Circular on Issues Relevant to Foreign Exchange Control in Connection with Foreign-invested Partnerships

(Issued by the State Administration of Foreign Exchange on November 19 2012 and effective as of December 17 2012.)

Hui Fa [2012] No.58

Branches and offices of the State Administration of Foreign Exchange of the provinces, autonomous regions and municipalities directly under the central government, the Shenzhen, Dalian, Qingdao, Xiamen and Ningbo Branches of the State Administration of Foreign Exchange, and Chinese-invested designated foreign exchange banks:

With a view to promoting the facilitation of foreign direct investment and regulating and enhancing foreign exchange control in connection with foreign-invested partnerships, we, pursuant to laws and regulations such as the PRC Partnerships Law, the Measures for the Administration of the Establishment of Partnerships in China by Foreign Enterprises or Individuals and the PRC Regulations for the Control of Foreign Exchange, hereby notify you on issues relevant to foreign exchange control in connection with foreign-invested partnerships as follows:

1. For the purposes of this Circular, the term “foreign-invested partnership” means a partnership lawfully established in the PRC by two or more foreign enterprises or individuals (Foreign Partners) or a partnership lawfully established in the PRC by (a) Foreign Partner(s) and (a) PRC natural person(s), legal person(s) or other organisation(s).

2. The State Administration of Foreign Exchange and its (sub-)branches (SAFE) shall be responsible in accordance with the law for regulating the foreign exchange registration and foreign exchange receipts and payments of, and fund conversions, etc. by, foreign-invested partnerships.

3. A foreign-invested partnership shall carry out foreign exchange registration with the local SAFE on the strength of the materials set forth below within 30 days of collection of the business licence issued by the enterprise registrar:

(1) an Application for Foreign Exchange Registration by a Foreign-invested Partnership signed by all of the partners, the managing partner or the designated representative (see the Attachment);

(2) a business licence and organisation code certificate (originals for verification and photocopies to be retained);

(3) a corporate basic information sheet or online search printout (Information Sheet) including all of the foreign-invested partnership's registered particulars and bearing the search stamp of the registrar;

if the Information Sheet does not show information on the capital contributions of the partners, a written confirmation from all of the partners of the capital contributions subscribed for or actually paid in by each of the partners (if a capital contribution is made in cross-border renminbi, the amount of the renminbi capital contribution shall be indicated) shall additionally be submitted; and

(4) other materials as requested by SAFE.

The (sub-)branches of a foreign-invested partnership are not required to separately carry out foreign exchange registration.

4. If a Foreign Partner is newly admitted as a partner or is admitted as a partner by acquiring all or part of the property share of an existing partner in the partnership, causing the original partnership to become a foreign-invested partnership, foreign exchange registration shall be carried out with reference to the relevant provisions of Article 3 hereof.

5. In the event of a change in a foreign-invested partnership's particulars registered with the enterprise registrar, the foreign-invested partnership shall carry out the procedures for the amendment of foreign exchange registration with the local SAFE on the strength of the materials set forth below within 30 days of the date of carrying out the amendment of registration with the enterprise registrar:

(1) an Application for Foreign Exchange Registration by a Foreign-invested Partnership signed by all of the partners, the managing partner or the designated representative (see the Attachment);

(2) if a change in the business licence was involved, the amended business licence (original for verification and photocopy to be retained);

(3) if a change in the Information Sheet was involved, the revised Information Sheet;

if a partner increased or reduced its/his/her capital contribution to the foreign-invested partnership and the information on the change in its/his/her capital contribution is not shown on the Information Sheet, a written confirmation signed by all of the partners or the person designated in the partnership agreement concerning the capital contribution subscribed for or actually paid in by the partner in question shall additionally be submitted; and

(4) other materials as requested by SAFE.

6. Once a foreign-invested partnership has been dissolved and liquidated, the liquidator shall carry out the procedures for cancellation of foreign exchange registration with the local SAFE on the strength of the materials set forth below within 30 days of carrying out the procedures for cancelling the business registration of the enterprise:

(1) a written application signed by all of the partners, the managing partner or the designated representative and the proof of foreign exchange registration;

(2) the liquidation report signed by all of the partners; and

(3) other materials as requested by SAFE.

7. If a Foreign Partner subscribes for its/his/her capital contribution in foreign exchange, the foreign-invested partnership shall, after carrying out foreign exchange registration, open a foreign exchange account for the foreign-invested partnership with a designated foreign exchange bank (a Bank) on the strength of the proof of foreign exchange registration. Such account shall be administered with reference to the administration of the foreign exchange capital accounts of foreign-invested enterprises.

If a Foreign Partner genuinely needs to remit inward foreign exchange for its/his/her capital contribution before the foreign-invested partnership has carried out foreign exchange registration, it/he/she may apply to the SAFE for the opening of a preliminary expense account for a foreign investor.

8. When a Foreign Partner makes a capital contribution to a foreign-invested partnership, the foreign-invested partnership shall carry out with the local SAFE the procedures for registration of the confirmation of a capital contribution by a foreign party, and the materials required for registration shall be submitted with reference to the requirements in respect of requests for confirmation of verification of the capital contributions of foreign investors to foreign-invested enterprises.

If a foreign-invested partnership fails to fully carry out registration of the confirmation of the capital contribution of a foreign party, the funds injected by the Foreign Partner may not be transferred within the PRC or converted for use.

The proceeds received by a Foreign Partner from the foreign-invested partnership from liquidation, a capital reduction, transfer of its/his/her partner property share, distribution of profits, etc. may be used for the payment of foreign exchange to a foreign entity or a domestic re-investment only after the foreign-invested partnership has fully carried out registration of the confirmation of the capital contribution of the Foreign Partner.

9. When a foreign-invested partnership wishes to outwardly remit the profit inuring to a Foreign Partner to it/him/her, it shall carry out the procedures with the Bank on the strength of the materials set forth below:

(1) a written application signed by all of the partners, the managing partner or the designated representative;

(2) the profit distribution resolution adopted by all of the partners based on the method specified in the Partnership Law and the profit distribution method specified in the partnership agreement;

(3) the tax certificate for the profit received by the Foreign Partner; and

(4) other materials as requested by the Bank.

Before carrying out the outward remittance of the profit for the foreign-invested partnership, the Bank shall confirm that the foreign-invested partnership has carried out the pertinent procedures for registration of the confirmation of the capital contribution by the foreign party, and check and review the relevant profit details.

When carrying out the outward remittance of the profit for the foreign-invested partnership, the Bank shall additionally record the relevant information in SAFE's relevant business system.

10. If a Foreign Partner (including its/his/her legal successor) wishes to use the profit obtained from the foreign-invested partnership or the proceeds received when withdrawing from, or from the liquidation of, the partnership or the proceeds derived from the transfer of its/his/her partner property share to invest in the PRC (including a contribution to a capital increase or a re-investment), it/he/she shall carry out registration with SAFE of the place where the foreign-invested partnership is located on the strength of the materials set forth below:

(1) a written application signed by all of the partners, the managing partner or the designated representative;

(2) materials evidencing the source of the aforementioned funds and the pertinent tax certificate;

(3) the business licence and articles of association (or partnership agreement) of the project that will be the recipient of the re-investment;

(4) if the project that will be the recipient of the re-investment is a foreign-invested enterprise, the approval document, approval certificate and proof of foreign exchange registration of said enterprise shall additionally be provided; and

(5) other materials as requested by SAFE.

11. When a domestic partner of a foreign-invested partnership outwardly remits the consideration for acquisition of the property share of a Foreign Partner, the domestic partner shall, after carrying out the amendment of registration with SAFE of the place where the foreign-invested partnership is located, carry out the procedures for the purchase and payment of foreign exchange with the Bank of the place where the domestic partner is located on the strength of the pertinent tax certificate and foreign exchange registration information.

12. If a Foreign Partner is admitted as partner by acquiring the capital contribution of a domestic partner, the foreign-invested partnership shall carry out the procedures for the amendment of its foreign exchange registration with the local SAFE, the original domestic partner shall open a domestic designated asset realisation account directly with the Bank based on the foreign exchange registration information and use the same to accept the consideration paid by the Foreign Partner. The conversion of the foreign exchange funds in such account shall be handled in accordance with current relevant foreign exchange control provisions.

13. When foreign-invested partnership outwardly remits to a Foreign Partner its/his/her funds from its/his/her withdrawal from the partnership or the funds inuring to it/him/her from the liquidation of the partnership, it shall, after carrying out the corresponding procedures for the amendment or cancellation of foreign exchange registration with the local SAFE, carry out the procedures for the purchase and payment of foreign exchange with the Bank on the strength of the pertinent tax certificate and foreign exchange registration information.

14. When SAFE handles foreign exchange control matters for a foreign-invested partnership or its partners, it shall do so through SAFE's relevant business system.

When a Bank handles matters for a foreign-invested partnership such as the opening of an account for capital account items, the crediting of funds to such an account, the conversion and sale of foreign exchange, and account closure, it shall, on the day that it handled the matter, accurately carry out record filing or information reporting in a timely manner through SAFE's relevant business system.

For relevant foreign-related receipts and expenditures of Foreign Partners and foreign-invested partnerships, statistical reporting of the international balance of payments shall be carried out in accordance with relevant provisions for statistical reporting of the international balance of payments.

15. A foreign-invested partnership shall participate in foreign exchange annual inspections with reference to those for ordinary foreign-invested enterprises.

For foreign exchange control matters of foreign-invested partnerships not expressly provided for herein, matters shall be handled with reference to relevant foreign exchange control provisions for ordinary foreign-invested enterprises.

16. If a foreign-invested partnership or Bank fails to handle foreign exchange matters in accordance herewith, SAFE shall penalise it in accordance with relevant provisions such as the PRC Regulations for the Control of Foreign Exchange.

17. Matters shall be handled with reference to the provisions hereof when enterprises or individuals from the Hong Kong Special Administrative Region, Macao Special Administrative Region or Taiwan establish partnerships in mainland China.

18. Other foreign exchange control issues related to the establishment in the PRC by Foreign Partners of foreign-invested partnerships whose main business is investment shall be provided for separately.

This Circular shall be effective as of December 17 2012. After receipt of this Circular, branches and offices of the State Administration of Foreign Exchange shall forward it to central sub-branches and sub-branches of the State Administration of Foreign Exchange, urban commercial banks, rural commercial banks, foreign-funded banks and rural cooperative banks in their jurisdictions in a timely manner; all Chinese-invested banks shall forward it to their (sub-)branches in a timely manner.

Attachment
APPLICATION FOR FOREIGN EXCHANGE REGISTRATION BY A FOREIGN-INVESTED PARTNERSHIP