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Representative Office & Taxation

March 26,2018.

Representative Office & Taxation

A Representative Office (RO) in China is an office established by a foreign company Doing Business in China to conduct marketing and other non-transactional operations, not for profit seeking activities . It is a good way for foreign investors since no paid up capital and the easy process, if you just want to increase your china supplier or customer relations quickly.

Function of Representative Office in China

Function of Representative Office in China

It can handle market research, quality control for parent company in China, liaison with customers and suppliers, keep good relationship with them;

It cannot enter into sales and purchase contracts from China supplier and customer, can not generate income or issue invoices;

A China RO can Open Bank Accounts in China for receiving operation fund from foreign company and employ staff for above- mentioned purposes;

Apply for China Work Permit and Work Residence Permit for foreign staff;

A RO can not conduct business but still subject to tax liability.

Taxation for Representative Office in China

Taxation for Representative Office in China

Individual Income Tax (IIT)

All the staff in China RO is subject to individual income tax. Individual Income Tax which rates from 5% to 45% based on salary income exceeding more than RMB3500 for local staff and RMB 4800 for overseas staff.

Value added Tax (VAT)

Value added tax which is based on monthly business total operational expense, the rough rate is 3% or 6% based on your expenses. It is calculated according to the formula like this: VAT= expenses/ (1-15%) ×3% (for small scale tax payer) or VAT= expenses/ (1-15%) ×6% (for general tax payer).

Enterprise Income Tax (EIT)

Enterprise income tax which is based on quarterly business total operational expenses, the rate is 25% as well as other type of business. It is calculated according to the formula: EIT = expenses/ (1-15%) ×20%(deem profit)×25%.

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