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With a view to improving China's environment for using foreign investment, perfecting the administration of the sale and payment of foreign exchange for non-trade purposes by multinational companies and promoting the sound development of the foreign economy, the State Administration of Foreign Exchange (SAFE) conducted experiments for the reform of the administration of the sale and payment of foreign exchange for non-trade purposes by multinational companies in the cities of Shanghai, Beijing and Shenzhen in 2003. On basis of summing up the experience from the said regions, we hereby notify you of the issues relevant to the national administration of the sale and payment of foreign exchange for non-trade purposes by multinational companies as follows: I. DEFINITION OF MULTINATIONAL COMPANIES For the purposes of this Circular, the term "multinational companies" means such an enterprises group that own coexistent affiliated companies at home and abroad, one of which in China performs the function of the administration of its investments in the globe or a region (including China), including Chinese-invested holding enterprises groups (i.e. Chinese-invested multinational companies) and foreign-invested holing enterprises groups (i.e. foreign-invested multinational companies). II. DEFINIATION OF AFFLIATED COMPANIES OF A MULTINATIONAL COMPANY For the purposes of this Circular, the affiliated companies of a multinational company includes the domestic affiliated companies at home and broad, of which the domestic affiliated company may be: (1) a branch established in China by a foreign-invested multinational company; (2) a foreign invested enterprise in which a multinational company has a controlling share or an equity participation (the ratio of equity participation shall not be less than 25 percent, infra the same); (3) a branch established in China and relegated to be managed by the overseas head office or affiliated company of a foreign-invested multinational company; (4) a foreign-invested enterprise in which the overseas head office or affiliated company of a foreign-invested multinational company has a controlling share or an equity participation and whose management is relegated to it; and (5) a branch established in China by a Chinese-invested multinational company or a company in which it has a controlling share or an equity participation. The overseas affiliated companies of multinational companies include: (1) The overseas head office of foreign-invested multinational companies; (2) the branches established outside China by the overseas head office of a foreign-invested multination company and companies in which it has a controlling share or an equity participation; and (3) the branches established outside China by a Chinese-invested multinational company and companies in which it has a controlling share or an equity participation. III. APPLICATION FOR SALE AND PAYMENT OF FOREIGN EXCHANGE FOR NON-TRADE PURPOSES If a multinational company and its affiliated company in China that complies with the conditions specified in this Circular needs to follow the procedures for the sale and payment of foreign exchange for non-trade purposes provided for in this Circular, it shall apply to the branch or foreign control department (hereinafter referred to "foreign exchange branch") of the State Administration of Foreign Exchange of the place where its affiliated company is located on the strength of the following materials: (1) The application bearing the signature of its legal representative; (2) The approval document for the establishment of the company issued by the department of commerce, the business license and the original of the foreign exchange registration certificate for the foreign-invested enterprise and their copies; (3) The name list of its overseas affiliated companies; and (4) Other materials required by the foreign exchange branch. If, upon examination by the foreign exchange branch of the place where its affiliated company is located, they are found to meet the conditions, the foreign exchange branch of the place where its affiliated company is located shall issue an approval document. IV. APPROVAL DOCUMENT ISSUED BY THE FOREIGN EXCHANGE BRANCH Any multinational company and its domestic affiliated company shall, when completing the procedures for the sale and payment of foreign exchange for non-trade purposes provided for in this Circular, file an application with a designated foreign exchange bank on the strength of the approval document issued by the foreign exchange branch and the relevant certification materials set out in this Circular and the designated foreign exchange bank shall, subject to the authentic verification, process the procedures for the sale and payment of foreign exchange for non-trade purposes. V. EXPENSES ADVANCED OR APPORTIONED BETWEEN A CHINESE-INVESTED MULTINATIONAL COMPANY AND ITS OVERSEAS AFFILIATED COMPANIES The expenses advanced or apportioned between a Chinese-invested multinational company and its overseas affiliated companies shall be paid abroad by the domestic head office of the Chinese-invested multinational company only, and any domestic affiliated company other than the domestic head office of the Chinese-invested company shall not pay the advanced or apportioned expenses to any of its overseas affiliated company. VI. SALARIES, BENEFITS AND ALLOWANCES OF THE EMPLOYEES ADVANCED BY AN OVERSEAS AFFILIATED COMPANY The salaries, benefits and allowances of the employees from foreign countries, Hongkong, Macao or Taiwan or the employees of the P.R.C with the right of permanent residence overseas advanced by an overseas affiliated company of a multinational company that should be paid by the multinational company or its domestic affiliated company may be debited directly to its foreign exchange account or paid after purchasing the foreign exchange from a designated foreign exchange bank on the strength of certification materials such as the notices of overseas payment, such identity certificates of foreign employees as their passports, employment certificates (including the employment certificates issued by the departments in charge of social security) or the specialists' certificates issued by the department in charge of foreign affairs and the employment contracts etc., the bills of RMB incomes and tax certificates. VII. OVERSEAS COMMERCIAL INSURANCE PREMIUMS OF FOREIGN EMPLOYEES ADVANCED BY AN OVERSEAS AFFILIATED COMPANY The overseas commercial insurance premiums of foreign employees advanced by an overseas affiliated company of a multinational company that should be paid by the multinational company or its domestic affiliated company may be debited directly to its foreign exchange account or paid after purchasing the foreign exchange from a designated foreign exchange bank on the strength of certification materials such as the notices of overseas payment, identity certificates of foreign employees such as their passports, employment certificates, overseas insurance policy (or the notices of payment that contain the names of foreign employees issued by an overseas insurance company) and tax certificates. The overseas social insurance premiums of foreign employees advanced by any overseas affiliated company of a multinational company that should be paid by the multinational company or its domestic affiliated company may be debited directly to its foreign exchange account or paid after purchasing the foreign exchange from a designated foreign exchange bank on the strength of certification materials such as the notices of overseas payment, such identity certificates the passports of foreign employees, employment certificates, and the overseas legal documents relating to social insurances. VIII. EXPENSES FOR OVERSEAS BUSINESS TRIPS AND OVERSEAS TRAINING FEES OF THE EMPLOYEES ADVANCED BY AN OVERSEAS AFFILIATED COMPANY Expenses such as the expenses for overseas business trips and overseas training fees of the employees of a multinational company or any of its domestic affiliated companies advanced by any of its overseas affiliated company that should be paid by the multinational company or that domestic affiliated company thereof may be debited directly to its foreign exchange account or after purchasing the foreign exchange from a designated foreign exchange bank on the strength of the notices of overseas payment, employment certificates, the relevant expenses documents and the materials proving its employees' going abroad for business trips or participating in training. IX. RESEARCH AND DEVELOPMENT EXPENSES, PROCUREMENT EXPENSES AND MARKETING EXPENSES PAID TO ANY OF OVERSEAS AFFILIATED COMPANIES Management expenses such as the research and development expenses, procurement expenses and marketing expenses apportioned by a multinational company or any of its domestic affiliated companies that should be paid by the multinational company or that domestic affiliated company thereof to any of its overseas affiliated companies may be debited directly to its foreign exchange account or after purchasing the foreign exchange from a designated foreign exchange bank on the strength of certification materials such as the apportioning agreements, the notices of overseas payment and tax certificates. X. OTHER EXPENSES TO BE PAID TO OVERSEAS AFFILITATED COMPANIES Other expenses, which should be apportioned by a multinational company or any of its domestic affiliated companies or are advanced by any of its overseas affiliated company, to be paid abroad by it or that domestic affiliated company thereof may be debited directly to its foreign exchange account or paid after purchasing the foreign exchange from a designated foreign exchange bank on the strength of materials such as the notices of overseas payment, the original documents of the relevant expenses and tax certificates. XI. Any multinational company or any of its domestic affiliated companies may download the relevant contracts or agreements and the notices of payment etc., fix its seals on the same and go through the procedures for the sale and payment of foreign exchange for non-trade purposes on the strength of the same. XII. If "identity certificates of foreign employees such as their passports" or " the employment certificates" mentioned in Articles 6 and 7 or "the employment certificates" mentioned in Article 8 hereof fail to be provided under special circumstances, the same may be replaced by the employees list issued and sealed by the multinational company or any of its domestic affiliated companies that applies for the purchase and payment of foreign exchange that contains elements such as the names, nationalities, salaries or benefits treatment of foreign employees. Furthermore, the multinational company or that domestic affiliated company thereof shall also guarantee the authenticity of the said list that it provides and the legality of foreign employees enumerated in the said list and state that it will bear the relevant legal liabilities. XIII. All foreign exchange branches shall submit the name list of the approved multinational companies and the domestic affiliated companies thereof to the SAFE in a timely way for the record. XIV. All multinational companies and their domestic affiliated companies that are found to be governed by this Circular upon examination and approval shall complete the procedures for the purchase and payment of foreign exchange for non-trade purposes shall be liable for the authenticity of its affiliation with any of its overseas affiliated companies. If the affiliation terminates or changes, it shall be reported in a timely way to the foreign exchange branch of the place where it is located, and the foreign exchange branch shall report it to the SAFE. XV. If a multinational company or any of its domestic affiliated companies violates any provision of this Circular and commits any act of falsifying an affiliation, making overdue reports or concealing the truth in reporting on the termination or change of an affiliation, the foreign exchange branch shall have the power to disqualify the company that is governed by this Circular from completing the procedure for the purchase and payment of foreign exchange for non-trade purposes, and impose corresponding penalties upon it with reference to the provisions relating to foreign exchange control. XVI. Single foreign invested enterprise (in which the capital contribution made by foreign investors shall be not less than 25 percent) that abides by the foreign exchange control provisions for the most recent years, commits no major acts in violation of foreign exchange control provisions, has a sound financial standing, has a comparatively large volume of the receipt and payment in its current account and exercises a major influence upon the locality may, subject to approval by the foreign exchange branch of the place where it is located, also go through the procedures for the sale and payment of foreign exchange for non-trade purposes with reference to the provisions of this Circular. All foreign exchange branches shall submit the names list of the said approved foreign invested enterprises to the State Administration of Foreign Exchange for recording. XVII. Matters such as expressly provided for in this Circular shall no longer be governed by the corresponding provisions of the Circular of the State Administration of Foreign Exchange Regarding the Sale and Payment of Foreign Exchange in Non-trade Account That Are not Expressly Provided for in the Existing Regulations. XVIII. The power to interpret this Circular shall remain with the SAFE. XIX. This Circular shall enter into force as of August 1st, 2004. The Circular of the State Administration of Foreign Exchange Regarding the Administration of the Sale and Payment of Foreign Exchange for Non-trade Purposes by Multinational Companies (for a Trial) (Huifa [2003] No.87) shall be repealed simultaneously. |
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