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Points for Attention for Foreign Enterprises to Establish A Resident Representative Office in China

Since China has carrying on the open-door and reform policy, more and more foreign enterprise take China as the core of their investment and development. It is usually the first step of their investment in China by establishing a resident representative office.

From October 30th 1980, Chinese government has promulgated seven laws and regulations in this area. Among them, the Ministry of Foreign Trade and Economic Cooperation, People's Bank of China and Ministry of Communications issued specific regulations for resident office belong to the industries under their administration. As the lawyers of Tianping Law Office, we will make a brief introduction to the procedures of establishing a resident office of a Foreign Enterprise according to our experience in handling matters in this area.

I. Application for Establishment and Approval

To establish a resident representative office in China, you shall obtain the relevant government authorities' approval firstly. The enterprises' headquarters shall prepare detailed application documents, such as an application letter, a credit certificate of the enterprise, the description of the potential office and other document, then you should submit them to relevant authority. The enterprise shall submit its application documents to different authorities as follows according to different industry the potential office belongs to:

1. A trader, manufacturer or a shipping agent should apply to the Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China for approval;

2. A banking or insurance institution should apply to the People's Bank of China for approval;

3. A maritime shipping operator or a Maritime shipping agent should apply to the Ministry of Communications of the People's Republic of China for approval;

4. An air transport enterprise should apply to the General Administration of Civil Aviation of China for approval;

5. Enterprises out side these lines of activity should, according to the nature of their operations, apply to the proper commissions, ministries or bureaus under the Government of the People's Republic of China for approval.

II. Business Registration

After be granted the approval for establishment application, the chief representative of the representative office shall, usually within 30 days of the date of approval, carry out registration procedures with the local Industry and Commerce Bureau by presenting the documents of approval. If there is a failure to register within the time limit, the document of approval shall be automatically invalid and recalled by the examination and approval authority.

After obtain the registration certificate, the representative office shall carry out other relevant procedures as follows within stipulated time limit:

1. File its record, making official stamps and do the affairs of resident card or Visa or provisional resident card for its representatives and their families in the Public Security Bureau;

2. A foreign representative shall get a working card from the Labor Bureau;

3. Do tax registration in the taxation authority and take the "tax registration certificate";

4. In case the office import office appliance, articles for daily use and means of transportation, it shall file record to the local Customs authority;

5. Open bank account in the appointed banks(usually the Bank of China);

6. If the office intend to recruit Chinese employees, it must entrust the local foreign enterprise service unit as designated by the government to carry out the employment matters, and shall registrate to the local industry and commerce administration authority, then get the "representative card" or "employee card".

After completion of all the above procedures, a resident representative office then legally established in the People's Republic of China.

III. Points for attention

Combining the experience in this area of our office, we think there are several points should be noticed during the establishment and operation of the office:

1. The resident representative office has a maxim approval resident period, it may different from 3 years to 6 years, the office shall apply for extension to its former approval authority before the end of its resident period if it want to extend its resident time.

2. the validity period of its registration certificate is usually one year, so before each expiration date, the office shall make extension procedures to the industry and commerce authority.

3. a resident office may only engage in indirect business operations within the territory of P. R. China, such as to represent its enterprise in conducting business liaison, product introduction, market surveys and research , and technological exchange within the scope of business of that enterprise. The office are not permitted to enter into any agreements or contracts with any legal or natural persons where such agreements or contracts would result in income for the representative office, nor may they engage in any other operational activities.

4. There is one more point to draw you attention, that is a representative office must rent a office building with foreign leasing qualification, you could ask the landlord to show you "the foreign leasing qualification certificate", and the rent office could only be used as a working place instead of a resident as well. Or, the office will not obtain the relevant government authorities' approval and registration.

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