Q&A on International Payments Declarations

By Wang Renyu

Q: If a domestic company makes renminbi payments to a foreign employee and the payments are made within China, is an international payments declaration required?

A: Such transactions are covered by the provisions of Article 4 of the Rules for the Implementation of International Payments Statistics Declaration through Banks(hereinafter referred to as the Rules). These payments are considered to be transactions between domestic residents and domestic non-residents. Domestic enterprises are therefore required to make a declaration of international payments for such transactions with domestic non-residents.

Q: But is a declaration required for all renminbi transactions?

A: According to the relevant provisions of Article 4 of the Rules, declarations are not required for "temporary"renminbi payments between domestic residents and domestic non-residents. Moreover, according to Article 8 of the Rules, declarations are not necessary for payments of less than US$5,000 to individuals. However, transactions between domestic non-residents and overseas individuals and enterprises do require a declaration.

Q: What criteria is used for determining whether an individual is a resident or a non-resident? For example,if an individual has a Japanese permanent residence permit is he or she considered to be a non-resident?

A: According to the provisions of Article 5 of the Rules, the determination of whether someone is a non-resident is based on whether or not that person has lived in China for at least one year. But in practice,it is dif fi cult to determine if an individual has lived in China for more than one year. Therefore,the determination is usually made according to the person’s identity card, permanent residence permit, or passport.

In theory, foreign permanent residence permits can prove that an individual has lived abroad for a long period of time. Thus, these persons can make international payments as non-residents. At the same time, these persons can be deemed as the residents based on their nationality (usually Chinese) written in their permanent residence permits.Either way is acceptable.

Q: Who is responsible for declaring transactions between domestic residents and domestic non-residents?

A: According to the provisions of Article 6 of the Rules, domestic residents are the ones who need to declare the international payments.

Q: Can international payments between domestic non-residents and overseas residents and nonresidents be declared through a bank?

A: According to the provisions of Article 6 of the Rules, such transactions can be declared through a bank without having to fi ll out a paper declaration vouchers.

Q: What is considered to be basic information? What is declaration information?

A: Basic information usually refers to a bank"s accounting information. Such information is usually generated automatically by the accounting system and imported into the macro system, mainly including the name of the receiver/payer(remittance), the organization code/personal ID number, the currency of collection/payment (remittance), the amount and the like.

Declaration information is all information in the declaration besides the basic information. It mainly includes pay/recipient"s resident country (region), the international payment transaction code, and trading postscripts or remarks

Q: Based on the provisions of the Rules stating that smaller transactions are exempt from the declaration requirement, is it correct to say that all individual foreignrelated payments amounting to no more than US$5,000 do not require an international payments declaration?

A: No, that is not the case. The individuals referred to here are individual residents. According to the provisions of Article 8 of the Rules, the exemption from declaration for international payments shall be interpreted as follows:international payments on transactions between resident individuals and domestic and foreign residents and nonresidents equal to or less than US$5,000 can be exempted from declaration. However, international payments on transactions between domestic non-resident individuals and foreign parties, regardless of the amount, should be declared as required.

Q: What identi fi cation is required to accompany the declaration of international payments? How long does the information need to be kept? Is an Application for Domestic Remittance considered to be a valid document for international payments?

A: There are only three types of valid documents for declarations of international payments -- the Declaration of Foreign-related Earnings, the Application for Overseas Remittances and the Noti fi cation of External Payment/Acceptance. According to Article 11 of the Rules,such paper certi fi cates and electronic versions are kept for at least 24 months. They can be destroyed after that period.

The Application for Domestic Remittance is a domestic transaction certi fi cate. It is not considered to be international payments data. Therefore, it is not a declaration certi fi cate for use on international payments.

Q: Can the declaration of international payments be processed only at a bank?

A: According to the provisions of Article 9 of the Rules, enterprises that declare foreign-related income may choose to submit paper declarations to banks or submit online declarations via the State Administration of Foreign Exchange (SAFE) Online System for International Payments (for Enterprises).

External payments by companies and all individual foreign-related payments can only be declared at a bank.

Q: What are the bank’s fi nancial institution code and fi nancial institution identi fi cation code? How does a newly established banking branch add the function of declaration of international payments to the online system?

A: The fi nancial institution code usually refers to the four-digit code assigned to the head of fi ce of designated foreign exchange banks by SAFE.This is a unique identi fi cation code of the organization engaged in fi nancial services.The fi nancial institution codes of all banking branches of the designated foreign exchange banks must be consistent with those of their head of fi ces. The fi nancial institution identi fi cation code is usually a 12-digit code composed of the SAFE code+ fi nancial institution code +sequence number (2 digits),which is the unique identi fi cation code assigned to the designated foreign exchange banks under the coding rules of the local foreign exchange bureaus.

If the banks want to add the function of declaration of international payments on the SAFE application service platform, they shall, in accordance with the provisions of Article 13 of the Rules,apply for a fi nancial institution identi fi cation code. After that,SAFE will approve this function on the online declaration system for international payments for the banks.

The author is from the Declaration of International Payments operations at SAFE’s Dalian Branch