One consistent topic of frustration for U.S. investors into China is the process required to repatriate cash back to the U.S. However, reforms issued by China’s State Administration of Foreign Exchange (SAFE) should help simplify the process. As of September 1, 2013, the new process for repatriation is in place, covering payments other than amounts for the cross-border trade of goods.
The previous complex repatriation procedures will be simplified by the following major changes:
- The requirement to obtain prior approval from SAFE will be removed, although a report of the remittance to SAFE is still required after the transaction.
- The new rule separates remittances by the transaction amount into two categories: small payments, which are a single remittance of $50,000 or less, and large payments, which are more than $50,000.
- Generally, single small payments will no longer require a submission of the transaction documents to a financial institution for review or verification, unless the transaction is suspicious and does not include the clear information of the fund source.
- For small remittances, the new rules also eliminate the requirement to obtain a tax payment certificate prior to making the payment. This should simplify the overall procedure and shorten the time spent on administrative issues.
- For remittance amounts over $50,000, the new rules will eliminate the process of pre-approval and the pre-registration by SAFE and tax authorities. Again, this should free the entities from time consuming requirements to obtain a tax payment certificate in order to facilitate the transactions.
The new rules do not apply to transactions related to trade in goods, but will still significantly increase the flexibility of foreign exchange related to service payments. The elimination of the document verification will help both financial institutions and businesses reduce administrative cost while also improving efficiency on service related transactions. The new rules may also allow an overseas parent company to provide intra-group support without incurring additional tax in China. Compared to the prior required procedure, this reformed process should be a welcome change with respect to moving cash out of China.