China Representative Office Registration and Maintenance Guide (5) - Powers and responsibilities of th Chief Representative

Powers of Chief Representative

The chief representative of a Permanent Representative Office is the person who is responsible for the daily running of the Permanent Representative Office (RO). However, Chinese laws do not clearly specify the limitation of the authorities of a chief representative or a representative. In the absence of express statutory provisions, it is not clear whether or not documents signed by a chief representative or a representative have binding force upon the foreign enterprise. Therefore, foreign enterprises should clearly set forth the authorities of the chief representative and representatives of a Permanent Representative Office (RO) in order to avoid, to the greatest extent possible, situations in which the acts of a chief representative or a representative have binding force upon the parent foreign enterprise.

Qualification for Acting as Chief Representative

Permanent Representative Offices (RO) may retain either Chinese or foreign personnel to act as chief representatives. Specifically, the chief representative of the permanent 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.

Period of Stay in China

Chinese laws do not provide for the minimum time period that the chief representatives or representatives must stay in China except in the case of Permanent Representative Offices (RO) established by foreign financial institutions. However, no matter whether or not the chief representatives or representatives reside in China, the Chinese taxation authorities always require chief representatives and representatives to pay PRC individual income tax in respect of their incomes arising from working for the Representative Offices (RO). Therefore, no matter whether or not the chief representatives or representatives stay in China, foreign enterprises should distinguish their income arising from their work for the Permanent Representative Offices (RO) from other incomes.

In the event that the chief representatives or representatives cannot distinguish their income precisely, the PRC taxation authorities will determine the income of the chief representatives or representatives. In this case, the determined salaries will often be higher than the actual income of the chief representatives or representatives.

Change of Chief Representative

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 Public Security Bureau to effect the necessary changes to the residence permit.