Shanghai is located in the Yangtze River Delta. The
municipality sits on the southern edge of the estuary of the
Yangtze River in the middle portion of the East China coast.
It borders the provinces of Jiangsu and Zhejiang to the north, south and
west, and is bounded to the east by the East China Sea.
Shanghai is the commercial and financial center of China, and
ranks 5th in the 2018 edition of the Global Financial Centres Index (and third most competitive in Asia after Singapore and Hong Kong) published by the Z/Yen Group and Qatar Financial Centre Authority. It also ranks the most expensive city to live
in Mainland China, according to the study of Economist Intelligence Unit in 2017. It was the largest and most
prosperous city in East Asia during the 1930s, and rapid re-development began in the
1990s. This is exemplified by the Pudong District, a former
swampland reclaimed to serve as a pilot area for integrated economic reforms
There are 16 districts under Shanghai's administration:
Songjiang, Changning, Fengxian, Jingan, Jiading, Jinshan, Baoshan, Yangpu,
Xuhui, Qingpu, Huangpu, Hongkou, Minhang, Putuo, Pudong New Area, and
Chongming.
When investors have plans on establishing representative office in Shanghai, it is better for them to acquire more information in order to run a successful business in Shanghai 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 Shanghai
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 memorandum 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 Shanghai
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 invest
in Shanghai. 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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