There are a lot of recent changes in foreign exchange and Renminbi (RMB), for examples, RMB has been one of the currencies in the reserve currency basket (Special Drawing Rights / SDR) of the International Monetary Fund from 1 October 2016 onwards, RMB devaluation starting from August 2015, reduction in foreign exchange reserve, trends of remitting funds to overseas. As management in China, in addition to the macro-economic moves, are you aware of those cross-border fund flow issues which affect your operations?
we will explain to you the cross-border fund movement issues by using cases and stories.
Latest foreign exchange control
• Explanation of the recent rules in controlling outbound remittances, including those controls on enterprises and individuals
• How does the code of practice of the banks in controlling payment of service fees to overseas affect enterprises?
Case 1 Recent controls on outbound remittances
What are the recent controls on outbound remittances? Which types of companies will be identified as "high risks"?
Case 2 Remittance to overseas
In 2015, State Administration of Taxation issued anti-avoidance notice Announcement No. 16 restricting tax deduction of various fees paid overseas related companies. Which types of expenses can be deductible in China? Which are not deductible? What are the tax implications? What are the differences between
"design fees" and "royalties"“
"management service fees" and "consultancy service fees
"onshore services" and "offshore services"
Case 3 Remittance of cost allocation and reimbursement to overseas
Overseas related company has paid salaries and other costs on behalf of China company. Can the amount be remitted out from China? What are the evidences required? What are the possible China tax implications?
Case 4 Collection of payment on behalf
China company has paid costs to China suppliers for and on behalf of overseas group companies. Can it collect the money from overseas? Under what circumstances the China company will be penalized by State Administration of Foreign Exchange?
Case 5 Disposal of equities
The Group has decided to sell the equity interest of the Sino-foreign joint venture (JV) to the Chinese partner. The JV owed the following items from the overseas shareholder:
• Foreign loan (registered)
• Trade debts
• Dividend payable
• Current account
What are the foreign exchange issues which overseas management needs to consider before disposal of the equities? What can be done to help getting more cash from the buyer? Which items will be difficult to collect?
Case 6 Cross-border cash pool
Group companies can set up cross-border foreign currency and RMB cash pool. How can this help moving funds into China or moving out for use between various group companies? What are the tax implications? What are the differences between the cross-border RMB cash pools of Free Trade Zone (FTZ) and non-FTZ?
Case 7 New investment project in China
Should it be a new WFOE? Should it be a subsidiary of the existing WFOE? What are the foreign exchange / fund movement implications? What are the tax implications? Should the Group set up a China Holding Company? How will such a holding structure affect listing in China?
The Amended Company Law of 2014 allowed no minimum capital requirement for normal companies. How should you decide the optimum amount of capital and time for capital contribution? What are the thin capitalization rules? Why the interpretation of thin capitalization rules of some Big 4 can be different from tax bureaus?
新公司该是新的外资企业？作为现有外资企业的子公司？有哪些外汇和资金流的考虑？ 有哪些税务考虑？ 集团应否成立外商投资性企业？这架构能否在中国境内上市？
Case 8 Possible short-term financing
A WFOE changed its business model which means short-term funds are required. What are the possible short-term funds which a WFOE can raise in addition to local borrowings from banks?
Case 9 Retirement from China
Mr Robinson is going to retire from China in 2016. He will sell the villa of Shanghai before returning to the US. He expects that he will have about RMB15 million. Can he remit the amount from China legitimately?
Case 10 Domestic companies borrowing from overseas
An internet group is using the VIE structure and planning to be listed in overseas stock exchange. There are funds in overseas but the group has difficulties in moving the money from overseas to China. Are you aware of the new rules which allow domestic companies to borrow from overseas?
Case 11 A foreign investment enterprise borrowing foreign loan with no difference between total investment and capital
How much foreign loan can an existing FIE with no difference between total investment and capital borrow? Can the foreign loan be used for re-lending to another related company in China?
Other cases –
We will have some other short stories and cases too. We also welcome your stories. Please provide us your stories before the seminar and we will talk about them during the seminar if appropriate.
Miss Bolivia Cheung , FCCA and FCPA
Bolivia has been providing China tax and business advisory services for 20 years. After retirement from partnership of KPMG in 2011, she studies a Master degree in Philosophy, shares her China tax knowledge by teaching and speaking in seminars, participates in charitable activities and some free-lance advisory. She has stayed in Guangzhou and Shanghai for over 8 years and this made her understand the practical problems of businesses operating in China.
She is a member of Steering Team of ACCA Southern China, ACCA China Professional Expert Forum, Working Party on Seminars of Accountancy Training Board of Hong Kong Vocational Training Council; and a part-time lecturer of University of Macau, HKU SPACE and Xiamen National Accounting Institute. She is also a board member of Sowers Action (a charitable organization in Hong Kong) from 2012 to 2016.
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