Discussion over the new IIT law is still ongoing and all kinds of rumours could be heard.
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WeChat Official Accounts: ExpatRights
One rumour says that “banks will report any ex-pat account with a balance over 5000RMB”. It’s really absurd, in my opinion. Obviously, the source mixed the updated IIT threshold (5000RMB) with an un-updated regulation – Administrative Measures for the Reporting of Large-sum Transactions and Suspicious Transactions by Financial Institutions, which actually came into effect as recently as July 1, 2017, but was extensively discussed later last year.
So, relax. First, there were related measures back in 2006, so it’s nothing new.
Second, anti-money laundering and anti-terrorism is the main purpose, as stated in article 1 of the Measures.
Then what does it say exactly?
A financial institution shall report the following large-sum transactions:
cash deposits, cash withdrawals, foreign exchange settlements and sales in cash, exchange of foreign currencies in cash, cash remittance, payment of cash bills and other forms of cash receipts and payments whose transaction value reaches or exceeds RMB 50,000 or foreign currency equivalent of USD 10,000 on a per-transaction or cumulative basis on a given day;
(2) Fund transfers
whose transaction value reaches or exceeds RMB two million or foreign currency equivalent of USD 200,000 on a per-transaction or cumulative basis between the bank account of a client that is not a natural person and another bank account on a given day;
(3) Domestic fund transfers
whose transaction value reaches or exceeds RMB 500,000 or the foreign currency equivalent of USD 100,000 on a per-transaction or cumulative basis between the bank account of a natural person client and another bank account on a given day; and
(4) Cross-border fund transfers
whose transaction value reaches or exceeds RMB 200,000 or the foreign currency equivalent of USD 10,000 on a per-transaction or cumulative basis between the bank account of a natural person client and another bank account on a given day.
Cumulative transaction value shall be calculated and reported on a per-client basis by unilaterally adding up the receipt or payment of funds.
I have clarified this already, and it does have something to do with IIT.
As part of the efforts of tax agencies to strengthen their taxation management, they will use data from financial institutions to do so shortly. Actually, people have been caught by the tax agency when they use their personal bank account to receive payments from their company account and heavy fines have been charged.
So my suggestion is: if you are doing business in China as an individual, it’s time to consider setting up a WOFE now. Everyone can see expenses exempted from an individual income is too limited, while any reasonable expenses can be treated as the cost of company operation, as long as Fapiao is provided.
The threshold for incorporating a WFOE is pretty low today. There is no more deadline for fund input, no more minimum capital requirement, no more month-long pre-permission from the Ministry of Commerce of PRC, and in some city such as Guangzhou, you can share an office with other people… as long as you can provide a legitimate ID, it may take ten days to get your license ready! You don’t even have to authenticate your passport in the embassy in your home country if there is a China entry record in your passport.
Source: Sophie Mao from ChinaLawHelp.com