An RO is a way to give your corporate presence in China for minimal outlay. Such a structure is inexpensive to establish and are a good initial low-risk venture into China while finding your feet in this market. In particular, if you do not need to invoice locally for services or products, and you just need a local presence to manage services a goods being sold by your parent, or wish to co-ordinate sourcing activities or conduct marketing to "get a feel" for the domestic market, then you can establish an RO.
ROs can be used for purposes such as conducting market research, QC facilitation or monitoring purchasing activities, marketing and sales administration for sales conducted between China and your parent company, and administration for group activities elsewhere in the country.
Other key points to note on ROs include :- ROs must usually be located in Grade A buildings (with the highest costs, unfortunately)
- ROs must hire local staff via an organization known as FESCO or some other payroll agent, who will ensuring mandatory welfare payments such as pensions, unemployment fund and so on are maintained for local Chinese staff-such fees plus the agent’s fee amount to about an additional 50% on top of the salary received by the employee
- ROs must also register for tax and submit monthly reports and annual audits
- ROs are subject to both Business Tax and Foreign Enterprise Business Tax in China ,which usually amount to a liability of approx 10% of the total expenses of your RO
The application procedure for what is quite a modest structure can be quite bureaucratic,. The consolidated documentation is submitted to several bureau for registration-the local industrial and commercial bureau, the tax bureau, and so on. It should also include registration at the tax bureaue application process or other registrations such as with the PSB for expat staff residence permits, immigration for expat staff work permits and visas and the opening of the bank account. Th should take three to four weeks before your license is ready.