Representative Office (“RO”)

Foreign companies, particularly those in the trade agency and service industries, often choose an RO to carry on liaison and marketing activities in China. Although ROs allow foreign investors to enter the Chinese market with little initial investment, they are prohibited from direct profit-making activities.

In general, an RO of a foreign company may engage only in indirect business activities in China, including acting as a liaison with clients and the head office; introducing the products of the head office; conducting market research; and collecting information. Thus, an RO of a foreign company may not sign and conclude contracts with Chinese customers directly and is prohibited from engaging in any “direct business operations”.

ROs generally are taxed at the same rate as domestic companies. They are taxed on a deemed basis in accordance with their expenses.

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