China for SMBs

, if a Rep Office is unable to maintain complete accounting books, or cannot accurately calculate its returns or costs, the Rep Office will be taxed according to the Deemed Profit Method, which is based on the Rep Office’s costs or revenue. The selection will depend upon which amount can be more accurately illustrated by the Rep Office. The tax authority will designate a deemed profit rate to the Rep Office and calculate the taxable income based on such deemed profit rate.

he minimum deemed profit rate under the Deemed Profit Method was increased from 10 to 15 percent

c) Liability for Rep Offices to pay Value-Added Tax (VAT)

b) Abolishment of Tax Exemption

a foreign company which seeks to set up a Rep Office must show that the foreign company has been set up at least for two years.

n the case of a renewal the applicant will need to prove that the foreign company still exists. Further a limitation has been introduced as to the term of new and renewed Rep Office licenses for one year at a time (compared to the usual three years).

a maximum of four representatives, including the chief representative, are generally allowed in a Rep Office.

(3) In-house lawyer

(4) Technician

Having a middle manager deal with a China project on a full-time basis and having his destiny interwoven with the China project (i.e. no China project = no job) may mean the deal will proceed regardless of whether it makes sense or not.

Having an export manager deal with a China project on a part-time basis will mean that the project may have a lower priority than it deserves

“A man who cannot say yes is useless, a man who cannot say no cannot be trusted”

Translators

 Accountants

Lawyers

If you require your China operations to directly buy and sell, have its own import/export license, and legitimately trade in China – you will need to change your current RO structure to that of a foreign invested commercial enterprise (FICE) or wholly foreign owned enterprise (WFOE)

2. ROs are now more expensive to operate than a FICE or WFOE

foreign invested commercial enterprises (FICE) These are typically used for the following business activities: • Import-export and distribution • Retailing: selling goods and related services to individuals from a fixed location, in addition to TV, telephone, mail order, internet and vending machines, • Wholesaling: selling goods and related services to companies and industry, trade or other organizations • Agencies, brokerages: representative transactions on the basis of provisions • Franchising Use of wholly foreign owned enterprises (WFOE) in the services industry • Consulting, other professional services • Quality control, after sales services, product design, technical support, sampling (although minimum amount permitted)

WFOEs may also be used for manufacturing.

the establishment of both a FICE and a WFOE are rather more complex than an RO

The structuring and application of the new FICE/WFOE can be combined at the same time as the RO closure.