By Dezan Shira & Associates
Editor: Ari Chernoff
On November 28, 2016, China’s Ministry of Public Security published a guide for overseas non-government organizations (NGOs) seeking to establish a representative office (RO) in the country, clarifying the new regulations that apply to the sector. In 2016, the government passed two laws affecting China’s civil society sector. The Charity Law, passed this March, has been praised for its efforts to incentivize charitable giving by simplifying regulations and eliminating taxes on donations. However, the Overseas Non-Government Organization (NGO) Law, which will go into effect in January 2017, has been seen by many as a crackdown on the freedoms of foreign NGOs operating in China. The law subjects foreign NGOs to police supervision, and demands that they declare the sources of their funding.
For foreign NGOs currently operating in or looking to establish an RO in China, it is essential to understand the new procedures and requirements outlined by the Ministry of Public Security for the application and notarization process, particularly in light of the intense government scrutiny given to the sector.
Criteria for establishing an RO
Under the Overseas Non-Governmental Organization (NGO) Law, a foreign NGO must meet the following criteria in order to establish an RO in China:
- It must be able to undertake civil liability independently, meaning that in the case of a lawsuit, it must be able to pay damages or other court-enforced payments.
- It must have been established for a minimum of two years before submitting an application to set up an RO in China, and it is required to function substantively.
- It is a legal entity in its home country.
- It must have clear objectives, and a business scope that can benefit community projects and development in China. Encouraged fields for foreign NGOs include sport, culture, health, technology, economy, education, and environmental protection.
Once a foreign NGO has concluded that it meets the criteria for establishing an RO in China, it can reach out and apply to the local civil affairs bureau, who will govern the establishment of the RO.
If the authorities conclude that the NGO meets all necessary criteria, the NGO will next need to submit its application documents and materials to the Overseas NGO Administration Office of the Public Security Department of the Provincial People’s Government (hereafter called the registration and administration authority) in the location where they propose to establish an RO.
Once a foreign NGO has submitted its application for establishing an RO in China, the registration and administration authority will review the application. If necessary, the authority may call in experts to assess the application in order to come to a final decision.
If the application is approved by the registration and administration authority, the foreign NGO will be issued a registration certificate that includes the name, address, scope of business, name of the chief representative, governing authority, and operating areas of the RO.
The NGO’s certified RO will then present its certificate to the tax authorities. Once the organization seal (chop) has been engraved, the RO will be able to open a bank account with a local Chinese bank. The RO must then give a file containing a photocopy of its seal, bank account number, and tax registration number to the registration and administration authority for record-keeping.
Materials required for submission
In order to establish an RO, the NGO must submit the following documents to the Ministry of Public Security:
- Application Form for Establishment of Representative Office of Overseas Non-Government Organization (Form 1)
- Form for Registration Matters of Representative Office of Overseas Non-Government Organization (Form 2)
- Registration Form for Chief Representative of Representative Office of Overseas Non-Government Organization (Form 3)
- Power of attorney for registration of establishment of representative office by the overseas non-government organization
- Proof documents and materials showing that the overseas non-government organization is lawfully established overseas
- Articles of association of the overseas non-government organization
- Proof materials showing that the overseas non-government organization has been established overseas for two years or more and has carried out activities substantively
- Identity document and curriculum vitae of the Chief Representative of the proposed representative office
- Statement of No Criminal Record of Chief Representative of Representative Office of Overseas Non-Government Organization (Form 4)
- Proof materials of the address of the proposed representative office
- Proof materials for source of funding
- Consent document of the governing authority.
Documents required to be notarized and authenticated
The RO must submit documents identifying the foreign, Hong Kong, Taiwan, or Macau resident who has been chosen to be the representative for the RO. Additionally, the NGO should submit its articles of association, provide proof that it has been established overseas for a minimum of two years, and that it functions substantively.
These documents must be notarized by a notary organization in the NGO’s home country and authorized by the relevant Chinese embassy or consulate. Although the process is generally the same, NGOs located in Hong Kong, Macau, and Taiwan face slight differences as to the notarization and authentication process for establishing an RO.
NGOs lawfully established in Hong Kong must submit the same documentation as foreign NGOs; however, they must be notarized by a notary public recognized by mainland China.
For Taiwanese residents, the identification documentation required for the Chief Representative is the Mainland Travel Permit for Taiwan residents. Taiwanese NGOs must be notarized by a notary public in Taiwan.
For residents of Macau, the documentation is the same as for foreign NGOs, but the documents can be notarized by either the notary department of the Macau Special Administration Region Government or another notary public recognized by mainland China.
Determining a name
Overseas NGOs have very little say in the naming of their RO in China. The final name is composed of a number of different components that identify the NGO, which include the following:
- The name of the overseas NGO;
- The overseas location (region or country) where it was originally registered;
- The name of the location in China; and
- The title ‘Representative Office’ (‘Liaison Office,’ etc.).
The location of the RO in China is considered to be the county-level administrative region where the RO is located.
With the likely implementation of the Overseas Non-Government Organization (NGO) Law this coming January, foreign NGOs will face increased police supervision and scrutiny by the Chinese government. Foreign NGOs looking to establish an RO in China would do well to understand the changes in the application process, and the new environment in which they will be operating.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
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