below is the tentative scheduling for 2011.

 

July 25th-29th 2011: Netherlands, France

September 13th-17th 2011: London, England

September 26th-30th 2011: Germany

October 12th-31st 2011: India, France, Turkey

To view the full schedule, please click here (PDF file)