Ministry of Finance and State Administration of Foreign Exchange on Further
Notice on strengthening the capital verification work of foreign-invested enterprises and improving the foreign exchange registration system for foreign capital
(Caishui [2002]No. 10 17)
The finance departments (bureaus) of all provinces, autonomous regions and municipalities directly under the Central Government, the branches and foreign exchange administrations of the State Administration of Foreign Exchange of all provinces, autonomous regions and municipalities directly under the Central Government, the branches of Shenzhen, Dalian, Qingdao, Xiamen and Ningbo, and the designated Chinese-funded foreign exchange banks:
In order to further strengthen the capital verification of foreign-invested enterprises, improve the foreign exchange registration system, ensure the reasonable and orderly flow of foreign exchange funds, and promote the healthy development of foreign capital utilization, the relevant issues concerning the capital verification procedures involving foreign investment and foreign exchange registration in the capital verification of foreign-invested enterprises are hereby notified as follows:
1. When a certified public accountant carries out the capital verification business of a foreign-invested enterprise, in addition to the verification procedures stipulated in the Statement of Independent Auditing PracticesNo. 1-Capital Verification and the China Professional Standards No.3-Capital Verification (for Trial Implementation), the following methods shall be adopted for verification according to the circumstances:
(1) If a foreign investor contributes capital in foreign currency, the certified public accountant shall check the foreign exchange registration certificate of the foreign-invested enterprise to determine whether the foreign currency has been remitted to the capital account approved by the branches of the State Administration of Foreign Exchange and the foreign exchange management department (hereinafter referred to as the "foreign exchange bureau"), and send a confirmation letter to the bank where the account is opened.
(2) Under any of the following circumstances, a certified public accountant shall check the original Approval Document of the State Administration of Foreign Exchange on Capital Account provided by the enterprise to determine whether its behavior is consistent with that approved by the foreign exchange administration:
1. Foreign investors reinvest in China with the monetary funds obtained from the net profit and liquidation, equity transfer, early recovery of investment and capital reduction of other foreign-invested enterprises held in China;
2 foreign-invested enterprises with capital reserves, surplus reserves, undistributed profits, registered foreign debts and dividend payable's capitalization;
3. Foreign investors reduce their capital contribution;
4. Other modes of capital contribution stipulated by the state must be approved by the foreign exchange bureau.
(3) If the foreign investor contributes in kind, the certified public accountant shall obtain the declaration form of imported goods and check whether the kind comes from abroad.
(4) Where a foreign investor contributes capital in the ways of items (1) to (3) of this article, the certified public accountant shall issue an inquiry letter about the foreign investor's capital contribution to the foreign exchange bureau in the place where the enterprise is registered, and attach copies of the bank inquiry letter, the approval document of foreign exchange business of capital account, and the customs declaration form of imported goods according to the foreign investor's capital contribution, so as to verify the authenticity and compliance of the above documents.
If a foreign investor invests in foreign currency, but transfers the original currency within China, the certified public accountant shall also check whether the transfer of the original currency is approved by the foreign exchange bureau.
II. Designated foreign exchange banks shall actively cooperate with the work of certified public accountants, check the relevant data and materials after receiving the confirmation letter, clearly sign the opinions, affix the special business seal with legal authentication effect, and give a reply within 5 working days from the date of receiving the confirmation letter.
If the certified public accountant directly goes to the designated foreign exchange bank for verification, the designated foreign exchange bank shall give a reply on the same day.
3. After receiving the confirmation letter of foreign investment, the foreign exchange bureau shall examine the authenticity and compliance of the attached documents in accordance with relevant regulations.
If the authenticity and compliance of the attached documents are confirmed to be correct, the foreign exchange bureau shall register foreign exchange in accordance with the requirements of Article 6 of this Notice, cancel the customs declaration form of imported goods online, and fill in the foreign exchange registration number in the reply. If it is found to be false or illegal, the foreign exchange bureau will not register it and explain it in its reply.
The foreign exchange bureau shall affix a special seal for capital account business on the confirmation letter and give a reply within 5 working days from the date of receiving the confirmation letter.
4. After receiving the confirmation of foreign investment, the certified public accountant shall take the reply indicating the foreign exchange registration number as the basis for issuing the capital verification report, and send a copy to the enterprise for future reference.
If the foreign exchange bureau points out in its reply that the attached documents are false or illegal, the certified public accountant shall not issue a capital verification report.
If the capital verification report is not issued after receiving the reply indicating the foreign exchange registration number of foreign capital, the certified public accountant shall inform the foreign exchange bureau of the change in writing, and the foreign exchange bureau shall cancel the foreign exchange registration number of foreign capital in time.
5. Enterprises with foreign investment shall submit a capital verification report and a copy of foreign investment confirmation letter when handling foreign exchange business or accepting foreign exchange inspection at the foreign exchange bureau and designated foreign exchange banks.
Six, the foreign exchange bureau shall establish a foreign exchange registration ledger, according to the foreign investment confirmation, truthfully record the enterprise name, investment period, foreign exchange registration number, foreign investment method, amount and date, and keep the foreign investment confirmation and the attached documents copy for future reference.
Seven, the foreign exchange bureau shall, through the joint annual inspection of foreign-invested enterprises, check the foreign exchange registration of enterprises in the previous year.
Eight, financial departments at all levels and foreign exchange bureaus shall, according to their respective functions and powers, strengthen the management of accounting firms and certified public accountants' capital verification and foreign exchange registration of enterprises. Accounting firms and certified public accountants who, in violation of professional standards and relevant regulations, issue false capital verification reports, enterprises submit false certification documents or adopt other fraudulent means to obtain registration shall be punished in accordance with the provisions of relevant state laws and regulations.
Nine, if the designated foreign exchange banks and foreign exchange bureaus fail to reply to the inquiry letter according to the requirements of this notice, certified public accountants may report to the State Administration of Foreign Exchange or its branches or the Institute of Certified Public Accountants.
X. This circular shall be implemented as of May 1 2002.