Guidelines on Foreign Exchange Control in Connection with Trade in Services

(Issued by the State Administration of Foreign Exchange on July 18 2013 and effective as of September 1 2013.)

Hui Fa [2013] No.30

Article 1: These Guidelines have been formulated pursuant to the PRC Foreign Exchange Control Regulations in order to improve foreign exchange control in connection with trade in services, promote the facilitation of trade and investment processes, and service foreign-related economic development.

Article 2: The state does not place restrictions on international payments in connection with trade in services.

Foreign exchange income derived from trade in services may, in accordance with the specified conditions, periods of time, etc., be repatriated or deposited abroad.

Article 3: Foreign exchange income derived from trade in services may be retained or converted; and for foreign exchange payments made in connection with trade in services, existing foreign exchange may be used to make payment or foreign exchange may be purchased with renminbi to make payment.

Article 4: Foreign exchange receipts and payments in connection with trade in services shall have genuine and lawful underlying transactions.

Organisations and individuals in China may not use fabricated transactions to fraudulently secure receipts and payments of funds or use means such as breaking up a large foreign exchange receipt or payment into smaller receipts or payments, etc. to circumvent exchange control.

Article 5: Organisations and individuals in China that engage in service trade activities shall do so in compliance with state provisions, and where the examination and approval, check and approval, registration, record filing, etc. of the relevant competent state department is required, the relevant procedures shall be duly carried out before the foreign exchange receipts or payments in connection with trade in services are carried out.

Article 6: When handling a foreign exchange receipt or payment in connection with trade in services, a financial institution that engages in foreign exchange business (a Financial Institution) shall, in accordance with state exchange control provisions, reasonably review the transaction documents for genuineness and consistency with the foreign exchange receipt or payment, and confirm that the transaction entities, amount, nature and other such elements provided on the transaction documents are consistent with the foreign exchange receipt or payment for which the application is made.

Article 7: A Financial Institution shall formulate internal management systems based on these Guidelines and related provisions, specify the relevant business operation rules, submit relevant foreign exchange receipt and payment information in a timely manner in accordance with state exchange control provisions and report indications of irregular and suspicious receipts and payments.

Article 8: When an organisation or individual in China carries out a foreign exchange receipt or payment in connection with trade in services, it/he/she shall submit in accordance with provisions transaction documents evidencing the genuineness and lawfulness of the transaction. If the submitted transaction documents fail to evidence the genuineness or lawfulness of the transaction or are inconsistent with the foreign exchange receipt or payment for which the application is made, the Financial Institution shall require it/him/her to provide additional transaction documents.

Article 9: Transaction documents relating to foreign exchange receipts and payments in connection with trade in services shall comply with the requirements of state laws and regulations and commonly accepted commercial practice, and mainly include:

(1) contracts (agreements) covering elements such as the subject matter of the transaction and the transaction entities;

(2) invoices (payment notices) or settlement slips (payment slips) specifying elements such as the subject matter of the transaction, the transaction entities and the amount; and

(3) other transaction documents evidencing the genuineness and lawfulness of the transaction.

Article 10: When handling a foreign exchange receipt or payment in connection with trade in services, a Financial Institution shall retain the reviewed transaction documents for future reference for the prescribed period of time; and the organisation or individual in China shall retain the relevant transaction documents for future reference for the prescribed period of time.

Article 11: The State Administration of Foreign Exchange and its (sub-)branches (SAFE) shall have the right to conduct monitoring inspections of the matters specified in Articles 2 to 10.

SAFE shall, by way of the foreign exchange monitoring system, monitor foreign exchange receipts and payments in connection with trade in services and conduct offsite checks and onsite checks/inspections of organisations and individuals in China, as well as relevant Financial Institutions, with irregularities in their foreign exchange receipts and payments so as to ascertain violations of foreign exchange laws.

Article 12: If foreign exchange control expressly provides otherwise in respect of the following foreign exchange receipts and payments in connection with trade in services, such provisions shall apply, and in the absence of such provisions, matters shall be handled in accordance with these Guidelines and their Implementing Rules:

(1) foreign exchange receipts and payments in connection with trade in services of individuals in China;

(2) foreign exchange receipts and payments in connection with trade in services of organisations in China located in zones under special customs supervision;

(3) a Financial Institution's own foreign exchange receipts and payments in connection with trade in services;

(4) foreign exchange receipts and payments in connection with trade in services arising from capital and financial account transactions; and

(5) foreign exchange receipts and payments in connection with trade in services expressly specified in foreign exchange control in connection with trade in goods.

Article 13: Foreign exchange control in connection with income and current transfers shall be handled in accordance herewith.

Article 14: Violations of these Guidelines shall be penalised by SAFE in accordance with the PRC Foreign Exchange Control Regulations and related provisions.

Article 15: The State Administration of Foreign Exchange shall formulate implementing rules based on these Guidelines.

Article 16: The State Administration of Foreign Exchange is in charge of interpreting these Guidelines.

Article 17: These Guidelines shall be effective as of September 1 2013. In the event of an inconsistency between these Guidelines and previous provisions, matters shall be handled in accordance with these Guidelines.