Laws of the People's Republic of China

The State Administration of Foreign Exchanges

Circular of the State Administration of Foreign Exchanges on the Management of Collection and Sales of Non-trade Foreign Exchanges of Transnational Companies (Trial Implementation)

HuiFa [2003] No.87

July 30, 2003

Bureaus and departments of state administration of foreign exchanges of the provinces, autonomous regions and municipalities directly under the Central Government, branches of the Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo, as well as designated banks of foreign exchanges:

In order to perfect the management of the collection and sales of non-trade foreign exchanges, improve the operation environment of enterprises and promote the development of foreign-related economy, the SAFE has through broad survey and thorough investigation formulated the policies for the management of collection and payment of foreign exchanges for the transnational companies and their domestic affiliated companies relating to overseas payment of the non-trade expenses that have been paid by overseas headquarters or overseas affiliated companies in advance or duly distributed, and decided to try for adoption in Beijing, Shanghai and Shenzhen. The SAFE will timely summarize the experiences and clarify the relevant policies around the country. Here is to notify you of the following issues concerned:

I.

The transnational companies herein refer to the foreign-invested transnational companies that have established foreign-invested enterprises of investment in the territory of China with approval by the foreign economic and trade administration, and the Chinese-invested group companies eligible for foreign-related operations with approval by the relevant competent administration.

II.

The domestic affiliated companies of transnational companies herein include: branches set up by foreign-invested transnational companies and the foreign-invested enterprises with share participation and share holding by foreign-invested transnational companies; branches and foreign-invested enterprises with share participation and share holding set up by their overseas headquarters or overseas affiliated companies in China that are entrusted for their management; and branches and enterprises with share participation and share holding set up in China by Chinese-invested group companies, which are entitled to foreign-related operations.

III.

The overseas affiliated companies of transnational companies herein include: branches and the foreign-invested enterprises with share participation and share holding set up by the overseas headquarters of the foreign-invested transnational companies in nations and regions (including Hong Kong, Macao and Taiwan) other than China; branches and foreign-invested enterprises with share participation and share holding set up by in the nations and regions other than China by Chinese-invested group companies.

IV.

In case transnational companies and their domestic affiliated companies pay overseas the salaries, benefits and allowance for foreign and Hong Kong and Macao employees or employees of Chinese nationality but owing permanent overseas residential rights (hereinafter referred to as foreign employees) that have been paid by overseas headquarters or overseas affiliated companies, or remit overseas the salaries, benefits and allowance for foreign employees, the overseas payment notices, ID certification of foreign employees such as passports, and employment certification such as labor contracts, and tax certification and other evidential materials may be held for payment from the foreign exchange accounts or purchase of foreign exchanges with Renminbi at the designated banks of foreign exchanges.

V.

In case transnational companies and their domestic affiliated companies pay overseas the insurance premiums of social, medical and pension insurance for foreign employees that have been paid by overseas headquarters or overseas affiliated companies in advance, or remit such premiums directly, the overseas payment notices, ID certification of foreign employees such as passports, and employment certification such as labor contracts, and tax certification and other evidential materials may be held for payment from the foreign exchange accounts or purchase of foreign exchanges with Renminbi at the designated banks of foreign exchanges.

VI.

In case the transnational companies and their domestic affiliated companies pay overseas the overseas travel expenses and overseas training fees for foreign employees that have been paid by overseas headquarters or overseas affiliated companies in advance, or remit such premiums directly, the overseas payment notices, ID certification of foreign employees such as passports, and employment certification such as labor contracts, and tax certification and other evidential materials may be held for payment from the foreign exchange accounts or purchase of foreign exchanges with Renminbi at the designated banks of foreign exchanges.

VII.

In case the transnational companies and their domestic affiliated companies pay overseas the distributed overseas patent use fees, franchising fees, fees for technological introduction, the agreement on expense distribution, overseas payment notices, valid registration certification and taxation certification and the relevant materials verified and issued by the intellectual property administration or the foreign economic and trade administration may be held for payment from the foreign exchange accounts or purchase of foreign exchanges with Renminbi at the designated banks of foreign exchanges.

VIII.

In case the transnational companies and their domestic affiliated companies pay overseas the distributed overhead, the agreement on expense distribution, overseas payment notices and taxation certification and the relevant materials may be held for payment from the foreign exchange accounts or purchase of foreign exchanges with Renminbi at the designated banks of foreign exchanges.

IX.

In case the transnational companies and their domestic affiliated companies pay overseas other overseas expenses that have been distributed or paid by overseas headquarters or overseas affiliated companies in advance, the overseas payment notices, the original documents of the relevant expenses and other relevant evidential materials, as well as tax certification if required for payment of tax, may be held for payment from the foreign exchange accounts or purchase of foreign exchanges with Renminbi at the designated banks of foreign exchanges.

X.

Transnational companies and their affiliated companies may download the relevant contracts, agreements and payment notices via Internet, and cover with the corporate stamps, which may be used for handling with the formalities for purchase and payment of non-trade foreign exchanges.

XI.

Single foreign-invested enterprises or Chinese-invested enterprises that have observed the provisions on foreign exchange management for the recent three years without any material acts in violation of foreign exchange management, with good financial position, with big volume of foreign exchange payment under current accounts, and with important local influences may also handle with the sales and payment of non-trade foreign exchanges according to the provisions of the Circular with approval by the local competent foreign exchange administration.

XII.

Beijing Department of Foreign Exchanges, and Shanghai and Shenzhen bureaus shall distribute the list of the eligible transnational companies and local domestic affiliated companies, as well as the verified single foreign-invested enterprises or Chinese-invested enterprises to the designated banks of foreign exchanges under their jurisdiction.

XIII.

The Circular shall come into force as of the date of its promulgation.

Upon receipt of the Circular, Beijing Department of Foreign Exchanges, and Shanghai and Shenzhen bureaus are requested to distribute the Circular to the designated banks of foreign exchanges and the relevant units under their jurisdiction as soon as possible, and the designated banks of foreign exchanges shall upon receipt distribute the Circular to their subordinate branches in Beijing, Shanghai and Shenzhen. In case of any problems encountered during enforcement, please feedback in timely to the Management Department of Current Accounts under the SAFE.

Contact with: Ma Chao

Tel: 010-68402114

Fax: 010-68402272