Investors are always concerned about the Return on Investment (ROI). Thus at an initial stage, it will conduct a consultation, paving the way for entry into the Mainland China market, the next step is budgeting, operational programs, costing of each program etc.
There is no capital requirement for foreign (region) enterprise to set up permanent representative office. The application procedure is simple and the operating cost is low. From early consultation to the establishment, operation and cancellation, etc. of a representative office, the costs covered the following items as expenditures:-
Firstly: The Pre-consultation for establishment - Cost Structure:
- (1) Advisory Service Fee: Fees for setting up their regional offices and professional service providers, while the complexity of issues raised while consultation determine the amount of advisory services fees.
- (2) Notarized certification fee: Foreign companies need to provide a notarized certification documents. List of documents need to be notarized is the same. It is the offshore company’s jurisdiction determines the notary certification program, simple or complicated, duration and fees etc.
- (3) Registration fee: It is charged by Mainland authorities.
- (4) Office rent and administration fee: Different cities or areas with the same consumption levels are various. It affects office rents. Meanwhile, there may be some governmental department which sets certain requirements or criteria for setting up a representative office; sometimes they may have requirements on building location etc.
Secondly: Cost Structure during Operation:
- (1) Office rent and administration fees: Different cities or areas with the same consumption levels are various. It affects office rents. Meanwhile, there may be some governmental department which sets certain requirements or criteria for setting up a representative office; sometimes they may have requirements on building location etc.
- (2) Staff salaries: Each district labor department has set the local minimum wage standards. Please ensure not to offend their bottom line ;
- (3) Social insurance, housing fund for employees: At present, authorities in Mainland China are much strictest in this management aspect. Again, different region has its minimum standard requirements. If there is no social insurance for employees, it will be ordered rectification and it has to bear the corresponding penalties.
- (4) Other administrative expenses: such as utilities, communications, office equipment, travel, entertainment fees.
- (5) Taxes: For each quarter, accompanying with its report and pay the sales tax, levy, additional taxes and income tax, the company needs to bear the tax fee, the sum of 11.7% of the quarterly expenditure ;
- (6) At the same time, the office has the responsibility to withheld personal income tax. Report monthly on the individual income by tax returns and withdrawing accordingly. Withdrawal personal income tax requires external agency company to declare and pay on its behalf of, or it can pay by a self-declaration or by a representative tax.
- (7) If it hires foreign employees, the foreign staff stay in China for more than 90 days, it will impose personal income tax.
Thirdly: De-registration Period - Cost
- (1) Consultancy services: If the case is handled by the company / office itself, this fee does not arise;
- (2) The special audit report for liquidation: 3 years liquidation special audit report must be issued by a PRC audit firm.
- (3) Others, such as transportation, communication expenses during the de-registration period.