Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?
Yes, the concept of 'permanent establishment' applies.
For non-self use, a foreign invested enterprise (FIE) must be set up for the proposed investment project. The establishment of a FIE requires the reporting to the Ministry of Commerce or its local counterpart (MOFCOM) and the registration with the State Administration of Market Regulation or its local counterpart (SAMR). In addition, a FIE will need to be registered with tax authority to establish tax status and to be registered with State Administration of Foreign Exchange (SAFE) to enable settlement into RMB of foreign funds for the proposed investment. The whole process takes around one to two months to complete and there are no costs involved other than nominal government registration fees. The corporate governance for a FIE needs to follow the corporate governance as set out in the Foreign Investment Law and the Company Law.
For self-use, FIEs and representative offices are permitted to purchase property for their own use in the city where such FIEs or representative offices are located.