On January 4, 2010, China’s State Administration for Industry and Commerce (“SAIC”) and the Ministry of Public Security jointly issued the Notice on Further Administration of Registration of Foreign Companies’ Resident Representative Offices (the “Notice”). The Notice provides that business operations of representative offices will face higher scrutiny, companies must comply with additional requirements to establish their representative offices or renew their registration certificates, and companies will be limited in the number of representatives that they can appoint – for more go http://www.omm.com/china-tightens-restrictions-on-foreign-representative-offices/

The lawyers over at O’Melveny & Myers have written about a new Notice indicating that the authorities intend to target representative offices (ROs). The reduction of the renewal period to 1 year is of particular interest.

A little over a week ago I started a series on my predictions on the major China tax developments in 2010. At the time of writing my initial, and at this stage only, post in that series I was not aware of the Notice referred to above (I have enough trouble keeping track of the notices issued by the SAT). However, in my post I commented ‘[o]ur indications are also that less and less ROs will be approved’. This comment was based on observations of the officials approach, and our discussions with them, to ROs over the past 12 months. We have been hearing concerns about the tax and general compliance of all ROs in China for a lengthy period of time. It is interesting to see the timing of this Notice and the fact it confirms what we have been hearing.