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In order to further strengthen the assessment of capital of foreign-funded enterprises, to enhance the system of registration of foreign exchange, to guarantee the rational and orderly flow of foreign exchange and to promote the healthy development of utilization of foreign funds, the issues related to the assessment procedures involving capital contribution of the foreign parties and the registration of foreign exchange in the capital assessment of foreign-funded enterprises are hereby notified as follows: I. When conducting assessment of capital of foreign-funded enterprises, the certified public accountants shall, apart from implementing the assessing procedures as provided for in the Announcement on Independent Auditing Practice No.1 ¨C Capital Assessment and the Guidance on the Practice Criteria for Certified Public Accountants of China No.2 ¨C Capital Assessment (for trial implementation), adopt the following methods in assessment according to the circumstances: (1) Where the foreign party made the capital contribution in foreign currencies, the certified accountants shall examine the certificate of foreign exchange registration of the foreign-funded enterprise to confirm whether the foreign exchange has been paid to the capital account approved by the branch administration or department of foreign exchange administration of the State Administration of Foreign Exchange (hereinafter referred to the "administration of foreign exchange"), and shall verify by letter with the bank of deposit of that account. (2) In any of the following situations, the certified accountants shall examine the original copy of the "Ratification Letter of the State Administration of Foreign Exchange on Foreign Exchange Business under Capital Items" provided by the enterprise to confirm whether its acts accord with those ratified by the administration of foreign exchange: 1. The foreign investor reinvests with the net profits it has obtained from other foreign-funded enterprises it set up within China and the monetary funds it has obtained through liquidation, transfer of stock equity, early recouping of investment and decrease of capital, etc; 2. The foreign-funded enterprise increases its capital by capital accumulation funds, surplus accumulation funds, undistributed profits, registered debts and payable dividends; 3. The foreign investor decreases the capital contribution; 4. Other forms of capital contribution that need the ratification of the administration of foreign exchange provided by the State. (3) Where the foreign investor makes capital contribution in form of goods, the certified accountants shall get the customs declaration form of import goods to check whether the goods come from abroad. (4) Where the foreign party makes the capital contribution in the forms mentioned in items (1) to (3) of this Article, the certified accountants shall send an inquiry letter for verification of the capital contributed by the foreign party to the administration of foreign exchange of the place of registration of the enterprise, and shall enclose the copies of the documents such as the reply letter of the inquiry letter sent to the bank, the ratification letter of foreign exchange business under capital items and the customs declaration form of import goods according to the forms of capital contribution made by the foreign investor, thus to query and verify the authenticity and the compliance with regulations of the aforesaid documents. Where the funds that involve capital contributed by the foreign investor in foreign currencies but are transferred in those currencies within China, the certified accountants shall check whether the transfer of original currency has been ratified by the administration of foreign exchange. II. The designated foreign exchange banks shall cooperate with the certified accountants actively, verify the relevant data after receiving the inquiry letter, sign the opinions clearly, put on the special business seal with the legal effect of external certification, and reply to the inquiry letter within 5 workdays from receiving the inquiry letter. If the certified accountant directly goes to the designated foreign exchange bank for inquiry, the bank shall make the reply on that exact day. III. The administration of foreign exchange shall, after receiving the inquiry letter for verification of the capital contributed by the foreign party, examine the authenticity and the compliance with regulations of the documents enclosed according to the relevant provisions. If the authenticity and the compliance with regulations of the documents enclosed are confirmed, the administration of foreign exchange shall make the registration of foreign exchange invested by foreign party according to the requirements of Article 6 of this Notice, write off the customs declaration form of import goods on the net, and fill in the registration number of foreign exchange invested by foreign party in the reply letter. If there is any falsity or any violation of rules, the administration of foreign exchange shall not make the registration and shall explain the reasons in the reply letter. The administration of foreign exchange shall put on the special business seal under capital items on the reply letter to the inquiry letter, and shall make the reply letter within 5 workdays from the day of receiving the inquiry letter. IV. The certified accountant shall, after receiving the reply letter to the inquiry letter for verification of the capital contributed by the foreign party, take the reply letter on which the registration number of foreign exchange invested by foreign party is indicated as the basis for issuing the report on assessment of capital, and shall give the copy of that letter to the enterprise to keep for reference. If the administration of foreign exchange indicates in the reply letter that there exists any falsity or any violation of rules, the certified accountant shall not issue the report on assessment of capital. If the certified accountant fails to issue the report on assessment of capital due to any changes after the reception of the reply letter on which the registration number of foreign exchange invested by foreign party is indicated, he shall inform the administration of foreign exchange of the changes in written form, and the latter shall write off the registration number of foreign exchange invested by foreign party without delay. V. When handling foreign exchange business or accepting foreign exchange checks at the administration of foreign exchange or the designated foreign exchange bank, a foreign-funded enterprise shall submit the copies of the report on assessment of capital and the reply letter to the inquiry letter for verification of capital contributed by the foreign party according to the provisions. VI. The administration of foreign exchange shall establish a registration account of foreign exchange invested by foreign party, and shall record faithfully the name of the enterprise, the time of capital contribution, the registration number of foreign exchange invested by foreign party, the form of capital contribution made by the foreign party, the sum and date, etc. according to the inquiry letter for verification of the capital contributed by the foreign party, and shall keep the copy of the reply letter of the inquiry letter and the enclosed documents for reference. VII. The administration of foreign exchange shall examine the registration of foreign exchange invested by foreign party of the enterprise through the unified annual examination of foreign-funded enterprises. VIII. The departments of finance and administrations of foreign exchange at various levels shall, according to their respective powers, strengthen the administration of the accounting firms, the assessment of capital conducted by the certified accountants and the registration of foreign exchange of enterprises. Where any accounting firm or certified accountant, in violation of the practice criteria and relevant provisions, issues false report on capital assessment, or any enterprise obtains the registration by submitting false certifications or by other deceitful means, it shall be punished according to the provisions of the relevant laws and regulations of the State. IX. If the designated foreign exchange banks or administrations of foreign exchange fail to reply to the inquiry letter according to the requirements of this Notice, the certified accountants may report to the State Administration of Foreign Exchange or its branches or the associations of certified accountants. X. This Notice shall be come into force as of May 1, 2002. Attachments: 1. Inquiry letter to the bank (format for reference) (omitted) 2. Inquiry letter for verification of capital contributed by foreign party (format for reference) (omitted) 3. Ratification letter of the State Administration of Foreign Exchange on Foreign Exchange Business under Capital Items (omitted) |
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