Chengdu is the capital
of the Sichuan province and is situated on the Western edge of the Sichuan
Basin. This capital city serves as the economic, financial and commercial
center of Southwest China. More than 15 million people live in Chengdu. The
province of Sichuan is known to tourists for its spicy food. Chengdu is famous
for their cute habitants: The Panda. Economically, it is ranked as the 15th most
competitive city in China. The ranking will probably move up quickly, as
experts estimate that Chengdu will soon be upgraded from a Tier 2 to Tier 1
city. The growth which makes the Tier upgrade possible, is fueled by
infrastructure and connectivity investments like the OBOR initiative and the
Chengdu – Poland railway connection.
When investors have
plans on establishing representative office in Chengdu, it is better for them
to acquire more information in order to run a successful business in Chengdu China.
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.
Setting up a
representative office in Chengdu China primarily requires 4 stages and this
entire process can take up till 4-5 months time.
- Pre-approval Stage
Once you have decided
to base your representative office in which city, the next thing is to approach
the local Ministry of Commerce (MOFCOM) for contacts of a local designated
foreign enterprise service company (FESCO) who will be in charge of your
representative office application process. You should be paying approximately
US$800 to $1000 to a designated FESCO for their service of notifying you on the
relevant upcoming deadlines and administrative procedures. In addition, a
signed lease agreement is one of the pre-requisite for the
approval; therefore it is vital to secure a lease for a “grade A” office
space before submitting the application.
Stage 2 - Application Stage
Generally your
application approval should be done by MOFCOM, but if your industry is specific
to banking, insurance, law, accounting and media, you may have to approach the
relevant authority which has jurisdiction over your industry sector. Once
approved, you should have the Certificate of Approval certifying your legal
presence for the next 3 years which can be further extended.
Stage 3 - Registration Stage
This stage is to
register for your representative office’s business license which must be
renewed annually. It is important to note that you must complete the
registration within 30 days of your approval from stage 2. The application
together with the supporting documents is required to be submitted to the local
State Administration of Industry & Commerce (SAIC and the process normally
takes about 1-2 months time.
Stage 4 - Post Registration Procedure
Firstly, In China, it
is expected for your representative office to register the office location with
the local police (Public Security Bureau) and to register with local and
national tax bureaus.
Secondly, you should make financial and corporate seals as it is a practice in China to use them on official documents. Thirdly, opening a foreign exchange bank account will aid to facilitate overseas fund transfer. Fourthly, to import the relevant equipments or materials, remember to complete the relevant customs registration. Lastly, get a FESCO to assist you in recruiting of Chinese staff.
Once all this is done, your
representative office is set to establish its presence in China. However before
getting to this stage, a good market research study is required to ensure that
your products or services are viable in the Chinese market.
term commitment to the
China market.
1 A representative office may, however,
negotiate contracts that are later signed in the name of the home office
located outside China.
2 The application letter should contain, in part, the following: a description of the company’s history, business and scope; the names of the Chairman of the Board, the General Manager and directors; the names of its major trading partners in China; its business volume; the proposed name of the representative office; the purpose for setting up the representative office and the scope of its activities; the duration of the office and its chief representative.
3 Head office incorporation documents include certified copies of the company’s business registration certificate, the certificate of incorporation, the memoranda and articles of association, etc.
4 Other post registration formalities include: registering with the tax bureau; opening a bank account; completing a residence application with the with the local Public Security Bureau; applying to the Customs Administration for permission to import office equipment and daily necessities for use by the representative office and its personnel; appointing a FESCO to recruit local Chinese employees; etc.
Set Up a Representative Office in Chengdu
is a big project by itself, which requires financial and time commitments,
business management knowledge and China expertise. Identifying a competent agent to manage thecomplex
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 invest
in Chengdu. We offer a range of company formation services including helping
you to set up:
-Wholly Foreign Owned
Enterprises (WFOE )
-Representative Offices
-Joint Ventures (Equity/Co-operative)
-Foreign Invested Partnership Enterprises (FIPE)
-Hong Kong Holding Company.
-Representative Offices
-Joint Ventures (Equity/Co-operative)
-Foreign Invested Partnership Enterprises (FIPE)
-Hong Kong Holding Company.
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