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Chief Representative

The chief representative of a Representative Office is the person who is responsible for the daily running of the 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 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.

ROs may retain either Chinese or foreign personnel to act as chief representatives. Pursuant to the foreign exchange control regulations, ROs may pay salaries to foreign employees in foreign exchange outside of China. However, ROs are not allowed to pay salaries to Chinese employees in foreign exchange.

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 ROs 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 ROs. 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 ROs 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.