Guide to Setting up a Representative Office (RO) in Shanghai China, Procedures of Set Up Rep Office in Shanghai

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.

  

Contact Us for  Setting up a Representative Office (RO) in Shanghai now.