An enterprise that does not have a registered business line or function relating to office leasing, premises rental, or real estate exploitation, but enters into a “business cooperation contract” with a partner merely to formalize rental income, is engaging in a practice that poses significant legal and tax risks. Where the substance of the transaction is that one party pays for the use of office space, the competent authorities may assess the transaction based on its actual nature rather than the title of the contract.

There are two key issues that should be carefully considered.

First, tax risks. Income derived from allowing another party to use office space, if not properly recognized in accordance with its true nature but instead recorded under categories such as “cooperation income,” “support income,” or other miscellaneous revenues, may result in incorrect revenue recognition. The enterprise may face tax reassessment, tax arrears, administrative penalties, and increased scrutiny of invoices and supporting documents. This is not merely a matter of classification, but of correctly reflecting the substance of the transaction.

Second, risks relating to business registration and scope of operation. Where an enterprise regularly conducts office leasing activities without having the appropriate registered business lines, it may be deemed to be operating beyond its licensed scope. This can lead to compliance issues during inspections or audits by tax and business registration authorities.

As a solution, the enterprise should consider supplementing its registered business lines if it intends to carry out office leasing activities on a regular basis. Alternatively, if the arrangement is not truly a lease, the cooperation model should be restructured to accurately reflect its genuine purpose, supported by proper documentation.

A fundamental principle remains: while the name of a contract may vary, the substance of the transaction cannot be altered to avoid legal obligations.