Q&A On Asset Sales and Transferring Funds Abroad

By Li Yuanshu

Q:

What restrictions apply on individuals transferring funds from property sales out of China?

A:

Basically, there are two types of fund transfers from property sales by individuals - “emigration transferring” and “inheritance transferring.” In the first category, an emigrant sells legally owned property in China, purchases foreign exchange, and then remits the funds outwards. In the latter category, an emigrant inherits property within mainland China, buys foreign exchange, and remits the exchange abroad.

Q:

Where should applicants start the process for transferring assets overseas?

A:

Prior to emigration the applicant needs to apply at a branch of the State Administration of Foreign Exchange (SAFE) where he or she has a registered residence prior to emigration.

Q:

Can an overseas applicant entrust another individual to complete the application? Is notarization of a principalagent agreement necessary?

A:

The application can be made through a representative. Notarization of such a principal-agent agreement is not mandatory.

Q:

After receiving approval from the local foreign exchange authority, can the applicant withdraw cash in foreign currency?

A:

That is not permitted. The applicant can apply to remit funds to his or her account in the country or region where he or she resides.

Q:

What are the qualifications for an “emigration transferring” applicant?

A:

The applicant needs to have a foreign nationality or be a permanent resident of another country or territory. This includes the Chinese territories of Hong Kong, Macau and Taiwan.

Q:

When an emigrant who has foreign citizenship applies for “emigration transferring,” is a certificate of residence required from the Chinese embassy or consulate where he or she resides?

A:

For the applicant who has been granted foreign citizenship, a certificate of residence without authentication from a Chinese embassy or consulate is acceptable.

Q:

Let's look at a hypothetical situation where an applicant had originally registered his household in Province A but has income from an asset disposal in a personal bank account in Province B. In this case, can a SAFE branch in Province A send a letter to the bank in Province B to show that the application for foreign exchange purchase, payment and remittance has been approved?

A:

A SAFE branch cannot authorize foreign exchange business in a bank outside its jurisdiction. In this case, if the bank from Province B has a branch in Province A, the bank branch can handle the business through the applicant's account in Province B.

The term “public employees” includes but is not limited to civil servants.

Q:

Let's look at the following kind of situation. Emigrant A acquired citizenship in a foreign country in April 2019 and took up residence there. Can foreign exchange purchases or payments be handled under the category of “emigrant transferring” for A's salary in May or afterwards?

A:

This is not permitted. Foreign exchange business related to A's salary after he received foreign citizenship should be dealt with according to regulations covering the foreign exchange business of overseas individuals under the current account.

Q:

Applicant A has been a permanent resident of the US since 2001. He inherited a house from his parents who died in China in 2018. He later sold the property. Can he remit the money from this sale to the US?

A:

On the basis of current regulations, only a foreign citizen can apply for “inheritance transferring.” As a permanent resident of the US, applicant A does not qualify for remitting money abroad under the category of “inheritance transferring.”

Q:

Applicant A inherited a home on the death of his parents in 2001. The applicant received Australian citizenship in 2015. Can he remit the money from the sale of the house?

A:

This too is not allowed. Applicant A was a Chinese citizen when he or she inherited the property from his parents. After the inheritance, he or she was granted Australian citizenship. The applicant should apply for “emigrant transferring,” rather than “inheritance transferring.”

Q:

In accordance with regulations, if public employees or their close relatives apply for approval of foreign exchange business concerning over one million yuan, the foreign exchange administration can conduct an inquiry with supervisory counterparts. What does the term “public employees” cover? Does the term refer to civil servants?

A:

The term “public employees” includes but is not limited to civil servants. The Supervision Law of the People's Republic of China (PRC), which was put in effect in 2018, provides that the term “public employees” refers to:

(1) civil servants and personnel as defined in the Civil Servant Law of the PRC;

(2) employees in an organization which is authorized by law and regulation, or lawfully entrusted by state organs to deal with public affairs;

(3) officials of state-owned enterprises;

(4) officials in state-run education, scientific research, culture, health care and sports institutions;

(5)administrators in self-managed mass organizations at the grass-roots level;

(6)other personnel who perform public duties in accordance with domestic law.

Q:

In the following case, individual A acquired Canadian citizenship in 2018. His or her mother sold a house in China and decided to give the money to A. Can A remit the money out of China under “inheritance transferring”?

A:

No, this is not permitted. For “inheritance transferring” the property should be received from someone who is deceased. This does not apply in this case as A's mother is still alive. A can apply for “emigrant transferring” if he or she received the money from his mother before he acquired Canadian citizenship. However, this must follow procedures for foreign exchange business concerning donations, if A received the money from his or her mother after the acquisition of Canadian citizenship.

Q:

In the following case, applicant A obtained Canadian citizenship in 2018. His mother transferred the ownership of a house in China to A, who later sold the house. A then decided to remit the proceeds abroad. If A applies for “inheritance transferring”, would it be approved?

A:

No, it would not be approved. For “inheritance transferring” the property should be obtained from someone who has died. A can apply for “emigration transferring” if he or she obtained the ownership before he acquired Canadian citizenship. But in the case where the house is transferred to A's name after A's acquisition of Canadian citizenship, A should apply to banks for the outward remittance as requested for foreign exchange purchase and remittance by individuals out of China concerning proceeds from the sale of commercial housing.

Q:

Individual A has been a Canadian citizen since 2005. His mother died in 2018, though his father is still alive. Can A sell his mother's home and remit the proceeds from the sale abroad?

A:

Under the Chinese Inheritance Law, when a valid will is made, it is generally respected. Property passes to the beneficiaries designated in the will. In the case of intestate inheritance, property is transferred to heirs in the following sequence:

(1) First in line for inheritance: spouses, children and parents.

(2) Second in line for inheritance: brothers and sisters, paternal and maternal grandparents.

When the succession begins, the successors who are first in line shall inherit to the exclusion of successors who are second in line. The successors who are second in line shall inherit in default of any successors who are first in order. The successors in the same order are entitled to an equal share of the inheritance. And the share can also be unequal with the consent of the successors through negotiation.

In this case, if applicant A's mother has made out a will that states she will pass on her property to A, or if A's father agrees that A inherits all of the property, A can remit all of the proceeds from the sale out of China. Otherwise, A's father is also entitled to inherit some of the property, and applicant A cannot remit all of the sale proceeds overseas.

Q:

In the following case, A obtained Canadian citizenship in 2005. He is applying for overseas remittance of his inheritance. He presented his Canadian passport, a Canadian bus pass, and certificates of payment for utilities -- water and electricity - at a Canadian address, in order to prove his Canadian citizenship and residence. Is a certificate of residence authenticated by a Chinese embassy or consulate necessary in addition?

A:

Document authentication by an embassy or a consulate abroad is to confirm the document in the name of a country. It is for the country's recognition of the document issued by a foreign country. A certificate of residence authenticated by a Chinese embassy or consulate is also for this purpose, and it is needed when one applies for “inheritance transferring”.

Q:

In the following case, applicant A was granted Canadian citizenship in 2007. He originally had a registered residence in Shenyang in China's Liaoning Province. The household registration of his parents was in Benxi in the same province. Applicant A's parents died in 2017, and A then wanted to remit his inheritance out of China. At which SAFE branch should he or she apply for “inheritance transferring”?

A:

According to the provisions related to “inheritance transferring”, the heir should apply to the branch of SAFE in the place of the household registration of the deceased individual. If the inheritance is from more than one decedent, the applicant can choose the branch in any place where there is a household registration. In this case, applicant A should apply at SAFE's sub-branch in Benxi.

The heir should apply to the branch of SAFE in the place of the household registration of the deceased individual