On March 30, 2015, the Chinese State Administration of Foreign Exchange (SAFE) eased its restrictions on the currency controls system. This means an increase in the flexibility of Foreign Invested Enterprise (FIE) currency management in China, with an aim to allow companies to settle their foreign exchange capital and to hedge currency risks. Briefly, the reform includes the following updates:

  • Companies can execute their foreign currency registration with a qualified bank in the area where the business is incorporated. It is no longer required to register with the local SAFE bureau before injecting capital through a bank.
  • Starting June 1, 2015, SAFE will extend the relaxed restrictions of currency controls under Chinese capital accounts, which will allow FIEs to convert up to 100 percent of their registered capital from a foreign currency into Chinese Yuan Renminbi (RMB).
  • Under the new announcement, SAFE will also remove several administrative procedures to simplify the overall process of financial and investment activities in China. For example, it will cancel the annual inspection on FIEs’ foreign exchange transactions; however, FIEs will be required to submit an annual report of their foreign exchange transactions to SAFE by September 30 each year. This new policy encourages foreign investors to reconsider the currency held in their Chinese capital bank accounts, which can now be used to hedge fluctuations in the Chinese currency market. These significant changes will also expedite the timeline to complete a Chinese subsidiary incorporation and accelerate the process to inject or amend the registered capital or equity for FIEs. Additionally, these changes will also help smooth the process of repatriating an FIE’s dividend or reinvestment of earnings, domestically or overseas.

This is a good time for FIEs in China to evaluate their current cash position with their local financial consultant to understand how this new policy could affect their international cash flow management. Please contact Henry Xue at henry.xue@plantemoran.com or Lou Longo at 312.602.3676 or lou.longo@plantemoran.com for more information on the following:

  1. General understanding of registered capital, capital accounts, and capital injection requirements in China
  2. Foreign currency management strategies in China
  3. The filing and processes of foreign currency registration and reinvestment abroad through Chinese bank accounts
  4. The annual inspection of foreign currency used in inbound investments
  5. Guidelines and timeline to submit the annual report on inbound and outbound investments to SAFE after the policy changes


In November 2014, the Bureau of Economic Analysis (BEA) updated the filing requirements related to their Benchmark Survey, the BE-10 Survey.  It is now mandatory for U.S. companies that own a foreign affiliate (had direct or indirect ownership of at least 10 percent of the voting stock) to complete the survey.

This survey is done every five years from US companies with both large and small foreign affiliates.  The survey is mandatory and confidential and there are penalties for not reporting.  The penalties for failure to report range from $2,500 to $25,000.  Willful failure to report results in fines not more than $10,000 and, if such failure is by an individual (including an officer, director, employee, or agent of any corporation), the individual may be imprisoned for not more than one year.  The survey collects financial data as well as operational data, and produces statistics on US direct investment abroad.  These statistics are available in detail by country and by industry on the BEA website.

BE-10A is filed for the U.S. parent company and BE-10B, BE-10C, or BE-10D is filed for each foreign affiliate depending on whether the U.S. Reporter has majority (>50%) or minority (between 10% and 50%) ownership of the foreign affiliate and on the size of the affiliate.  The 2014 survey is due May 29, 2015 for a U.S. Reporter filing fewer than 50 forms of BE-10B, BE-10C, and BE-10D.  The survey is due June 30, 2015 for a U.S. Reporter filing more than 50 forms of BE-10B, BE-10C, and BE-10D.  A request for extension can be filed by completing the Request for Extension form no later than the original due date.

The forms can be e-filed at www.bea.gov/efile.  They can also be paper filed at the addresses found on the front of the survey forms.  If a U.S. person was notified by the BEA about the need to file the survey but did not have foreign affiliates during its 2014 fiscal year, the Claim for Not Filing form can be filled out by the due date of the form.

For additional information, visit www.bea.gov/dia.


Chinese Tax Authority — Policy Reminder on Accelerated Depreciation of Fixed Assets

February 4, 2015

The Chinese Tax Authority issued a new policy on accelerated depreciation of fixed assets to promote technology innovation and economic development in China (Circular 75).  This policy expands the scope of fixed assets that are eligible for accelerated depreciation methods for corporate income tax (CIT) deduction purposes.  This new policy allows manufacturing companies to accelerate […]

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New Joint Initiative – U.S. & Canada to Share Information on Individuals Crossing the Border

November 18, 2014

The United States and Canada recently announced an initiative to track individuals crossing the border for both work and for personal reasons. The initiative will track the number of days a resident of one country works or stays in the other country during a calendar year. The foreign individual will have their days in Canada […]

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China Tax Authority – Outbound Payments Under the Spotlight

November 13, 2014

The Chinese tax authorities have enhanced their efforts to monitor intra-group outbound service payments and royalty charges. In July 2014, the highest tax authority in China, the State Administration of Taxation (SAT), released the “Notice of Anti-Avoidance Examination on Significant Outbound Payments.” In this notice, the SAT instructs the local tax bureaus to launch comprehensive […]

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Straight Talk on Inversions

October 31, 2014

The corporate structuring transaction known as an “inversion” has been front and center recently regarding U.S. corporate tax policy. Corporate inversions typically involve the acquisition of a U.S. corporation by a foreign corporation, during which the U.S. corporation’s shareholders acquire a majority interest in the “acquiring” foreign corporation. The transaction benefits corporate groups that earn […]

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Straight Talk on Inversions

October 10, 2014

The corporate structuring transaction known as an “inversion” has been front and center recently regarding U.S. corporate tax policy. Corporate inversions typically involve the acquisition of a U.S. corporation by a foreign corporation, during which the U.S. corporation’s shareholders acquire a majority interest in the “acquiring” foreign corporation. Read more at plantemoran.com. If you have […]

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Additional Guidance Related to Preparation of the Report of Foreign Bank and Financial Accounts (Form 114)

September 5, 2014

The foreign bank and financial account reporting rules require anyone with signature authority over a reportable foreign bank account to complete and file Form 114. Many times, an entity that has a reportable foreign bank account will have an employee that has signature authority over the foreign account. Such employees are required to submit their […]

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Importance of Post‐Merger Integration

July 17, 2014

“Going global” is one of the key focuses for many companies nowadays. Accordingly, cross-border mergers and acquisitions (M&A) has been on the rise, and the trend is expected to continue. Considering post‐merger integration (PMI) plans during the M&A process is as important as considering purchase pricing and financial risks. PMI encompasses everything from financial reporting […]

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IRS Announces Revisions to Its Offshore Voluntary Disclosure Program

July 2, 2014

Oops! The IRS Did It Again! OVDP-2014 Announced The IRS does not seem to be able to leave well enough alone for more than a year or two at a time.  While the last change, in 2012, is only a couple of years old, the IRS announced new revisions that took effect on July 1, […]

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