Representative Office

The first way for a foreign company can establish itself in China, is through the establishment of a Representative Office (RO).

The ODM Group set up a Rep office in Shanghai in 2008.  It is not a separate legal entity but is considered to be part of its parent company, in this case our Hong Kong headquarters. 
It is the most basic form of foreign investment and can be very useful, and in some cases even necessary, for most administrative decisions concerning the establishment of a business.
For companies who have complimentary business to the ODMgroup we are able to form a less formal joint venture whereby our clients/partners can avail of our infrastructure to employ or base a few key staff in China.  This simplifies the administrative tasks and expensive set up costs. 

Setting up an office in China means renting of office space in a dedicated Rep. office compliant building, the employment of Chinese personnel, the opening of bank accounts in name of the company, etc.  The advantage of establishing with The ODM Group can be found in its inexpensiveness (There is no obligation to bring in any type of capital), the simplicity of the procedure as well as in its short time frame for implementing.

The ODM Group will act as a business liaison between the parent company and local companies. It often conducts market research, takes care of product promotion, establishes contacts with prospective customers or partners, makes travel arrangements for parent company representatives coming to China and conducts other non-profit making business activities.

Want to set up your China Representative Office on your own?

Setting up a representative office in China is considered as one of the most popular and low-cost solutions that allow foreign investors to explore the business opportunities in China.  A representative office can carry out certain "in-direct operation" activities and their scopes will be limited to:
A) Market research;
B) Quality checking on purchasing;
C) Administration on sales between China and parent company
There are a lot of hidden costs for seting up Representative Office in China such as changing the Chief operations (RMB 10,000), changing office location (RMB 20,000). Hidden charges should be well studied and understood before deciding which option to take.  Depending on your trade, city where operations are set up etc... different Govt taxes will be applied to operations.
Most importantly, a rep office cannot legitimately do the following.   
  • Cannot Employ staff directly - must employ people through HR service.
  • Cannot Invoice and collect money from 3rd parties in China.
For larger operations consider a WFOE.
Click here to view The ODM Group Services for your China Representative Office.

Choosing The ODM Group as your buying office is simple and hassle-free. The ODM Group can provide our services such as documentation to the China Authorities, staffs, rental of office spaces in China and production.


Documentations needed for submission including:
  • An introduction to the foreign company and its business activities in China
  • The name, address, purpose, duration as well as business scope of the RO (It is very important that the business scope is filled in correctly because it will be stated in the Registration Certificate for the Representative Office. And a RO can only engage in business activities that are within the business scope as set forth in the Registration Certificate)
  • The name of the chief representative
  • A list of the documents being submitted
  • Application form for the employees of a RO. This form should contain the basic information of the employees like their names, nationalities, contact details and positions in the RO
  • The appointment letter for the chief representative. This letter must be printed on the letterhead paper of the company and has to be signed by an authorized representative of the company. It should clearly state the name of the person who will become chief representative of the RO
  • Resumes (These have to be signed by the person in question), photocopies of the passports as well as passport size photos of all the representatives, including the chief representative
  • Bank creditworthiness letter. This letter, printed on the letterhead paper of the bank, has to be issued by a foreign bank in the area where the foreign company is located and should be signed by authorized officials of the bank. It is needed to show that the applicant has financial and credit standing. The letter should contain the following information:
  1. The name of the foreign company
  2. The normal deposit amount of the average daily balance for a period of six months
  3. A short review of the creditworthiness of the foreign company
  • A signed office lease agreement or a letter of intent of lease (It is important to remember that a landlord of an office or a building needs a special permission to rent commercial property to foreigners. So always make sure that he has that permission. You need an official letter from your landlord stating either that he has permission to rent commercial property to foreigners or that the building in which the property is located is itself certified by the local public security bureau as suitable for ROs registrations, a so-called grade A building)
  • * Statutory documents of the parent company issued by authorities of the country of origin, e.g. a certificate of incorporation or a business license. 

Representative Office Taxes Need To Know

You are free of Tax if you conduct only the following activities:
a) Market research
b) Information collection
c) Business liaison (No income generated)
However, ANY commissions, bonus or fees charged on behalf of the head office shall be taxed

These taxes applies to you if you are not free of tax: 
a)       Corporate income tax
b)       Business tax
c)       Individual income tax
d)       Stamp duty
e)       Any other taxes related to foreign companies
Payment Methods
(1) Actual Profit Method 
  • Should clearly record revenue and expenses
  • Tax filing should be done as if it is a business enterprise (e.g. Law Firm, Accounting Firm)
(2) Expenses Gross-up Method
  • Taxed based on the expenses incurred instead of the income received 
  • Relatively low tax risk
  • Mostly tax on RO of foreign enterprises
(3) Actual Income Method 
  • Used if cannot be classified as (1) or (2) or tax free office 
  • Should pay taxes if office has revenue 
  • Otherwise, a report describing all the activities during the year needs to be sent to the local tax authority 
(4) Tax Free Method 
  • RO established by foreign governments, international organizations, not-for-profit organizations, can apply for tax free method by submitting application to state tax authority 
  • Yet the application process maybe cumbersome and sufficient documents should be filed properly here shall be NO business tax and income tax for the representative office.

Things to note
* Your representative office should determine the method in accordance with the business nature of your headquaters and practical situation. 
* Any Penalities and overdue fines Paid by RO can be excluded in the expenses when calculating income tax under expense gross-up method
* Rep offices shall calculate income tax based on actual expenses. *Interest revenue shall not offset thee expenses of the current period
* Payment Method Tax Rule 
Paying Individual income taxes for all his/her global income
Paying Individual income tax for his/her China-sourced income during his/her actual working period in China