http://www.tommyconsulting.com/CorporateFormation.html Set Up a Representative Office in Shenzhen China, Establishing Rep Office (RO) in Shenzhen, Shenzhen Rep Office Setup Procedures

1. Set Up a Representative Office in Shenzhen China, Establishing Rep Office
(RO) in Shenzhen, Shenzhen Rep Office Setup Procedures
Shenzhen is the best choice for business-doing in China. Shenzhen is situated in the Pearl River
Delta. It is the first Special Economic Zone since China carried out reform and open-door policy 30
years ago. Shenzhen has an area of 1953 square km2 . Shenzhen is the best city both for living
and working in China the fastest growing city in the world. In Shenzhen you can enjoy sound
infrastructure and nice industrial chain for trading, manufacturing and value investment. Since
Shenzhen is bordering Hong Kong, you can take lots of advantages and opportunities from “one
country, two systems” policy. With sound infrastructure and easily recruited many talented
personnel in Shenzhen, Foreign company can take this advantage to set up representative office
in Shenzhen as china market entry strategies
When investors have plans on establishing representative office in Shenzhen, it is better for them
to acquire more information in order to run a successful business in Shenzhen. Setting up a
representative office is the most inexpensive entry form for foreign enterprises to enter the
Chinese market. And about 20% of investing clients have chosen Representative Office as their
Shenzhen business entity since setting up a representative office is cost efficient and it requires
no capital investment. A representative office basically is to serve as a liaison office between a
foreign company and its business partners in Shenzhen, and to coordinate the parent enterprise
activities in Shenzhen (travel arrangements, promotion etc.). Representative offices are
applicable for many industries: trading, shipping, consulting, etc. The Chinese government has a
name format for anyone who wants to setup a representative office (RO) in China, the format is:
country (area) + parent company name + Shenzhen Representative Office.
Shenzhen Representative Office Setup-Procedures
Preparing all the needed documents→ fill out the application form→ sign the agreement with
TCBC→ pay for the services→ submit all the needed documents→ name reservation→ apply
for the business license and work card→ go to the public security bureau for stamp-make→
apply for Organization Code License & card→ apply for Setup license of the Local & National
Taxation Bureau.

2. An RO has no legal personality, meaning it does not possess the capacity for civil rights and
conduct, cannot independently assume civil liability, and is limited in its hiring ability. Chinese
staff working for an RO, although not limited in number, must be employed through a human
resources agency that will sign a contract with the RO on the one hand and with the Chinese staff
on the other in order to ensure social security and housing fund contributions are paid on a
regular basis. No more than four foreign employees can be hired per RO. Foreign staff working for
ROs should have an employment relationship with the parent company abroad, and any disputes
should be settled under the laws of that country
ROs are usually taxed on gross expenses with the overall tax burden around 11.75 percent of
total monthly expenses; however, these rates may be increased by the relevant tax bureau
according to the industry. If the chief representative is a foreign national, whether they stay in
China or not, they shall be subject to individual tax based on the income derived from the RO.
A new provision in the notice states that foreign companies applying to establish a rep office in
China must have been in existence for at least two years, as evidenced by an apostilled certificate
of incorporation. This means that foreign companies must use established vehicles, rather than
incorporate new SPVs, to handle their rep office operations. The notice also requires foreign
companies to obtain and provide new apostilled certificates of incorporation each time they
apply to renew their rep offices’ registration certificates—a potentially onerous process—and
requires rep offices to renew their registration certificates every year.
In addition to stricter registration and renewal requirements, the notice creates new bureaucratic
hurdles for rep offices’ operations. Specifically, it limits the number of representatives that a
company may appoint to four individuals, including the office’s chief representative. (Previously,
there were no explicit limits on the number of representatives that a foreign company could
appoint.) Existing rep offices that have more than four representatives may not appoint
additional representatives, though the notice does not specify whether such offices must reduce
this number to comply with the new rules. One local SAIC official in Beijing indicated that
reduction would likely be unnecessary unless a rep office applies to SAIC to make changes to its
registered representatives. (In addition to SAIC’s registration requirements, the PRC government
has found practical ways to enforce the rule, such as refusing to issue visas or work permits to
foreign employees of rep offices that have more than four registered representatives.) The notice
also does not specify whether the restrictions would apply to rep offices of companies in
industries that require regulatory approval. Local SAIC officials have provided different answers to
this question, likely because of the limited number of registration applications that have been
received since the notice was issued.
Setting up a rep office may thus be the best choice for a foreign company that is mainly
interested in promoting its overseas products and services and establishing networking
relationships between Chinese businesses and their overseas operations. In addition, for some
entities such as foreign law firms and certain nonprofit organizations a rep office may be the
only option for conducting their China operations.

3. Set Up a Representative Office in Shenzhen is a big project by itself, which requires financial and
time commitments, business management knowledge and China expertise. Identifying a
competent agent to manage the complex process will be a cost and time effective way to avoid
potential pitfalls. Since 2006, Tommy China Business Consulting has been focusing on consulting
services for our clients to set Up a Representative Office in Shenzhen. TCBC will manage all
aspects of incorporation to get you a business license in Shenzhen China
Please visit http://www.tommyconsulting.com/CorporateFormation.html