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Representative office registration
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Representative office registration
Representative office registration
In order to cooperate with foreign enterprises to carry out business in China and adapt to the needs of the Chinese market, some foreign enterprises prefer to set up a resident representative office as a bridge of business liaison in China. This article will provide a detailed introduction of the application conditions, required information and tax obligations for the registration of foreign representative offices.
Legal status of the representative Office
A resident representative office of a foreign enterprise, also known as a "representative office", refers to an office established within the territory of China to engage in non-profit activities related to the business of the foreign enterprise in accordance with the Regulations on the Registration of Resident Representative Offices of Foreign Enterprises No. 584 of The State Council of 2011. A representative office does not have the status of a legal person.
Application conditions
The foreign representative office is not an independent legal entity, but the parent company's domestic business liaison organization. Therefore, to apply for the establishment of a foreign representative office, the following conditions must be met:
—— The investor has good credit standing and no bad record;
—— Have a fixed office space;
—— Appoint the Chief representative;
—— The foreign company has been established for more than 2 years.
Required information
—— Complete the registration form;
—— Appoint the Chief representative;
—— Provide the company's registered address;
—— Investor certification. The details include:
a. The registration certificate or identity document of the foreign investor notarized by the notary office of the country where it is located and certified by the embassy (consulate) of our country;
b. Investors from Hong Kong, Macao and Taiwan should provide registration certificates or identity certificates notarized by local notaries.
Handling process
The process of foreign representative office registration is relatively simple, as follows:
—— Consulting orders: to understand your specific needs, to provide you with professional consultation and advice;
—— Prepare application documents such as justice documents: guide you to complete the preparation and notarization of relevant documents;
—— Sign the application documents, submit to the Industrial and Commercial Bureau for approval, registration certificate, tax registration, engraving: assist you to complete the submission and approval procedures of relevant documents;
—— Receive the certificate: After completing all the approval procedures, you will receive the representative office registration Certificate as well as the official seal, representative seal and financial seal.
After completion, the documents you will receive mainly include: representative office registration certificate, official seal + representative seal + financial seal. These documents will provide legitimacy and convenience for your business contacts in China.
Tax obligations of foreign representative offices
According to Article 3 of the Interim Measures for the Tax Administration of Resident Representative Offices of Foreign Enterprises (hereinafter referred to as Article 18), the representative offices of foreign enterprises "shall declare and pay income tax on their attributable income according to law, and declare and pay business tax and value-added tax on their taxable income according to law." This also means that the representative office does not need to pay any tax burden because it is not engaged in profit-making behavior, but should pay, and then how to pay.
From the perspective of the tax authorities, although the representative office itself cannot engage in for-profit activities, the essence of its establishment is to assist the overseas parent company to expand territory and expand business tentacles. It seems to be a cost center, but in fact, the income is directly attributable to the overseas parent company, so the representative office must contribute to the profits of the parent company. Therefore, the proportion of the representative office in the income of the parent company should be divided according to the principle of its economic substance, so as to confirm the actual income and cost of the representative office, so as to determine its taxable income. Article 6 of the Interim Measures for the Tax Administration of Resident Representative Offices of Foreign Enterprises (No. 18) puts forward the first treatment of income tax payment of representative offices, that is, the principle of reporting according to the facts. Article 6: The representative office shall set up an account book in accordance with relevant laws, administrative regulations and the provisions of the competent financial and tax departments under The State Council, keep accounts on the basis of legal and valid vouchers, conduct accounting, and accurately calculate its taxable income and taxable income in accordance with the principle of matching the functions actually performed with the risks assumed. The enterprise income tax and business tax shall be declared and paid to the competent tax authorities within 15 days after the end of the quarter, and the VAT shall be declared and paid to the competent tax authorities according to the tax payment deadline stipulated in the Provisional Regulations of the People's Republic of China on Value-added Tax and the Rules for its implementation.
However, due to the tax jurisdiction, and complex factors such as cost sharing or income segmentation, the actual declaration of the tax method can only be ideal, and the practice is very difficult, so there is a second way of income tax payment, that is, authorized collection. According to Article 7 of the Interim Measures for the Tax Administration of Resident Representative Offices of Foreign Enterprises (Document No. 18) : For representative offices with unsound account books, unable to accurately calculate income or costs, and unable to declare according to the provisions of Article 6 of these Measures, tax authorities have the right to adopt the following two ways to determine their taxable income:
1, Conversion of income according to expenditure: applicable to representative institutions that can accurately reflect expenditure but cannot accurately reflect income or cost.
2, According to the total amount of taxable income: applicable to the representative office can accurately reflect the income but can not accurately reflect the cost of expenses. Calculation formula: enterprise income tax payable = total income × approved profit rate × enterprise income tax rate.
It can be seen that, in line with the first method of collection and payment based on the actual declaration, the premise of determining the taxable income according to the total income is that the representative office can accurately reflect the income, which in fact returns to the origin and difficulty of the first method of actual declaration. Under the premise that most representative offices cannot confirm the total income with the overseas parent company in terms of the proportion of contribution, According to the total amount of income to verify the taxable income of this way, while more enterprises are based on the conversion of income by funds, is also the most common tax authorities to adopt the method of verification and collection.
The amount of expenditure of representative offices includes: salaries, bonuses, allowances, welfare expenses, purchasing expenses of goods (including fixed assets such as cars and office equipment), communication expenses, travel expenses, rent, equipment rental, transportation expenses, social expenses, and other expenses paid to staff inside and outside China.
Article 8 of Article 18 stipulates that the approved profit rate of a representative office shall not be less than 15%. Once the expenditure is determined, the amount of income and taxable income of the representative office can be accurately calculated.