Set Up Business in Form Of a Representative Office in Shanghai China,

Establishing Rep Office (RO) in Shanghai, Shanghai Rep Office Setup

Procedures

Shanghai has a great pro as it is located in the middle of north-south coastal line, with
convenient transport system, vast land resources, and advantageous geographic location. It is
located in front of the Yangtze River, close to the East China Sea in the east, face the
Hangzhou bay in the south, connect with Jiangsu and Zhejiang province in the west, and close
to the mouth of Yangzi River in the north. Located in the heart of the Delta Yangtze River,
Shanghai has the worlds busiest container port.

Shanghai has great investment environment, which is seen by many businessmen and
enterprises as: ever-increasing efficiency of government, construction of social honest, solid
social security system, place of increasing international cooperation, good legal system, high
information level, large group of talent in different fields, language advantage, balanced
industry mix, complete adequate and systematic service, etc.

Shanghai is the largest city by population in the Peoples Republic of China. It is a major
financial center in China and one of the most significant trade and finance centers in the
world. It is one of Chinas old industrial bases which thanks to reforms which took place for
over past 20 years have been injected with new vitality. The city is also home to powerful
Stock Exchange, the Shanghai Stock Exchange has been ranked third among worldwide stock
exchanges in terms of trading volume and sixth in terms of the total capitalization of listed
companies, and the trading volume of six key commodities. The importance of this metropolis
is consistently increasing. Currently Shanghai is being ranked alongside with New York,
Tokyo and London. Furthermore, Shanghai is one of the most prosperous cities in the world.
Its cosmopolitan character, sophisticated and wealthy consumers, and highly educated skilled
labor force make it highly attractive to overseas investors.

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. Setting
up a representative office is the most inexpensive entry form for foreign enterprises to enter
the Chinese market. And about 20% of investing clients have chosen Representative Office as
their Shanghai business entity since setting up a representative office is cost efficient and it
requires no capital investment. A representative office basically is to serve as a liaison office
between a foreign company and its business partners in Shanghai, and to coordinate the parent
enterprise activities in Shanghai (travel arrangements, promotion etc.). Representative offices
are applicable for many industries: trading, shipping, consulting, etc. The Chinese
government has a name format for anyone who wants to setup a representative office (RO) in
China, the format is: country (area) + parent company name + Shanghai Representative
Office.

Shanghai Representative Office Setup-Procedures

Preparing all the needed documents fill out the application form sign the agreement with
TCBC pay for the services submit all the needed documents name reservation apply
for the business license and work card go to the public security bureau for stamp-make
apply for Organization Code License & card apply for Setup license of the Local &
National Taxation Bureau.

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.

A new provision in the notice states that foreign companies applying to establish a rep office
in China must have been in existence for at least two years, as evidenced by an apostilled
certificate of incorporation. This means that foreign companies must use established vehicles,
rather than incorporate new SPVs, to handle their rep office operations. The notice also
requires foreign companies to obtain and provide new apostilled certificates of incorporation
each time they apply to renew their rep offices registration certificatesa potentially
onerous processand requires rep offices to renew their registration certificates every year.

In addition to stricter registration and renewal requirements, the notice creates new
bureaucratic hurdles for rep offices operations. Specifically, it limits the number of
representatives that a company may appoint to four individuals, including the offices chief
representative. (Previously, there were no explicit limits on the number of representatives that
a foreign company could appoint.) Existing rep offices that have more than four
representatives may not appoint additional representatives, though the notice does not specify
whether such offices must reduce this number to comply with the new rules. One local SAIC
official in Beijing indicated that reduction would likely be unnecessary unless a rep office
applies to SAIC to make changes to its registered representatives. (In addition to SAICs
registration requirements, the PRC government has found practical ways to enforce the rule,
such as refusing to issue visas or work permits to foreign employees of rep offices that have
more than four registered representatives.) The notice also does not specify whether the
restrictions would apply to rep offices of companies in industries that require regulatory
approval. Local SAIC officials have provided different answers to this question, likely
because of the limited number of registration applications that have been received since the
notice was issued.

Setting up a rep office may thus be the best choice for a foreign company that is mainly
interested in promoting its overseas products and services and establishing networking
relationships between Chinese businesses and their overseas operations. In addition, for some
entities such as foreign law firms and certain nonprofit organizations a rep office may be the
only option for conducting their China operations.

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 set Up a Representative Office in Shanghai. TCBC will
manage all aspects of incorporation to get you a business license in Shanghai China

Please visit: http://www.tommyconsulting.com/CorporateFormation.html

Email: tomlee@tommyconsulting.com, Skype: tomleeli

WhatSapp/Wechat/Cell Phone: +86 18926401128