A Representative Office is often the first step and entry strategy of foreign companies into China. Representative Offices are preferred due to the relative ease of establishment and lower investment requirements. Representative Offices generally need only to be registered with the local authorities and do not require a registered capital.
However, as they are not separate legal entities, they are only allowed to engage in a limited range of activities such as a marketing or liaison office. Although Representative Offices are not allowed to enter into any contracts or engage in any commercial or profit-making activities, they are still taxable on a cost-plus basis.