Meaning
An administrative requirement forces foreign-invested companies to register their capital flows and foreign debts with the state administration of foreign exchange. The process of SAFE foreign exchange registration is managed through licensed banks to monitor capital accounts and maintain cross-border balance. This filing must be completed before a company can open a capital account.
Filing System
To register, the foreign investor must submit corporate identity documents, the business license, and the investment agreement to the designated bank. The bank reviews the documentation and enters the information into the SAFE foreign exchange registration system, issuing an IC card or digital certificate. This filing tracks foreign equity investments and corporate equity transfers to ensure tax compliance.
This registration must be updated within thirty days of any change in the corporate structure.
Foreign Debt
Special rules apply when a local subsidiary borrows money from an overseas affiliate or bank. The loan contract must be registered under this system, and the loan amount must fall within the borrowable limits set by the central bank. If the borrowable capacity is exceeded, the company cannot receive the funds or make repayment of the principal and interest.
This control prevents the unmonitored buildup of foreign currency liabilities.
Compliance Audit
Failing to maintain updated records can lead to administrative fines and the freezing of foreign currency accounts. Banks are required to block any transfers that do not have the correct registration records. This registration is the first step in any outbound cash transfer.
