Representative Office (RO)

A Representative Office is a subsidiary of a foreign company in China. If your company needs a local presence to manage services or coordinate outsourcing business activities or to research the developing Chinese market, then a Representative Office is a useful and inexpensive vehicle for establishing a presence in China. Other main tasks include conducting market research, monitoring purchasing activities, marketing, and administration of sales conducted between China and the parent company. Representative Offices cannot bill their clients in China for services or sales. However, it can act as a liaison office in matters pertaining to ordering, shipping, collecting money, and so on.

Benefits and Disadvantages

Benefits:
Low set up costs. No paid-up share capital is required.
Easily to registered with the Chinese government.
Represents the parent company.
Coordinates business activities.
Disadvantages:
Limited in its business scope, no trading or invoicing permitted.
Must hire local staff via a government organization.
Business licenses are usually issued for two to three years but are renewable.
Still subject to taxation on its running costs at a rate of roughly 10%.
Tax filing has to be submitted monthly. Annual audits. There are statutory audit requirements with respect to operating expenses as well as foreign currency bank accounts.
Summary:
A Representative Office is a useful and relatively inexpensive first step to establish your business in China. But it is not a self-governing entity with all attached rights and responsibilities. Responsibility remains with the parent or offshore company. Since it only handles liaison and co-ordination work, its business scope is very limited. A Representative Office provides the opportunity to explore China as a market and to analyze its potential and viability for your business. As a low-cost introductory presence, it\’s a perfect solution.

A Representative Office is a subsidiary of a foreign company in China. If your company needs a local presence to manage services or coordinate outsourcing business activities or to research the developing Chinese market, then a Representative Office is a useful and inexpensive vehicle for establishing a presence in China. Other main tasks include conducting market research, monitoring purchasing activities, marketing, and administration of sales conducted between China and the parent company. Representative Offices cannot bill their clients in China for services or sales. However, it can act as a liaison office in matters pertaining to ordering, shipping, collecting money, and so on.