What are the legal ways or purposes for Chinese individuals' large amounts of funds to leave the country?

What are the legal ways or purposes for Chinese individuals' large amounts of funds to leave the country?

Monica zhan

The State Administration of Foreign Exchange (SAFE) released many foreign exchange violation cases in the form of official notice. From the non-natural person penalty case study, the main types of non-compliant businesses are remittances or exchange settlements with false documents; natural person violations mainly involve splitting of foreign exchange purchases and payments, and illegal transfer of assets through underground banks, etc.

There are already many consulting schemes that describe the ways for personal funds to leave the country. Chinese individuals are allowed to exchange $50,000 equivalent of foreign currency per year, which can be used for private travel, overseas study, official and business trips abroad, family visits, overseas medical treatment, non-investment insurance, consulting services, and trade-in goods, etc.

The advantage of the individual purchase of foreign exchange is that it is legal and safe, but the disadvantage is that the available amount is small and it is difficult to realize the demand for a large amount of foreign exchange. Many service proposals mention the "ant move" method of purchasing overseas properties (by purchasing foreign currency in amounts not exceeding $50,000 separately, By purchasing foreign currency in amounts not exceeding $50,000 separately, and remitting the purchased foreign currency from their respective bank accounts in China to the developer's offshore bank account or the purchaser's offshore account to deliver the house purchase funds), but this approach is essentially a splitting of foreign exchange settlements and sales by individuals.According to the State Administration of Foreign Exchange regulations, “some individuals use the annual foreign exchange quota of others for illegal cross-border movement of funds through splitting.For individuals involved in such violations,the State Administration of Foreign Exchangewill put them on the 'watch lists 'and cancel their facilitated foreign exchange purchase quota for the following two years,and will also transfer them to the foreign exchange inspection department for filing penalties in serious cases”.

The following acts are defined asa splitting of foreign exchange settlements and sales by individuals:

①  One individual/organization outside the territory of China remits foreign exchange to 5 or more different individuals on the same day/every other day/or on successive days, and these payees separately carry out the exchange settlement;

②  An individual withdraws foreign currency notes close to an equivalent of USD10,000 five or more times within 7 days from the same foreign exchange savings account;

③  The same individual transfers deposits from his/her foreign exchange savings account to five or more direct relatives, etc.

So are there any other ways to get your money out of the country?Let's talk about it in detail.

1.    Alimony

Some of the high-net-worth individuals have children who attend school overseas.When the children are still too young to live alone, they often need to be accompanied by a parentwhile the other parent remains in China for a career.In such cases, people who live abroad often need their relatives in China to pay for various expenses, like tuition fees, living expenses, accommodation fees, course training fees, etc.,which often exceed the $50,000 foreign exchange limit.Alimony is classified as “non-operating foreign exchange settlement for domestic individuals under current account”.

When processing this foreign exchange settlement at the bank, please remember to prepare:

①  Proof of immediate family relationship or notarized proof of support relationship；

②  Documents proving out-of-country expenses (non-investment spending certificates in previous years);

Note: Please consult your local bank for details.

2.    Property Transfer

Personal property transfers are divided into emigrant property transfers and inheritance property transfers.

Emigrant property transfers: emigrating from mainland China to a foreign country or settling in Hong Kong, Macao, or Taiwan (hereinafter referred to as "immigrants"); realizing the legal property they owned in China before obtaining immigrant status, and purchasing foreign exchange through designated banks and remitting it abroad.

Inheritance property transfers:foreign citizens or residents of Hong Kong, Macao Special Administrative Region or Taiwan realize the inheritance inherited in China in accordance with the law,and purchase foreign exchange through designated banks and remit it abroad.

Personal property transfers for foreign exchange purchases and payments are capital accounts, and it is necessary to apply to the foreign exchange administration in the place of the original household registration for approval and obtain the approved document before.In addition, if the subject of the application involves state public officials (including those in charge of state-owned enterprises) and their close relatives or the application amount exceeds the equivalent of RMB 1 million,the State Administration of Foreign Exchange will consult with the Ministry of Public Security, the Ministry of Foreign Affairs and other relevant departments as needed.

3.    Foreign Exchange Settlement of Personal Employee Compensation

Please remember to prepare your employment contract, proof of income, and tax completion certificate file in advance.

4.    Overseas Investment Income

It means domestic individuals apply for foreign exchange settlement for dividend income from overseas listed (non-listed) companies. According to the Circular on the Management of Offshore Investment and Financing and Round-Trip Investment by Domestic Residents through Special Purpose Vehicle: the profits and dividends earned by domestic residents from special purpose vehicles which are transferred back to China,should be handled in accordance with the current account foreign exchange management regulations.

Required files:

①  Business registration certificate registered by Circular 37;

②  Foreign Exchange Registration Form for Domestic Individuals Overseas Investment

③  Special purpose vehicledividend-related data.

5.    Summary

When a domestic individual’s non-business-based foreign exchange sales under the current account exceed the total annual quota, he/ she shall handle the business at the banks with the following supporting documents:

(1)For donations: a notarized agreement or donation contract. The donations shall comply with the relevant provisions of the State;

(2)For alimony: evidence of the relationship of the immediate family member or a notarized document for alimony payment, and proof of revenue of the overseas payer, such as bank statements or individual tax returns;

(3)For inheritance income: legal or notarized document of inheritance;

(4)For insurance payments: the insurance policy and proof of payment from the operating insurance institution. Purchases of insurance policies in foreign exchange shall meet the relevant provisions of the State;

(5)For patent and royalty income: proof of payment, agreement, or contract;

(6)For legal, accounting, consulting, and public relation services income: proof of payment, agreement, or contract;

(7)For employment compensation: contract of employment and evidence of income;

(8)For proceeds from overseas investment: foreign exchange registration certificate of overseas investment, resolution of profit distribution or dividend payments, or evidence of other income;

(9)For outbound personal travel shopping: valid identify certificate and personal travel shopping customs declaration;

(10)       For other: relevant evidence and payment vouchers.

Feel free to contact us

+86 13810760894