A RO is the easiest and most economic way of setting up a legal presence in China. It is an office of a foreign enterprise set up for the purpose of liaising with Chinese businesses and customers on behalf of its parent company. A RO is not considered to be a separate legal entity and it can not carry out direct revenue earning business activities, i.e. it cannot enter into purchase/sales contracts and cannot receive payment for products or services, issue invoices or repatriate monies overseas. A RO is restricted to conduct only "indirect operational activities", such as:

• Business liaison
• Introduction of products
• Market Research
• Technology exchanges

However, a RO can open bank accounts and employ staff to maintain liaison with customers and partners. Its head office can also enter into contracts with its customers in China in its own name, but not in the name of its RO.

There are no capital contribution requirements for a RO. Establishing a RO is therefore largely a matter of complying with the prescribed application procedures. After submitting all the documents required, and in case of approval, an Approval Certificate for the RO will be issued. Application procedures usually take one to three months.

A RO, although indirectly operational, is liable for filing and paying Business Tax, Foreign Enterprise Income Tax and Individual Income Tax. Regular bookkeeping is required to keep track of all expenses associated with the RO.

An RO must be situated in a Grade "A" office building or in an office whereby the landlord has a right to rent his office space to Foreign representative offices. A list of rental certificates, such as Property Ownership Certificate and contracts are required and must be submitted to the government authorities.

There is no longer a requirement that the parent company must have been established for one year, although a bank reference letter is still required from the parent company.

Benefits of a Hong Kong Holding company for Representative Offices