Foreign companies looking at Mainland China often start by asking about a representative office, because it sounds like the light option: a small presence, no company to run. Sometimes it is the right first step. But a representative office can’t earn any revenue, and it pays tax even when it has no income. This guide compares it with a wholly foreign-owned enterprise (WFOE), from China’s own regulations checked in November 2026.
One thing to say up front: we set up WFOEs, not representative offices. We explain both here because the choice comes first.
Side by side
| Representative office | WFOE | |
|---|---|---|
| What it is | An office of the foreign company, with no legal personality of its own | A separate Chinese company, usually a limited liability company |
| What it may do | Market research, exhibitions and promotion; liaison on sales, services, purchasing and investment | Anything in its business scope that the negative list allows |
| Earning revenue | Not allowed: fines of RMB 50,000 to 500,000, and the certificate can be withdrawn in serious cases | Yes; it invoices customers with fapiao |
| Who can set one up | A foreign company that has existed for at least two years | A foreign company or individual |
| People | One chief representative and up to three representatives; check local rules on hiring other staff | Hires directly |
| Tax | Corporate income tax even with no income; often calculated from its expenses | 25% on profit, about 5% for qualifying small companies until the end of 2027 |
| Every year | Annual report 1 March to 30 June, with audited expense figures | Annual report 1 January to 30 June |
Sources: Regulations on representative offices (MOFCOM, 2024 text) · Foreign Investment Law · MOF/STA Announcement 2023 No. 12 · SAMR: enterprise annual reports
What a representative office can do
The State Council’s regulations define it as an office carrying out non-profit activities related to the foreign company’s business, with no status as a legal person, and say plainly that it may not engage in profit-making activities. What it can do is limited to two things:
- market research, exhibition and promotion of the foreign company’s products or services;
- liaison on the foreign company’s sales, services, purchasing in China and investment in China.
So it can meet customers, check suppliers and support the head office. It can’t sell. Customers in China are invoiced and paid by the foreign company, from abroad, which some Chinese customers won’t accept.
Registration is with the provincial market regulator, which decides within 15 days. The foreign company must show it has lawfully existed for at least two years. The office has one chief representative and can have one to three more representatives. Older State Council rules from 1980, still published by the market regulator, route the hiring of other staff through a local foreign-service agency; check how that works in your city.
Sources: Regulations on representative offices · 1980 Provisional Rules (SAMR)
The tax surprise
A representative office has no sales, but it isn’t tax-free. China’s tax measures for representative offices say each office files corporate income tax on the income attributable to it. Offices with proper books can file on actual figures. Otherwise tax is worked out on a deemed basis, with a profit rate of at least 15% applied to what the office spends:
Taxable income = expenses ÷ (1 − deemed profit rate) × deemed profit rate, taxed at 25%.
At the 15% minimum, our arithmetic puts that at about 4.4% of everything the office spends: on RMB 1,000,000 of rent, salaries and travel, about RMB 44,000 of corporate income tax, with no income at all. The measures also say local tax offices no longer accept applications for exemption.
Sources: Tax measures for representative offices (STA) · Enterprise Income Tax Law
When a WFOE is the better answer
A WFOE is a real company: it can sign with Chinese customers, issue fapiao, hire directly and hold its own bank accounts. Its costs are higher in admin, and its registered capital must be paid in within five years, but its tax is on actual profit, which can be low in the early years. Choose a WFOE if any of these apply:
- you want to sell to Chinese customers and be paid in renminbi;
- you need more than a handful of people, or want to employ them directly;
- your foreign company is less than two years old;
- you plan to stay long-term.
A representative office still makes sense if you only need someone on the ground to research a market or check suppliers, and all your contracts and invoices stay with the foreign company.
See how to set up a WFOE in China.
Moving from a representative office to a WFOE
We found no national procedure that converts one into the other. The usual route is to form the WFOE, move the people and activity across, and then close the office: the foreign company applies to deregister within 60 days of deciding to close it, with proof of tax deregistration and customs clearance, and the regulator decides within 10 days.
Sources: Regulations on representative offices (Arts. 32–34) · State Council Order 777
An example
Invented for illustration. Anna’s German company makes laboratory equipment and has been buying parts in Suzhou. She opens a representative office with one chief representative to check quality and visit suppliers. It works for two years, at a tax cost of about 4.4% of its spending. Then Chinese hospitals start asking for quotes and want fapiao from a Chinese company. The office can’t issue them. She forms a WFOE in Suzhou, moves the staff across and closes the office.
Ready for a WFOE?
We set up WFOEs, not representative offices. We check your scope against the negative list, structure the ownership, register the company and open its accounts.
China company (WFOE) formationFrequently asked questions
What is the difference between a representative office and a WFOE in China?
A representative office is an office of the foreign company, with no legal personality, limited to market research, promotion and liaison, and it can’t earn revenue. A WFOE is a separate Chinese company that can sell, invoice with fapiao and hire directly.
Can a representative office in China earn money?
No. The regulations say it may not engage in profit-making activities, with fines of RMB 50,000 to 500,000 and possible loss of its certificate in serious cases.
Does a representative office pay tax in China?
Yes. It files corporate income tax on the income attributable to it. Where it can’t file on actual figures, tax is worked out from its expenses at a deemed profit rate of at least 15%, which by our arithmetic is about 4.4% of what it spends.
Who can open a representative office in China?
A foreign company that has lawfully existed for at least two years. It appoints one chief representative and can appoint up to three more.
Can a representative office be converted into a WFOE?
We found no national conversion procedure. The usual route is to form the WFOE separately, move the activity across, and then deregister the office.
General information for internationally mobile founders, not tax, legal or immigration advice for your situation. Rules and fees change; confirm your position with a qualified adviser in each country involved before acting.