A representative office is a business entity established by foreign companies in a foreign country to conduct non-commercial activities on behalf of the parent company. Representative offices serve as a liaison or extension of the parent company and are typically limited to market research, promotional activities, and liaison work.

Key features of representative offices include:

Non-Trading Activities: Representative offices are prohibited from engaging in profit-generating activities such as buying or selling goods, entering into contracts, or providing services for a fee. Instead, they focus on non-commercial activities such as market research, promoting the parent company’s products or services, and establishing contacts with potential customers or partners.

Limited Scope of Operations: Representative offices operate within strict limitations on their activities, as defined by the laws and regulations of the host country. They are typically restricted from conducting business transactions, hiring local employees, or entering into legally binding agreements on behalf of the parent company.

Legal Status: Representative offices are not considered separate legal entities from their parent companies. Instead, they are treated as extensions or branches of the parent company and do not have independent legal personality. As such, they may not enter into contracts or own property in their name.

Registration and Licensing: In many countries, representative offices need to register with the relevant government authorities and obtain a license or permit to operate legally. The registration process may involve providing documentation such as proof of the parent company’s existence, the purpose of the representative office, and the appointment of a local representative or agent.

Tax Considerations: Representative offices are often subject to taxation on any income derived from their activities, such as salaries paid to employees or rental income from office space. However, they may be eligible for tax exemptions or concessions depending on the laws and regulations of the host country.

Limited Duration: Representative offices are typically established for a specific period, often renewable, as determined by the parent company’s needs and objectives. They may be closed or converted into other forms of business entities, such as subsidiaries or branch offices, as the parent company’s business interests evolve.