Comparing Investment Structures: Representative Office
on the way out?
Since new regulations on representative offices came into effect
in March 2011, cities such as Shanghai and Beijing have seen many
such offices being replaced by wholly-owned subsidiaries in
consultancy or trading. This trend is in part a direct result of
the tightening of the supervision on activities that employees of
the representative office may engage in. Rep. offices are only
permitted to engage in non-operational activities such as marketing
and liaison only, with the penalties on operating beyond this
approved business scope greater than ever.
An even more important consideration has been the increased
legal and practical disadvantages, administrative burden and fiscal
cost of continuing to operate a rep. office.
