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OUTLINE OF BASIC LEGAL AND PRACTICAL ISSUES IN RESPECT OF
[ 作者: 来源: 点击次数:7351 发布时间:2009-9-21 14:27:37 ]
OUTLINE OF BASIC LEGAL AND PRACTICAL ISSUES IN RESPECT OF
THE ESTABLISHMENT OF A REPRESENTATIVE OFFICE 
 
1. INTRODUCTION
 
1.1 Summary
This outline contains only a brief summary of certain aspects of Chinese law and practice that may be pertinent to establishing a representative office in the People's Republic of China ("PRC"). This outline is not intended to address all possible issues that may arise in connection with the establishment of a representative office.
 
1.2 Representative Office Vehicle
The representative office is one of the common business vehicles through which foreign investors can establish their first presence in China. The relative simplicity and comparatively short time frame required to establish such an office is the main reason for its popularity. Unlike other forms of foreign investment vehicles, there is also no capital requirement.
 
2. REGULATORY FRAMEWORK
 
2.1 Principal Regulations
The principal regulations governing the establishment and operation of representative offices in the PRC are the:
(a) Interim Regulations of the State Council of the People's Republic of China Concerning the Control of Resident Representative Offices of Foreign Enterprises, effective as of 30 October, 1980 ("Interim Regulations");
(b) Procedures of the State Administration for Industry and Commerce ("SAIC") of the People's Republic of China for the Registration and Administration of Resident Representative Offices of Foreign Enterprises, enacted by the State Council and effective as of 15 March, 1983 ("Registration Procedures"); and
(c) Detailed Rules of the Ministry of Foreign Trade and Economic Cooperation for the Implementation of the Provisional Regulations Governing the Examination, Approval and Administration of Resident Representative Offices of Foreign Enterprises, effective as of 13 February, 1995 ("Detailed Rules").
 
2.2 Local Regulations
Local regulations are also applicable. In Beijing, the following local regulations may apply:
· the Provisions of the Beijing Municipal People's Government for the Administration of the Hiring of Chinese Employees by Resident Representative Offices of Foreign Enterprises (1996); the Notice of the Beijing Municipal People's Government for the Further Improvement of the Labour Administration of the Secondment of Chinese Employees to Resident Representative Offices of Foreign Enterprises (1996); the Circular of the Beijing Municipality Regarding Payments Made by Permanent Representative Offices of Foreign Enterprises on Behalf of their Head Offices May Be Excluded from the Calculation of Taxable Income (1989); and the Circular Regarding Representative Offices in Beijing of Foreign Enterprises Shall Withhold and Pay Individual Income Regulatory Tax on the Remuneration Paid to their Chinese Employees (1991),
Note that in this memorandum, specifics relating to the establishment of a representative office in Beijing are provided for reference. Details may vary from city to city in China and thus should be separately confirmed.
 
3. NATURE AND FUNCTION OF A REPRESENTATIVE OFFICE
 
3.1 Liaison Office
A representative office is not an independent PRC legal entity, but rather a liaison office with a limited range of authorised activities. The parent enterprise will be legally responsible for the activities of its representative office.
 
3.2 Activities Scope
By law, the representative office's activities are quite restricted and must be specifically approved during the application process. A representative office may only engage in activities within its registered business scope. (Please see discussion below for approval and registration procedures.)
 
3.3 Permitted Activities
PRC law provides that representative offices are prohibited from engaging in direct business activities. The following types of activities within the business scope of the parent enterprise are permissible:
(a) conducting business liaison for the parent enterprise;
(b) introduction of products;
(c) market research; and
(d) technological exchanges in China.
In our experience, a representative office also coordinates visits and exchanges of personnel, and conducts negotiations on behalf of its affiliate companies/parent enterprise in the PRC. However, as it is not an independent legal entity, a representative office does not have the legal standing to enter into contracts with other entities on behalf of its parent enterprise. Special restrictions apply with respect to representative offices of financial institutions and other restricted categories of business.
A representative office is also permitted to carry out activities related to its own office administration. Examples include engaging the services of Chinese personnel, renting permanent office space, displaying the name of the office outside its premises, using a company chop, importing personal and office goods, obtaining telephone lines, opening a bank account in the name of the office, obtaining resident visas and other permits for expatriate employees and referring to itself as having an "office" in China.
 
3.4 Complying with Limitations on Activities
The apparent intention of limiting representative offices to "non-direct business activities" is to ensure that representative offices act on behalf of the foreign-based companies they represent and not on their own behalf as separate business entities. Thus contracts signed by the representative office (other than those relating to its own administration, such as its office lease) should be signed in the name of its parent enterprise or one of its affiliates, not in the name of the representative office itself. Such contracts should also show an address outside of China for the relevant foreign party. Any sale and subsequent billing and collection of money for technical, consulting, inspection, or other services should similarly be carried out by the parent enterprise or one of its affiliates, not the representative office. Based on the regulations, representative offices should not perform the functions of a "service centre".
 
3.5 Consequences of Exceeding the Limitation on Activities
If an established representative office is found to be "directly engaging in business activities", the Registration Procedures provide for penalties including fines of up to RMB 20,000 and suspension of business activities. In practice, actual fines and sanctions are somewhat discretionary and determined on a case-by-case basis. It is possible that the representative office may be allowed to remedy the situation without sanction or that appropriate penalties will be determined on the basis of the amount invested in such activities and/or income generated through such business activities.
 
3.6 Basic Requirements to Establish a Representative Office
A foreign enterprise seeking to establish a representative office in the PRC must satisfy the following basic requirements:
(a) it must be legally registered in its home country;
(b) it must enjoy a sound commercial reputation;
(c) it must provide authentic and reliable documents as required by the relevant laws and regulations; and
(d) it must complete the application procedures as required by the relevant laws and regulations.
These are flexible principles which can be managed easily with careful preparation of the application documentation.
 
3.7 Eligible Foreign Enterprises
In Beijing, the applicant foreign enterprise must have been incorporated for more than one (1) year prior to the application. Where the applicant is a newly incorporated subsidiary of the parent, the application will be considered on a case-by-case basis and may be allowed if the parent of the applicant has a good track record. An application by a foreign enterprise in business deficit shall not be approved.
 
4. TWO-STEP APPLICATION PROCESS
 
4.1 Two-Step Process
There is a two-step application process to establish a foreign enterprise representative office in the PRC. The first step involves preparing and filing the application materials and completing the approval process. Once approval has been obtained, the second step involves undertaking registration procedures with the Chinese registration authority. Without such approval and registration, a foreign enterprise is not permitted to establish a representative office, or engage in the related activities, within the PRC, and the foreign enterprise may be fined and/or ordered to terminate its business activities.
 
4.2 Prohibitions Prior to Establishing a Representative Office
In addition, until a foreign party has successfully applied and registered its representative office, it will be prohibited from:
(a) putting up any signs or nameplates in front of any offices, including hotel rooms or private residences which may serve as offices;
(b) holding out to the public (whether through brochures or other forms of advertisement) that it has an "office" in the PRC;
(c) using a seal identifying its "office" in the PRC; and
(d) opening a bank account. If the SAIC determines that any foreign party has engaged in such activities reserved for representative offices without having yet established the entity, that foreign party may be ordered to pay a fine and/or terminate its business activities in the PRC. Although such fines and sanctions may be levied on a discretionary basis, it is advisable that prior to registration, the office generally not enter into any employment agreements for local staff or other office-related contracts in its own name.
 
4.3 Main Approval Authorities
The application should be submitted for approval to the government authority which administers the particular industry sector of which the foreign enterprise falls under. The Detailed Rules stipulate that the Ministry of Commerce (the successor of the former Ministry of Foreign Trade and Economic Cooperation) ("MOFCOM") or its local branch, either a Commission of Foreign Trade and Economic Cooperation ("COFTEC") or a Bureau of Commerce ("BOFCOM") is the approval authority for establishing representative offices of foreign enterprises which engage in trading, manufacturing, cargo transport, consulting, advertising, investing, leasing and other economic and trade activities. The applications by the following foreign enterprises, economic entities or organizations shall be filed with MOFCOM directly:
(1) Chamber of commerce of a foreign country;
(2) Official or quasi-official organization of a foreign country;
(3) Enterprises or economic entities from a country with which China has not established formal diplomatic relationship; and
(4) Enterprises or economic entities from Taiwan.
 
4.4 Other Approval Authorities
In addition, foreign parent enterprises, other than those designated by the Detailed Rules, shall apply to the following governmental agencies according to their business:
(a) a financial or insurance institution shall apply to the People's Bank of China;
(b) a maritime shipping agency shall apply to the Ministry of Communications of the PRC;
(c) an air transport enterprise shall apply to The General Administration of Civil Aviation of the PRC;
(d) a law office shall apply to the Ministry of Justice of the PRC;
(e) an accounting firm shall apply to the Ministry of Finance of the PRC; and
(f) any other enterprises shall, according to the nature of their business, apply to the competent commissions, ministries or bureaus of the Central Government of China.
 
5. STEP 1 - APPROVAL REQUIREMENTS
 
5.1 Filing Applications and Sponsors
The first step of the application process involves filing the application materials with the relevant Chinese approval authority to obtain a certificate of approval ("Approval Certificate") to register the representative office. The application must be made through a local Chinese sponsor, which is usually a foreign service unit accredited by MOFCOM to submit documents on behalf of the applicant for a fee ("Sponsor"). In order for the Sponsor to file the application materials and documents with the approval authority, the foreign enterprise shall issue a power of attorney addressed to the approval authority certifying the Sponsor's authority to file the application on its behalf.
The Sponsor submits the various documents to the relevant Chinese approval authority and carries out the application procedures on behalf of the foreign enterprise. The Sponsor does not play a significant role in the operation of the representative office.
For example, in Beijing, the Foreign Enterprise Services Corporation ("FESCO"), and in Shanghai, the Shanghai Foreign Investment Service Centre is a designated foreign-service unit which can submit the application, and handle the application formalities, for the foreign parent enterprise. Other sponsors may also be authorized to provide such services.
In Beijing, the basic handling fee for FESCO will be around US$800 for the application and registration of a representative office.
FESCO also offers a full service package including additional items such as the opening of bank accounts, tax registration, bar code registration etc. for around US$1,300.
A relevant factor to consider in determining whether to select the full package or basic package may be the foreign parent enterprise's ability and willingness to liaise with FESCO and to process the more mechanical aspects of preparation and submission of documentation. Such work is commonly handled by local staff on the ground.
These fees are subject to change. Other service entities in other jurisdictions may charge different rates.
 
5.2 Documents for Submission
The following documents are required to be submitted in connection with the application for the establishment of a foreign party's representative office:
(a) an application letter signed by the chairman of the board of directors, or the general manager, of that foreign party, and the completed prescribed application forms;
(b) the constitutional documents of that foreign party and supportive documents sanctioning the legal incorporation and operation (e.g. incorporation certificate, annual report, and tax statements) of that foreign party issued, as appropriate, by the authorities of the relevant jurisdiction where that foreign party was established (notarised copies);
(c) a credit reference letter from a bank with which the foreign party has regular business contact, advising on the credit-worthiness of that foreign party;
(d) letters of appointment of the chief representative (i.e. the person held in charge of a representative office at law) and other representatives signed by the chairman of the board of directors, or general manager, of that foreign party together with their respective CV's and identification papers. If the chief representative is the chairman of the board of that foreign party, the letter of appointment must be signed by at least two (2) directors of that foreign party. If the chief representative is a PRC national a special approval letter by the designated foreign service unit (FESCO etc.) in favour of such chief representative has to be submitted with the application (which will often require the foreign Sponsor to enter into a service agreement with FESCO etc. as described in section 8 below); and
(e) a lease contract showing the address of the representative office and the relevant title documents. In this regard, it should be noted that:
(i) as there are some restrictions on where foreign companies may be located, it is important to confirm that the building under consideration is legally permitted to lease space to foreign companies; and
(ii) because the representative office is still in the process of being established, there is often a "chicken and egg" question about having the not yet established representative office signing the lease. In such cases, it may be possible to either (a) sign a letter of intent for presentation along with the application materials; or (b) have the representative office go ahead and sign the lease, which is subject to ratification upon formal establishment of the representative office.
Please note that the relevant local Chinese approval authority may require additional documents. However, in our experience, the above documents are the usual documents requested.
Drafting notes for the foregoing documents are set out in section 5.3 below. It should also be noted that where any of the above documents is not in Chinese, a Chinese translation of that document is necessary.
Further, the application documents will be subject to notarisation by a notary public in the home country of the foreign enterprise, and legalisation or authentication by the Chinese Embassy or Chinese Consulate-General in the home country of the foreign parent enterprise. The documents required to be notarised, and the notarisation requirements, will vary depending on the particular Chinese approval authority. That is, the requirements of the Beijing approval authority for a representative office to be set up in Beijing may differ from the requirements of say, the Shenzhen approval authority for a representative office to be set up in Shenzhen. In addition, the notarisation and authentication steps may also differ between different states in the home country of the foreign enterprise, and the place of incorporation of the foreign enterprise will be a relevant factor. Accordingly, the notarisation and authentication process may involve a number of steps.
 
5.3 Drafting Notes for Application Documents
Care should be taken when drafting the application documentation to ensure that approval can be obtained. The following sections highlight certain aspects relevant to the preparation of the foregoing application documents.
(a) Application Letter. The application cover letter, referred to in section 5.2(a) above, should list the documents that will be included with the application, and must set out the following essential information:
(i) a brief introduction to the foreign enterprise;
(ii) the purpose of establishing the representative office;
(iii) the name of the representative office to be set up (see below);
(iv) the name(s) of the responsible member(s) (i.e. the chief representative and other representatives, if any);
(v) the scope of business activities;
(vi) the duration of the representative office (see below); and
(vi) the location of the representative office.
A sample application letter is attached as Appendix 2.
The name of the representative office should be in the form of "country of origin + name of enterprise + name of city in the PRC + representative office".
An original standard form application form for the "Establishment (Extension) of Representative Office of Foreign Enterprises" should also be completed and submitted in Chinese. The maximum term for the duration of a representative office is three (3) years, calculated from the date the approval certificate is issued. Within sixty (60) days of expiry of the term, the foreign enterprise through its Sponsor may apply to the relevant approval authority for an extension of the term.
A summary of the corporate information and business activities illustrating the strength of the foreign party will also be of assistance, particularly where the local Chinese approval authority is not familiar with the parent enterprise. If an annual report or firm brochures are available, this is often helpful. A projection of how the local municipality may benefit from the establishment of the foreign party's representative office may assist to expedite the process.
(b) Credit Reference Letter. There is no required format for the credit reference letter referred to in section 5.2(c) above. It may be a letter from a reputable bank with which the foreign party has its account or has business dealings, testifying to the credit-worthiness of that foreign party.
(c) Letter of Appointment. The letters of appointment, referred to in section 5.2(d) above, should include credentials and brief biographies, and should enclose identification documents, of the chief representative and any other representatives who will be staffing the representative office. A sample appointment letter for the chief representative is attached as Appendix 3 herein.
 
5.4 Chief Representative Qualifications
The chief representative of the representative office must meet one of the following qualifications:
(a) he/she is a foreign citizen holding a valid ordinary passport (excluding foreign students studying in the PRC);
(b) he/she is a Chinese citizen who has obtained permanent residence status in a foreign country;
(c) he/she is a compatriot from Hong Kong, Macau or Taiwan who holds valid documentation; or
(d) he/she is a Chinese citizen (not including Chinese citizens referred to in paragraph (b) above), in which case the representative office must entrust an authorised local service unit to undertake the relevant employment formalities (see section 8 below).
We are not aware of any current requirement for the duration of stay in China by the chief representative of a representative office of a foreign enterprise. It should be noted that the chief representative and representative(s) cannot concurrently hold such positions as the chairman of the board of directors, general manager or manager of other domestic foreign invested enterprises.
 
5.5 Approval Certificates
If the application materials are in good order, and taking into account certain somewhat intangible factors such as whether the parent enterprise is an internationally recognized firm and whether the Sponsor has clout and experience, the Approval Certificate can generally be obtained within about ten (10) business days in Beijing (timing for other cities may vary). The Approval Certificate will usually be issued to the applicant without charging any application fee, except under certain circumstances. Once the Sponsor is notified that the Approval Certificate is ready, it should be picked up personally by the designated chief representative of the representative office (and not the Sponsor).
 
6. STEP 2 - REGISTRATION REQUIREMENTS
 
6.1 Registration Certificates
Once the Approval Certificate has been obtained, the second step of the application process involves undertaking the registration procedures with the Chinese registration authority to obtain a registration certificate for the representative office (the "Registration Certificate"), and certificates for the representatives ("Identification Certificates"). Within thirty (30) days of the date of issuance of the Approval Certificate, the foreign party must register at the local branch of the SAIC to obtain a Registration Certificate. The Approval Certificate will be automatically invalid if there is a failure to register within the thirty (30) day time limit.
 
6.2 Required Documents
The following documents must be submitted to the local branch of the SAIC as part of the registration procedures to obtain the Registration Certificate:
(a) the completed standard registration forms prescribed by the local authorities;
(b) the Approval Certificate;
(c) a complete set of the application documents submitted for obtaining the Approval Certificate; and
(d) resume, Identification Certificate and two photos for each representative.
 
6.3 Registration Procedures
The representative office is deemed to be officially established on the date of registration. Registration of the representative office once approval to set it up is given is generally a procedural process. Under Chinese law, if the documents submitted by a foreign enterprise or an economic entity for registration conform to the stipulation of the relevant regulations, the registration authority shall give its permission to register and issue a certificate of registration and certificates for the representatives (working card) after the registration fee is properly paid. The registration fee payable is approximately RMB 600 in Beijing.
 
6.4 Time Required
In our experience, the entire application process should usually take not more than one (1) month in Beijing (time in other cities may vary), counting from the date of submission of all the required documents for the application. However, the collection of all the relevant documents and preparation of the full submission may take anywhere from a few weeks to a few months, depending on the client's particular circumstances.
 
7. POST-ESTABLISHMENT REGISTRATION / FILING MATTERS
A note setting out a check list of the post establishment matters for a representative office in Beijing is annexed as Appendix 4.
 
8. EMPLOYMENT OF CHINESE CITIZENS
 
8.1 Employment Procedures
If a representative office of a foreign enterprise wishes to employ Chinese citizens, it must do so through a local service unit authorised and designated for this purpose. Beijing representative offices are prohibited from hiring Chinese employees, whether directly or indirectly through other organizations, and must entrust above-mentioned units ( such as FESCO, China International Intellectual Corporation, China International Talent Development Center etc.) to do this. The main points of the employment practice of representative offices in Beijing are set out below.
 
8.2 Contracts with Employees
Typically, a representative office will sign a "contract for service" agreement with the local service unit. Under such service contract the local service unit agrees to provide, and the representative office agrees to pay for employee hiring services and for administering the employment relationship. The fees are usually calculated on the basis of US$100 (basic) to US$200 (additional package) per employee. Typical provisions in the service contract include the representative office's direct payment of salary to the employee and the local service unit's management of the employees contribution to certain funds.
 
8.3 Hiring Practice
In practice most representative offices will conduct their own hiring activities such as putting up ads, interviewing candidates etc. with the tacit approval of the local service unit. The local service unit can also recommend candidates from its pool of "employees", typically office staff registered with it. In effect, the local service unit can act as the headhunter as well as the employment service provider.
 
8.4 Employment Contract with Service Unit
Once the representative office has decided on a candidate, the local service unit will sign an employment contract with the employee (if one does not already exist, as in the case of an existing local service unit "employee") which will provide for the basic rights and obligations of the employee. The local service unit's employment contracts typically are very basic and often only list personal details of the candidate. The employee has to be in possession of the following:
(i) he or she has to have permanent residency in Beijing or a temporary residence permit issued by the responsible Beijing Public Security Bureau ("PSB")—the local service unit usually can help with obtaining this;
(ii) he or she has to have an employee certificate for employees or a representative certificate for the chief representative issued by the local branch of the SAIC—the local service unit usually can help with obtaining this as it is the local service unit's responsibility to register; and
(iii) he or she has to have other residency and employment papers that may be required from time to time.
 
8.5 Employment Contract with Representative Office
The representative office will usually sign, again with the tacit approval of the local service unit, a supplemental employment contract with the employee which may provide for detailed rights and obligations of the employee. It is commonly understood that the supplemental contract may not be in conflict with the primary service contract between the representative office and the local service unit. Supplemental provisions typically include details of compensation, holidays, work duties, office rules and regulations, confidentiality etc.
 
8.6 Service Unit Employee Administration Matters
After the establishment of the employment relationship, the local service unit will handle on a regular basis the employee's mandatory contributions to the unemployment insurance plan, to the medical insurance plan and to the retirement plan. The local service unit also administers the employees' personal file, and may handle such other administrative employment matters as may be entrusted by the representative office. In case of a dispute between the employee and the representative office, the service contract provides for labour dispute arbitration before the Beijing Labour Dispute Arbitration Commission, which is also required by Chinese labour laws.
 
9. INCOME TAXATION OF EMPLOYEES OF REPRESENTATIVE OFFICE
Please note, that the following overview on personal income tax issues of PRC Representative Offices should not be used as substitute advice for a full income tax review. You should consult with your international tax advisors and accountants on the detailed issues of PRC income tax.
 
9.1 Relevant Regulations
The PRC Individual Income Tax Law and related legislation ("IITL") provide for different tax treatment depending on whether an individual is a resident or a non-resident, and if a resident, the length of such residence. Note, that a resident of a country that has concluded a treaty for the avoidance of double taxation with China ("Tax Treaty"), such as the United Kingdom of Great Britain and the United States of America, are subject to different rules with respect to residence and source, from residents of countries which have not concluded such a Tax Treaty.
 
9.2 Residence in China
The term "residence" is a legal definition by which a taxpayer is judged to be a resident or non-resident for tax purpose and does not refer to the place where a taxpayer actually resides within a specific period of time. The term refers to individuals resident within the territory of China through residency registration, family or economic beneficiary relationships. The place of usual residence of an individual who resides outside of the territory of China for reasons of study, work, family visit or as a tourist, and who must return to the territory of China after the reason for being absent no longer applies, shall be China.
 
9.3 Taxable Income
(a) Taxable income includes wages, basic salary and other income. Under the IITL, wages and salaries derived by an individual during his or her actual working period within the territory of China, including residents and non-residents, will be regarded as income derived from sources within the territory of China regardless of whether the enterprise or individual employer which makes the payment is situated inside or outside the territory of China. Practically all Tax Treaties apply this principle.
(b) Note, that income sources outside of China are generally taxable for PRC permanent residents, although certain rules in respect to double jurisdictions and also other exceptions relating to the transfer nature of foreign sources (ie. compensation for foreign currency fluctuations etc.) may apply (see below). Income derived outside of China is also taxable for non-residents of the PRC under certain stipulated terms set out in the IITL.
 
9.4 Tax Payment
For foreign personnel who owe personal income tax, a filing with payment must be made with the local Municipal Tax Bureau no later than the seventh day of the month for income earned during the preceding month.
 
10. CONTINUING REQUIREMENTS FOR REPRESENTATIVE OFFICE
 
10.1 Registration Renewal
While the maximum term of a representative office is three (3) years from the date of issue of the certificate of approval (subject to any extension), the registration certificate is valid for one (1) year, and will have to be renewed annually. To renew its registration, a representative office must submit to the Chinese registration authority an application for renewal and an annual report of its business operations (in Chinese), within thirty (30) days prior to the expiry date. In our experience, extensions of the term of a representative office are fairly routine.
 
10.2 Tax Filings
Tax returns must be filed and payment of enterprise income tax and business tax, if any, must be made quarterly with the local Municipal Tax Bureau. Such returns should state the amount of income attributable to the representative office or the amount of office expenses depending on the method used to assess taxes. In many cases, representative offices have no actual or deemed income, in which case the quarterly filing is a mere formality.
 
10.3 Changes of Registered Details
If a representative office changes the name of its office, the names or number of its representatives, the scope of its business, its duration, or its address, it must, through its Sponsor, apply to the local COFTEC or BOFTEC (as the case may be) for approval of such changes by submitting (1) a letter of application for the amendment signed by the chairman of the board of directors or the president of the parent enterprise; (2) other relevant documents related to the change; and (3) the Amendment Application Form for Representative Offices.
After obtaining such approval, the representative office must then effect the changes in the registration by submitting to the local branch of the SAIC in duplicate (1) an amendment registration application form; (2) the document approving the amendment; and (3) other relevant documents required by the local branch of the SAIC depending on the type of change, and by paying change-of-registration fees. Failure to comply with these requirements may result in fines or other sanctions.
If a new representative is to be appointed, a power of attorney or authorization letter issued by the parent enterprise must be submitted in addition to other required documents together with the new representative's resume when applying for approval of the change. Any change in foreign personnel or in the local address of such personnel or in the location of the representative office requires that the representative office applies at the local Municipal PSB to effect the necessary changes to the residence permit.
 
10.4 Expatriate Personnel Matters
Foreign personnel of the representative office must, on an ongoing basis, pay income taxes and ensure that their working papers and other documents authorizing such personnel to work and remain in China are maintained in force. Ongoing obligations for foreign personnel include the following:
(a) Payment of Taxes. This is discussed in section 9 above.
(b) Renewal of Visas. For "Z" (residence) visas, renewals are generally required every six (6) months (currently one (1) year for U.S. citizens). Other types of visas may require renewals at shorter intervals or require that the holder leave China every thirty (30) days.
(c) Renewal of Residence Certificates. The personal residence permit for each representative must generally be renewed annually.
(d) Renewal of Work Permits. Individual work permits must generally be renewed annually thirty (30) days prior to the expiration of the permit. This may be carried out at the same time that the representative office registration certificate is renewed.
 
11. DE-REGISTRATION OF REPRESENTATIVE OFFICES
To cancel the registration of a representative office upon termination of business activities, the representative office must, through its Sponsor, submit an application for cancellation to the local COFTEC or BOFTEC (as the case may be) thirty (30) days prior to its termination of business. It must then return to the local branch of the SAIC its original registration certificate and submit documentation from the Foreign Tax Collection Office, the bank in Beijing where it maintains its account and the local Customs Bureau evidencing the final settlement of taxes, debts and other obligations under the cover of a registration cancellation form and an application letter for cancellation of registration. It should be noted that the parent enterprise of the representative office will be held responsible for any unsettled matters of its representative office.
 
12. PENALTIES
The failure by a representative office to follow the procedures (1) to effect changes in its registration when required or (2) to effect a cancellation of registration when appropriate may result in the imposition of a penalty.
 
APPENDIX 1
 
[ON [APPLICANT FOREIGN INVESTOR] LETTERHEAD]
 
___[month] 200_
 
[city] Municipality, [district] District Foreign Trade and Economic Co-operation Bureau People's Republic of China
 
Dear Sir / Madam
ESTABLISHMENT OF [PLACE OF ESTABLISHMENT] REPRESENTATIVE OFFICE As the duly authorized representative of [foreign investor], I have the honour of writing to you to apply for the establishment of a Representative Office in [place of establishment].
 
[foreign investor] was established in [year]. Since establishment, we have worked closely with our customers and partners to design and deliver products and services with high-level expertise. We sell our products and services to [industry] companies. [foreign investor] maintains the highest standards of quality in its products and services and our well-known trademark bears testimony to this.
 
[foreign investor] is interested in the Greater China region. The People's Republic of China has, within a short period of time, achieved record economic growth and is recognised as an important player in the development of Asia. It is anticipated that economic growth in the People's Republic of China will become the driving force behind the development of the economies of Asia. [foreign investor], which enjoys a substantial presence in our home country and the Asia-Pacific region, has responded to the rapid growth, vitality and vigour of the Chinese economy by seeking to participate in China's economic reforms. The establishment of a Representative Office is an important step in this direction.
 
[foreign investor]'s Representative Office to be known as "[Chinese name of Rep Office]” in Chinese, and “[English translation of Chinese name of Rep Office]" in English, if approved, will [scope of business of Rep Office].
 
The Representative Office will be staffed by [name of general manager] ([Chinese name of GM]) as the general manager, who has considerable expertise in our home markets and in the Asia-Pacific region. Subject to approval, the proposed duration of the initial term of the Representative Office shall be [three] ([3]) years. The proposed location of the Representative Office is [address of Rep Office].
 
The establishment of a Representative Office in [place of establishment] will assist [foreign investor] to acquire a better understanding of the People's Republic of China and to explore further and better ways to co-operate with our partners. [foreign investor] strongly believes that this can only strengthen the economic co-operation and technological exchanges between the People's Republic of China and the [investor's country of origin].
 
We would be most grateful to receive your positive consideration and approval of this application. Your early reply would be greatly appreciated.
 
Yours faithfully,
 
Signature: __________________
Name: [ ]
Title: [ ]
 
APPENDIX 2
[ON [APPLICANT FOREIGN INVESTOR'S BANK'S] LETTERHEAD]
 
[Date]
 
[name of city] Municipality, [name of district] District Foreign Trade and Economic Co-operation Bureau
People's Republic of China
 
Dear Sir / Madam
I am writing to you in relation to [foreign investor]. [foreign investor] has advised that it is in the process of applying for approval to establish a Representative Office in [name of city], the People's Republic of China. [foreign investor] has asked if I could provide this letter to accompany its application and I am pleased to do so.
 
[foreign investor] has maintained operating accounts with [name of Bank] since [insert date]. Over the past six (6) months, [foreign investor] has maintained average balances of not less than an equivalent of US$[amount] in such accounts. [foreign investor] also has a significant cash management and investment management relationship with [name of Bank].
 
I have been [foreign investor]'s relationship manager since [insert date]. [I have visited the company's headquarter facilities in [location] and have personally met with [names of [foreign investor]'s relevant senior management e.g. CEO, CFO, financial controller], and other members of management.] I can verify the signatures of [name of [foreign investor]'s relevant signatories], who are signatories of [foreign investor]'s operating accounts with [name of Bank].
 
[foreign investor] is dealing with [scope of business]. [foreign investor] reported revenues of US$[*] for the year ended [*], and US$[*] in the prior year. Operating income (earnings before interest and taxes) for these periods were US$[*] and US$[*], respectively.
 
Yours faithfully
 
[Name]
[Title]
[name of Bank]
 
APPENDIX 3
 
[ON [APPLICANT FOREIGN INVESTOR] LETTERHEAD]
 
[Date]
 
[Location] Foreign Trade and Economic Co-operation Bureau
[Address]
People's Republic of China
 
Dear Sir / Madam
[Foreign investor] ("Company") hereby authorises and appoints [name of chief representative] to serve as the chief representative of its representative office in [location], the People's Republic of China, and to manage the affairs of the representative office for and on behalf of the Company.
The appointed chief representative's brief biography and copies of identification documents are enclosed for your reference.
 
Yours faithfully
 
[Name]
[Title]
[Foreign Investor]
 
Encl.
 
[ON [APPLICANT FOREIGN INVESTOR] LETTERHEAD]
 
[Date]
 
CHIEF REPRESENTATIVE IN THE PEOPLE'S REPUBLIC OF CHINA
 
[Foreign investor]'s chief representative in the People's Republic of China is [Mr. / Ms.] [full name of chief representative].
 
Since [insert date], [Mr. / Ms.] [surname of chief representative] has been [foreign investor]'s [insert title].
 
From [insert date] to [insert date], [he / she] was the [insert title] for [insert previous company's name]. From [insert date] to [insert date], [he / she] was the [insert title] for [insert previous company's name]. From [insert date] to [insert date], [he / she] was the [insert title] for [insert previous company's name].
 
[Mr. / Ms.] [surname of chief representative] has a [insert degree] from [name of University]. [Mr. / Ms.] [surname of chief representative] is a citizen of [insert country] and was born on [insert birth date].
 
Passport number: [insert details]
Place of issue: [insert details]
Term of validity: [insert details]
 
APPENDIX 4
 
BASIC CHECK-LIST OF POST-ESTABLISHMENT REGISTRATIONS AND FILINGS PROCEDURES IN RESPECT OF A RESIDENT REPRESENTATIVE OFFICE OF A FOREIGN ENTERPRISE
 
After a foreign enterprise's ("Company"'s) representative office ("RO") is approved and has received its Registration Certificate, PRC laws and regulations require the RO, and in certain cases, its personnel, to carry out certain administrative registrations and filings. The standard post-establishment procedures prescribed by the national authorities in Beijing are set out below.
 
1. LOCAL PUBLIC SECURITY BUREAU ("PSB") (公安局)
 
1.1 Filing and Registration Record (备案登记簿)
Within 10 days of the issuance of the Registration Certificate, the RO is required to file with the competent local PSB:
(a) the Approval Certificate; and
(b) the Registration Certificate
The PSB will issue a Filing and Registration Record (备案登记簿).
 
1.2 Office Chops
The RO is further required to apply for office chops with the competent local PSB, and has to provide the following documents:
(i) Application letter signed by legal representative;
(c) Filing and Registration Record; and
(d) 1 original and 1 photocopy of personal identification or passport ("ID") of individual(s) authorized (a simple introduction letter of the Company would suffice) to apply to make the chop.
The PSB will allow the RO to have the chops made at a designated unit.
 
2. LOCAL TECHNICAL SUPERVISION BUREAU ("TSB") (质量技术监督局)
The RO has to apply for the Enterprise Organization Code with the competent local TSB, and has to provide the following documents:
(i) Application form;
(ii) Registration Certificate, 1 original and 1 copy;
(iii) 1 copy of ID of the legal representative of the RO;
(iv) Approval Certificate; and
(v) Office Chop.
The competent local TSB will issue a Certificate of Enterprise Organization Code (组织机构代码证) (also referred to as "IC Card"), providing 1 original, 1 copy and 1 electronic copy.
 
3. LOCAL ADMINISTRATION OF FOREIGN EXCHANGE ("AFE") (地方外汇管理局)
The RO has to register with the competent local Administration of Foreign Exchange. The following documents have to be submitted for such registration:
(i) Registration Form;
(ii) Registration Certificate;
(iii) Approval Letter, Approval Certificate;
(iv) Certificate of Enterprise Organization Code; and
(v) Office Chop.
The AFE will issu, , e (i) a Foreign Exchange Account License (外汇帐户开户许可证) and (ii) a Foreign Exchange Registration Certificate (外汇登记证).
 
4. LOCAL BANK
The RO is required to open an RMB and a foreign exchange bank account. The following items are required:
(i) Registration Certificate;
(ii) Approval Certificate, Approval Letter;
(iii) Certificate of Enterprise Organization Code;
(iv) Foreign Exchange Account License;
(e) Foreign Exchange Registration Certificate;
(f) the Office chop, finance chop and the chief representative's chop;
(v) ID (1 original and 1 photocopy) of the legal representative;
(vi) Introduction letter of RO; and
(vii) ID (1 original and 1 copy) of each individual of the Company's finance staff that is authorized to open accounts.
The bank will issue account books for (i) a foreign exchange account and for (ii) a RMB account.
 
5. LOCAL TAX BUREAU (税务局)
The RO has to register within 30 days of the issuance of the Registration Certificate with the competent local Tax Bureau. It needs to submit the following documents:
(i) Registration Certificate;
(ii) Approval Certificate;
(iii) Evidence of Bank Account (account book);
(iv) Certificate of Enterprise Organization Code; and
(v) ID of the individual filing the application.
The competent local Tax Bureau will issue (i) a local Tax Registration Certificate (地税登记证) and (ii) a State Tax Registration Certificate (国税登记证).
 
6. LOCAL CUSTOMS BUREAU (海关)
The RO is required to register with the local Customs Bureau and has to provide the following:
(i) Registration Certificate.
(ii) Approval Certificate;
(iii) Certificate of Enterprise Organization Code; and
(iv) any other documents Local Customs Bureau may require.
The competent local Customs Bureau will issue a Customs Registration Certificate(海关登记证).
 
7. PROCEDURES IN REGARD TO FOREIGN EMPLOYEES
ROs that plan to employ foreign nationals are required to comply with the following procedures:
(a) Directly obtain the Work Permit (《中华人民共和国外国人就业许可证书》) from the local Labour and Social Security Bureau ("LSSB") on submission of the following documents:
(i) Curriculum Vitae of the prospective foreign employee;
(ii) Employment Proposal;
(iii) Report on the reason of employing a foreign person for the job;
(iv) The prospective employee's qualification for the job;
(v) Health status of the prospective employee;
(vi) Employer's business Approval Certificate;
(vii) 5 passport photos (2 inch sized); and
(viii) any other documents required by PRC laws and regulations.
(b) Apply for a Working Visa from the Chinese Embassy in the proposed foreign employee's home country.
(c) Within 15 days after the foreign employee arrives in China, he/she shall apply to obtain the Working Certificate from the local LSSB on submission of the following documents:
(i) Work Permit;
(ii) Employment contract;
(iii) Passport; and
(iv) 5 passport photos (2 inch sized);
(d) Within 30 days after the foreign employee arrives in China , he/she shall apply to the local PSB for a Foreigner Resident Permit (《外国人居留证》)on submission of the Working Certificate.
 
 
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