1. OVERVIEW ABOUT Shanghai
Shanghai is the best choice for business-doing in China. Shanghai is situated near the sea.  Shanghai is the best city both

for living and working in China the fastest growing city in the world. In Shanghai you can enjoy sound infrastructure and

nice industrial chain for trading, manufacturing and value investment. Since Shanghai is bordering Hong Kong, you can take

lots of advantages and opportunities from “one country, two systems” policy.

2. CONCEPT OF RO
A Chinese representative office (RO) is an office of the foreign enterprise established in China for liaison with Chinese

businesses and customers on behalf of its parent company.

A RO is not considered to be a separate legal entity. It can not directly engage in operational activities. However, its

parent company can enter into contracts with its supplier/customers in China in its own name, but not in the name of its RO.

Therefore, before a foreign investor establishes its presence in China using wholly foreign owned enterprise, equity joint

venture and cooperative joint venture, it could first set up a representative office to test the market.

3. REPRESENTATIVE OFFICE NAME
The format of the RO Name is: country (area) + parent company name + Shanghai Representative Office

4.  FUNCTIONS OF RO
RO enjoys a great popularity in Chinese market since its simple procedure, short time consuming and comparatively loose

requirements for formation.

The simplicity and short time required for establishing a RO is the main reason for its popularity in China market. Unlike

foreign investment enterprises ("FIEs"), representative offices are not required to meet stringent requirements for items

such as capital contribution.

The functions of a RO are as follows:
1. Can handle market research, sourcing, project investigation for parent company, who in turn to execute trading function.
 
2. It cannot enter into purchase/sales contracts and receive payment for services, issue invoices.

3. A RO can open bank accounts and employ staff to maintain liaison with customers and suppliers.

4. Apply for work permit and residence permit more easily.

5. RO is not considered to be a separate legal entity, so it only works as liaison purpose.

6. Limitation in activity. No trading or invoicing is allowed.

7. Local staff should be hired via government admitted agents.
 
8. Although not profits, cost expenses still attract tax liability

5. PROCEDURE
Fill in the application form→ sign the agreement→ pay for the service→ submit all the needed documents→ name checking→

apply for the business license→ go to the public security bureau to carve seal→ apply for Organization Code License & card

→ apply for Registration license of National &Local Administration of Taxation

6. DOCUMENTS REQUIRED
1. Parent company's original copy of business licenses, certificate of Incorporation & stamp;

2. Two original copies of bank reference letters for the parent company, stating a 6-digits bank balances, issued within 6

months & in both English and Chinese translation and certified by the Chinese Embassy or Consulate in your country;

3. Lawyer’s legalization or notarization; the whole set of company documents (including business licenses, certificate of

Incorporation, documents showing information of shareholders and directors; M&A; annual return report) should be notarized by

the organization which is recognized by the P.R.C. Ministry of Justice: If the parent company is abroad, the above mentioned

documents should be notarized by the local Chinese Embassy or Consulate);

4. Original copy of identity certification, 2 color photos and one copy of resume of the chief representative (CR);

5. Two original copies of lease with signature and sealed by Housing Management Authority. (The signing party should be in

the name of general representatives and rent for more than one year. In the meanwhile, the purpose must be for commercial use

only).

7.  OUR SERVICE
1. Both original and duplicate copy of business license;

2. Registration license of National &Local Administration of Taxation;

3. Seal carving registration card;

4. Organization Code License & card (IC card);

5. Three seals.

8.  FOLLOW UP
TANNET can provide a series of follow up services to customers, such as bank account opening, book-keeping and auditing,

annual return service, company alteration, financial planning and so on.

9. TIME NEEDED
Once all the necessary documents for application are ready for submission, government approval can be got within 10-15

working days.

10. TAXATION
In General a RO is subject to foreign enterprise income tax (FEIT) and Business tax (BT) under the PRC FEIT Law and the PRC

Provisional Regulations of BT. There are different ways in which a representative office may be taxed but the most common

basis is the cost-plus-basis. As at April 2002, the total tax burden under this assessment method is approximately 5-10% of

the operating expenses incurred by the representative office. The FEIT and BT for a RO should be filed on a quarterly basis

within 15 days after the end of each quarter.

Although a RO is not to conduct business, it attracts tax as stated below:

1. Chief Representative and local staff’s Individual Income Tax (IIT), rating from 5% to 45%, IIT depends on salary amount.

Presently starting point is RMB2000 for people in mainland China and RMB 4800 for overseas people. It is calculated according

to the formula: IIT= expenses/ (1-15%) ×10%×25%.

2. Cost Expense Taxes base on monthly operational expenses (CET), the rate is 5%. It is calculated according to the formula:

CET= expenses/ (1-15%) ×5%.

In accordance with the relevant Chinese tax regulations, a RO may claim for tax exemption if it satisfies certain criteria

stipulated in the regulations. Suppose the head office takes responsibility of all the expenses incurred from the

representative office, no tax is levied.

NOTE:
1. Hand over of such as for non- Chinese document, need to translate into Chinese, and hand over together.
2. Carry out time to hand over a well-found day by consigning down payment and data since start computing.

Tannet——Global Corporate Solution Provider,Value Investment & Strategic Developmen