Measures tightened to control outward remittances from China
Overview
Recently, China’s State Administration of Foreign Exchange (SAFE) has tightened up measures to control outward overseas remittances with a view to curbing Chinese capital outflows.
The measures include:
- raising the limit for personal outward remittance and
- double checking the authenticity of each payment transaction.
Unfortunately, the shipping industry has inevitably been a victim. Particularly for those who intend to remit foreign currency (freight, hire, commission, demurrage) out of China. In that the measures are likely to prolong the process for company outward remittances.
In practice, many foreign shipping entities take advantage of their overseas offices to avert the problem, by handling all foreign exchange remittance. This is largely to avoid Chinese foreign exchange control, as well as other administrative difficulties. Under such circumstances, their Chinese offices purely act as an agent.
The increased measures may also trigger a tax withholding issue when remitting funds out of China. This depends on many factors and whether they are relevant to China, such as cargo, payer, loading port and so on. In theory, the payer is obliged to withhold such tax within China, according to the most common Chinese tax regulation. However, this practice varies from city to city and we recommend members carefully check with the local Chinese tax authority whether, and if so, which tax scheme may apply to that particular business.
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Posted:
07 February 2017
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