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Closing Down a Representative Office in China

Updated:2018-8-3 17:25:24    Source:www.tannet-group.comViews:557

Closing down a representative office in China is much easier compared to other legal entities. A Representative Office (RO) is the resident representative office of foreign enterprises in China to engage in indirect business activities in Mainland China on behalf of the international enterprises within the business scope allowed. It is a popular corporate establishment model for foreign investors who are newcomers to Chinese market. However, foreign investors might come to a point where they must close their ROs for various reasons. The following are the basics about the deregistration of an RO in China.

Common Reasons for Closing Down an RO in China
An investor needs to close its RO when:
(1) The RO is required to shut down in accordance with the law;
(2) The RO no longer engages in business activities upon the expiry of its period of residence;
(3) The foreign enterprise terminates its business (meaning the parent company is being closed);
(4) The foreign enterprise terminates its RO; or
(5) The RO is no longer suitable for facilitating foreign investor’s business in China, as ROs are unable to engage in profit-making commercial activities.

How to Close Down an RO?
To closing down a Representative office in China would be much more complicated than set up one. The following are the basic steps need to go through.
1. Complete outstanding business activities;
2. Send closing applications to local and national tax bureau;
3. De-register with Customs;
4. Close bank account;
5. Officially de-register with State Administration of Industry and Commerce (SAIC) as well as other authorities.

The total time required for deregistration is typically three to six months (depending on the region), but can take over a year in cases containing irregularities, particularly in the tax deregistration phase.

Investors should note that one cannot simply walk away from the RO without properly closing it in line with the legal procedures. As the RO will soon be in non-compliance with taxes and other regulations, fines and penalties will be imposed. If no rectification is made, the RO’s license may be revoked. At this point, the foreign company and the RO chief representative will be blacklisted and barred from setting up a new RO in China for the next five years.

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