Q:Can I apply for the remittance of preliminary expenses if the overseas enterprise has not yet been established but preliminary expenses need to be paid?
A:Yes. A domestic enterprise may apply to the local foreign exchange bureau for registration of preliminary expenses for overseas direct investment by domestic institutions. You may then handle the remittance procedures at a bank using the business registration certificate issued by the foreign exchange bureau.
Operational Tip:The use of preliminary expenses is subject to a time limit. If the domestic institution fails to obtain approval or filing from the competent department of overseas direct investment within 6 months from the date of remitting the preliminary expenses, it shall report the usage of the preliminary expenses to the local foreign exchange bureau and return the remaining funds. If there are objective reasons, the domestic institution may apply for an extension to the local foreign exchange bureau, for a maximum period not exceeding 12 months.
Q:If multiple domestic enterprises jointly invest in the establishment of an overseas enterprise, how should the foreign exchange registration for overseas investment be handled? Can it be handled by one enterprise on behalf of all?
A:When multiple domestic institutions jointly invest in establishing an overseas enterprise, one agreed-upon domestic institution may apply for foreign exchange registration for overseas direct investment with the foreign exchange bureau at its place of registration. After registration, each domestic institution shall separately collect the foreign exchange business registration certificate from the foreign exchange bureau at its respective place of registration, and use the certificate to handle the remittance of investment funds at a designated foreign exchange bank.
Q:Document Hui Fa [2012] No. 59 divides the forms of contribution by domestic institutions to overseas enterprises into equity contributions and debt contributions, which is different from previous documents. What is the reason for this? What is the difference between equity contributions and debt contributions?
A:The new policy aims to simplify foreign exchange management for overseas investment to meet the needs of certain domestic institutions whose difference between the total investment and registered capital of the overseas enterprise exists in the form of loans and requires remittance back to the country. Currently, when handling foreign exchange registration for overseas investment, the foreign exchange bureau will, based on the approval documents from the competent department of overseas investment, register the registered capital portion of the overseas enterprise as an equity contribution, and the difference between total investment and registered capital as a debt contribution. If the overseas enterprise has sufficient funds, it can remit the funds of the debt contribution portion back to the country in the form of debt, without the need to handle capital reduction procedures with the competent department of overseas investment.
Operational Tip:Funds remitted back to the country in the form of debt must have been registered as debt with the foreign exchange bureau and must have been remitted out in the form of debt; funds remitted back in the form of debt must be entered into an account after opening an asset realization account for the overseas investment project before they can be used according to regulations. Domestic institutions can directly go to a bank to handle the opening of an overseas investment project asset realization account and the entry procedures for debt funds.
Q:A private enterprise intends to invest in establishing a wholly-owned subsidiary in the United States. It now needs to remit capital; what procedures must be followed?
A:Before remitting funds for overseas investment, a domestic enterprise must obtain approval documents for overseas investment from the competent department of overseas investment, then carry out foreign exchange registration for overseas investment with the local foreign exchange bureau, and subsequently handle the fund remittance procedures at a bank. The specific procedures are as follows:
Step 1: The domestic institution handles the approval documents for overseas direct investment with the competent department responsible for overseas direct investment; Step 2: The domestic institution uses the approval documents from the competent department of overseas direct investment and other materials to handle foreign exchange registration for overseas direct investment with the foreign exchange bureau at the place of registration to obtain the foreign exchange registration certificate; Step 3: The domestic institution uses the foreign exchange registration certificate to handle the remittance of overseas direct investment funds at a designated foreign exchange bank.
Q:Are there any restrictions on foreign currency purchase for overseas direct investment by domestic enterprises? Can RMB be used for overseas investment? How is it handled?
A:The foreign exchange management policy for overseas direct investment does not contain any provisions restricting the purchase of foreign exchange. As long as domestic institutions obtain the approval documents from the competent department of overseas direct investment and have completed foreign exchange registration for overseas direct investment with the foreign exchange bureau, they can use the foreign exchange business registration certificate to handle the remittance of investment funds at a designated foreign exchange bank. Domestic institutions can directly use RMB for overseas direct investment. When domestic institutions use RMB for overseas direct investment, there is no difference in the foreign exchange registration process compared to contributions in other currencies.
Q:Is it mandatory to remit the funds for overseas direct investment in a single lump sum?
A:No. As long as the amount of overseas investment funds to be remitted does not exceed the quota established during the foreign exchange registration for overseas direct investment, domestic institutions may remit investment funds in batches or in one lump sum according to the actual needs of the overseas enterprise.
Q:How should a domestic enterprise handle the remittance procedures when establishing a branch office overseas?
A:When a domestic enterprise establishes an overseas branch, it can refer to the foreign exchange management principles for establishing overseas subsidiaries and handle foreign exchange registration with the foreign exchange bureau at its place of registration. After completing the overseas direct investment registration for the establishment of the overseas branch, the domestic enterprise can directly go to a bank to handle the fund remittance procedures using the foreign exchange business registration certificate. If the overseas branch requires additional funds later, an application for the change of foreign exchange registration for overseas direct investment by the domestic institution must be handled.
Operational Tip:Since the "Certificate of Overseas Enterprise" issued by the commercial department to domestic enterprises does not contain a corresponding capital amount, the domestic enterprise can use the amount specified in the application submitted to the commercial department as the amount for foreign exchange registration for overseas investment. When domestic institutions apply for a change in foreign exchange registration for overseas investment for the purpose of providing additional capital to an overseas branch, they can apply for the remittance quota based on actual needs.
Q:What issues should banks pay attention to when handling the remittance of overseas investment funds for enterprises?
A:When handling the remittance of overseas investment funds for domestic enterprises, banks must first verify whether the overseas enterprise invested in by the domestic enterprise has any remaining remit-able amount; secondly, confirm whether the remaining remit-able amount is under equity or debt; finally, when reporting transaction data, correctly fill in information such as the foreign exchange business registration number and the balance of payments transaction code. If the overseas investment funds remitted by the domestic enterprise include both equity contribution and debt contribution, the different transaction codes and amounts for equity and debt should be distinguished and filled out separately when reporting transaction data.
Q:What procedures must be handled at the foreign exchange registration stage when domestic institutions make overseas direct investments in the form of physical assets or other non-monetary forms?
A:When domestic institutions make overseas direct investments in non-monetary forms such as physical assets, intangible assets, or equity, in addition to handling foreign exchange registration for overseas direct investment, they must also go to the foreign exchange bureau at their place of registration to handle confirmation registration of the non-monetary contribution after completing the contribution. If the domestic institution does not handle the confirmation registration for the non-monetary contribution, it will be unable to handle capital reduction, equity transfer, liquidation, or other capital repatriation procedures.
Q:What procedures are required when funds from equity transfer or capital reduction are remitted back to the country because the domestic institution no longer holds equity in the overseas enterprise due to equity transfer, capital reduction, etc.?
A:First, the change of registration procedures must be handled at the foreign exchange bureau at the place of registration. If multiple domestic institutions jointly invest in establishing an overseas enterprise, an agreed-upon investment entity shall apply for the change of registration to the foreign exchange bureau at its place of registration, and other domestic institutions do not need to re-apply. After handling the change of registration at the foreign exchange bureau and obtaining the foreign exchange business registration certificate, one can directly go to a designated foreign exchange bank to handle the opening of an overseas asset realization account and the entry of remitted funds using the foreign exchange business registration certificate.
Q:Do I need to go to the foreign exchange bureau to handle procedures for the remittance of profits from an overseas enterprise?
A:No. Profits generated by overseas enterprises invested in by domestic institutions belong to current account income and can be handled directly at a bank. Domestic institutions can keep the profits remitted from overseas in their current account foreign exchange accounts, or they can directly apply to the bank for foreign exchange settlement.
Source: China Foreign Exchange
