FREQUENTLY ASKED QUESTIONS
CHINA FOREIGN INVESTED COMPANY
FAQs Concerning Registration of Representative Offices in Shanghai
Q1: How do foreign or Taiwan, Hongkong and Macau enterprises apply for the establishment of representative office in Shanghai?
If a foreign, Hongkong, Taiwan or enterprise (referred to trading company, manufacturer, forwarding agent, contractor, consulting company, advertising company, holding company, and leasing company) intends to establish a representative office (a non-direct-operational institution representing its enterprise to engage in such activities as liaison services, marketing survey, product Introduction and technical exchange), it shall entrust Shanghai Foreign Investment Service Center (SFISC) or other sponsors authorized by the government authority according to the nature of its business to apply to the Shanghai Municipal Commission of Foreign Economic Relations and Trade. Once approved, the foreign enterprise shall register to ICAB of Shanghai with the Certificate of Approval within thirty days.
Q2: What sort of documents and materials shall be presented when an application is made?
When applying for the establishment of a representative office, a foreign or Hongkong, Taiwan and Macau enterprise shall submit the following papers and materials:
(1)The application with the signature of either the Chairman of the Board or the General Manager of the enterprise including brief introduction of the enterprise, purpose to set up a representative office, the name of its representative office, names of the chief representative and representatives (if any) and business scope, its duration and its address, etc;
(2) A legal business-opening certificate issued by the competent authorities of the country or region where the applicant is located (copy);
(3) A letter issued by a financial institution which has business relations with the applicant testifying its financial and credit standing (original);
(4) A letter of attorney issued by the Chairman of the Board or the General Manager for the chief representative and representative (if any) of its office and their curriculum vitae and identity cards (copy). If the Chairman of the Board happens to be the chief representative or representative, the letter should be co-signed by at least another two directors. For those enterprises which have no Board of Directors, the letter should be signed by the executive director.
(5) Two application forms for establishment and personnel arrangement.
(6) Other documents the government considers necessary.
A foreign financial institution or a foreign insurance company or a foreign stock exchange shall submit, in addition to the documents and materials mentioned above, the organization charter of its general company, the name list of the directors and its latest annual report about its capital, debt, profit and loss.
Q3: Is a Representative Office/Company permitted to be located in a building both used for business and living or an apartment?
No. The Representative Office must be located in designated office building which is qualified and approved by the Shanghai Government to host foreign representative offices/companies.
Q4: Is it necessary to rent office space prior to application of setting up representative office/company?
Yes. Before proceeding your office/company registration the lease agreement of office space must be signed between tenant and owner and the lease term must be not less one year.
Q5: Must the Chief Representative go to Shanghai to handle those issues such as office registration, tax registration, bank account opening etc.?
No, it's not necessary. You can authorize COLVASS Consulting Limited or your own employee to do them.
Q6: What's the maximum time limit of a representative office for one approval? How long does the business registration certificate remain in force?
The maximum time limit for a Representative Office approved for one time is three years and if it's necessary, the foreign enterprises shall apply to the Shanghai Municipal Foreign Economic Relations and Trade Commission for extension through original sponsor at least sixty days before termination. The valid term of business registration certificate for a Representative Office is one year. The Representative Office shall apply for extension to the Administration Bureau of Industry and Commerce 30 days before termination and at the same time present a business summary of one year.
Q7: What shall be done if a representative office wants to change the contents of registration?
If it wants to change the name, its chief representative or representatives, its business scope, it duration or its address, a representative office shall entrust the original sponsor to apply to SMERT (Shanghai Municipal Foreign Economic Relations and Trade Commission). Once approved, it can handle its amendment at the ICAB with the certificate of approval.
Q8: How to apply for extension of Registration Certificate when it is expired?
Normally the Business License is valid for three years. You can engage COLVASS Consulting Limited or other agent to prepare and submit all necessary documents 2 months before it is expired. In particular, the following documents need to be prepared and submitted:
(1) Application Letter for Extension (original)
(2) Appointment Letter (original)
(3) Personal Documents
b) certificate of status
c) 2 pictures
(4) Certificate of Incorporation & Other Registration Documents
(5) Credibility Letter (Bankers’ reference letter)
(6) Documents of Office Location
a) located in office building or hotel approved by SFERTC, which is qualified to host foreign companies
b) Lease Agreement (1 year or above)
c) Lease Certificate authorized by Shanghai Real Estate Management Bureau (copy)
d) Statement of Office Location issued by Property Management Company
(7) 3 Year Business Report Of Representative Office (with signature of Chief Representative and Chop of Representative Office
(8) Original Certificate of Approval, Registration Certificate, Taxation Registration certificate
Q9: How are the cancellation procedures followed when the representative office expires or winds up operation before expiration?
When it is time for termination or winding up operation before termination, the Representative Office shall report to the original examination, the Representative Office shall report to the original examination and approval department for reference through original sponsor at least 30 days before termination with the Cancellation Application Letter signed by the Chairman of the Board or General Manager of the enterprise and afterwards go through the cancellation procedures at Administration Bureau of Industry and Commerce, Public Security Bureau and Custom Office after clearing its liabilities, tax and other relevant matters.
Q10: As a representative office is only permitted to engage in business liaisons according to relevant regulations, why should it pay taxes?
Generally speaking, a representative office is only permitted to engage in business liaisons. But such activities are a kind of indirectly managed activities, yet are still of business characteristics. China's relevant tax policies have drawn a clear boundary between imposition and exemption. As stipulated, a representative office, which conducts market surveys and provides business information, liaisons and other preparatory and supportive activities only for the sake of its head office's product manufactured and sold, can apply to be exempt from taxes. But taxes should be levied on the income of a representative office earned through transactions similar or relevant to intermediary and agency services.
Q11: As a representative office is only permitted to engage in business liaisons according to relevant regulations, why should it pay taxes?
If the Representative Office will hire foreigners the employer should apply for Certificate of Working Permit issued by the Foreigner Employment Office of Shanghai Labor Bureau before entering China.
(2) With the Certificate of Working Permit the employer should proceed to the entry visa for the employed foreigner.
(3) The authorized unit will send the letter of entry visa and the Certificate of Working Permit to the employed foreigner.
(4) The foreigner with concerned documents including the received letter and the Certificate should go for application of professional (Z) visa
(5) Within 15 days the foreigner with (Z) Visa should apply for the Employment Permit issued by the Foreigner Employment Management Office of Shanghai Labor Bureau.
(6) If has received the Employment Permit the employed foreigner should go to Shanghai Security Bureau for Residence Permit within 30 days.
(7) Without the requirement of Working Permit the appointed Chief Representative or Representative of Shanghai Representative Office can directly go for Employment Permit and Residence Permit with the Work Certificate of Representative Office in China of Foreign Enterprises issued by Shanghai Administration Bureau of Industry and commerce.
Q12: As a representative office is only permitted to engage in business liaisons according to relevant regulations, why should it pay taxes?
Representative offices of foreign enterprises including Taiwan, Hong Kong and Macau enterprises should, within one month after receiving the Certificate of Industrial & Commercial Registration, go to the local competent taxation office to handle the tax registration. The six main taxes levied on representative offices are as follows: Business Tax (tax rate: 5%), Foreign Enterprise Income Tax (tax rate: 33%), Individual Income Tax (progressive tax rate: 5%-45%), Vehicle and Vessel Usage License Plate Tax, Urban Real Estate Tax and Stamp Tax. In practice, business tax, foreign enterprise income tax and individual income tax are the commonest.
As for representative offices that should pay business tax and foreign enterprise income tax, taxes that can be levied on real income or contract amount and commission rate known by tax authorities may be levied on the amount declared or assessed. As for representative offices that cannot provide eligible documents or be distinguished between trading in self-produced goods or trading as merchandise agents, after the examination and approval of tax authorities, taxes can be assessed and paid on the income converted according to the outgo expenses in order to simplify tax collection procedures.
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