China Company Formation: Corporate Bank Accounts
Requirements, Transactions, Tips
by Jasur Mavlyanov
When can a company open it’s bank account in China?
In China, Main Corporate bank account (which is in RMB) can be opened right after the general business license of the company is issued by the company registrar, that’s approximately after 15 business days from the moment you submit your incorporation application. Once you get the business license of the company, you need to contact the bank you want to open a corporate bank account with, and make an appointment – most of the banks do not accept walk-in clients, corporate banking section of each bank operate through appointments, you have to go or call to make an appointment.
What are the requirements to open a corporate bank account in China?
On the appointment day, company director will need to bring the following documents:
1) Set of company documents including all the official seals;
2) Original passport of the director + original passport of the company supervisor;
3) Real Name authentication record from the mobile number provider – it has to be from the company which provides your main mobile number, because bank will record that number in the system for future communications with you;
4) Around 1200 Yuan to cover the corporate bank account service fees;
Once the account is open, the bank will issue two USB token for online banking. One USB token is for company manager to initiate payments, and another token will be for the company director to confirm the payments. Also, during this visit, company director should remind the bank staff to enable payroll in the system, so the company can pay to its staff using online banking, otherwise it might take another visit to the bank.
The whole process takes 1 visit, and lasts around 2 hours.
After the RMB account is open, company should apply for a document, called “Registration Form for Foreign Trade Operators” (对外贸易经营者备案登记表) at the Ministry of Commerce (商务部). It normally takes around 5-6 business days to get it. Once it’s issued, company director can make another appointment with the same bank to open a foreign currency account for the company.
On the appointment day, company director will need to bring the all the documents of the company + two original passports, and RMB account details from the previous visit.
Company can open many separate accounts for each currency they want to do business in – USD, Euro, Hong Kong dollar etc. So, one the foreign currency account is open, it will be included in the same online banking the company already has from the previous visit when they open their RMB account, but it might take several days for the foreign currency accounts to appear online.
The whole process takes 1 visit, and lasts around 2 hours.
How do corporate transactions work in China?
Like mentioned earlier, company director is given two USB tokens for online banking. One is to initiate payments, and another is to confirm the payments. But the important thing we need to mention is, in the early days – maybe in the first few months, online banking of the company can only control RMB transactions – receive and pay only within China. While the company can see their foreign currency accounts online, it won’t be able to make any foreign currency exchanges until bank gives them permission. This permission can be applied for after the company works with this bank for several months, shows that it’s operating well, and conducting genuine business, and once the company earns this trust of the bank, it can apply for permission to exchange its foreign currency using online banking. However, this online exchange of foreign currency is always limited, and the limitation can be negotiated between the bank and the company. Normally, it’s based on the current cash flow and the transactions of the company, if for e.g. company making 1000,000 USD / quarter, it can ask for permission to exchange that amount using their online banking. Once the permission is granted, online banking will have this function to exchange foreign currency into RMB. Exchanging foreign currency into RMB doesn’t take long – it’s usually a few hours. Another important thing about online banking and transactions in China is, even the bank gives a permission to exchange foreign currency online, company won’t be able to transfer foreign currency using online banking. For this, company director of company accountant should visit the bank in person and fill out some forms. Another important thing is: As a rule, companies can make payments in foreign currency to outside of China for business purposes – consulting, management fee etc., but usually, if the amount is bigger than 50,000 USD, the company will have to justify this and get permission from the government.
How many accounts can a company have?
Companies can have one main account in the place of registration because of tax reasons (Companies are registered at the tax department where they are registered, and they pay tax locally), for e.g. if they are registered in Shanghai, their main bank account should also be in Shanghai, because they pay tax in Shanghai – they cannot open their main account in Beijing, for instance. Once their main account is open in the place of registration, they can open their secondary accounts in any region in China they want.
Some important tips on corporate bank accounts in China:
1) Most of the Chinese factories / suppliers ask their clients to pay to their Hong Kong accounts and that’s illegal in China. They do this to avoid taxes in China. In this situation, when your China registered company is a client to a China factory, you might face this request from a factory, they might ask you transfer the payment to their foreign account, which is either in Hong Kong or Singapore. When you approach the bank, 99.9% of the time, bank will stop you, because like we mentioned, it’s illegal to do that. When a product is sourced within China and the client is a China registered company, the transactions should take place in China, in RMB – it cannot be transferred using a China company to outside of China in foreign currency. Being a part of this tax evasion transactions will put the company and its owner at risk in China.
2) Company director or whoever is holding online banking USB tokens of the company should perform account reconciliation every month. There’s a function for it in the system, just need to login to the online banking and go through the process every month. Failing to do that will cause the accounts to get frozen.
3) Every time a company receives a payment, company accountant should issue an invoice in Chinese (fapiao 发票) – be it local payments or foreign currency payments, and declare the income to the tax office. Also, for foreign payments, company should issue a standard invoice printed in a normal printer, and the invoice should be sealed with company’s official seals.
4) Company must ask for fapiao (发票- Chinese invoice) from its suppliers in China, every time it transfers payments to them. If the suppliers do not issue any fapiao (发票) , it’s a red flag – they do it to avoid taxes in China, and being a part of this transactions puts your company at risk and will result in heavy fines.