Notes from FDI Law Class – Rep Office Taxes

2009-10-27

A quick comment from yesterday's lecture on taxation. I must have had a hundred conversations with clients over the years about Representative Offices and taxation, and I always realized that the law as written and reality were not exactly in agreement.

I was reminded of this rather forcefully when I lectured on the topic. When teaching students about Representative Offices, the key concept to get across is that a Rep Office is not supposed to collect revenue, sign contracts, and do other things you could describe as conducting an active business onshore. It's more complicated than that, of course, but the basic idea is what I want my students to understand.

And then, only two classes later, I have to teach them about how Rep Offices are taxed.

Right. "Listen, kids. Remember that Rep Offices make no money. And also, by the way, they have to pay tax." Got that?

It's all a bit weird. I did get a question or two, but I think I'm going to have to let it all settle in and bring up the issue again during the end-of-the-course review session.

Tags: China Law, Representative Office