The following is a wide-ranging interview with an official of SAFE’s Jiangsu branch on foreign exchange requirements related to the current account.  

01

Q: How does a bank verify transaction authenticity when handling foreign exchange payments with multiple purposes，some of which have no bearing on tax filing?

A: Banks need to examine for authentication purposes any transactions of more than US$50,000 or the equivalent of that amount in another currency. If the purpose of the foreign exchange to be paid or received is unclear，domestic companies must provide transaction documents for further examination. According to the Announcement of the State Administration of Foreign Exchange and the State Administration of Taxation on Relevant Issues Concerning the Filing of Tax for External Payments for Trade in Services and Other Accounts (SAFE Document [2013] No. 40)，banks must examine the Tax Filing Form for the External Payments for Trade in Services and Other Accounts for those who are required to file taxes.

02

Q: When a contract requires payments in several installments above the equivalent of US$50,000，how does an enterprise handle the tax filing procedures?

A: Where the said contract requires payments in installments above the total of US$50,000，the enterprise shall comply with tax filing requirements before each foreign exchange payment. However，copies of the contract or related transaction documents are required only with the first filing of the foreign exchange payments.

03

Q: When domestic institutions handle advance or partial payments related to the services trade，what key elements should be kept in mind?

A: When domestic institutions handle advance payments or a series of continuing payments related to the services trade，these should be for a period of no longer than 12 months. If，under special circumstances，the payments extend beyond this limit，the bank involved needs to make a report to the local foreign exchange authorities. The fees related to the services trade shall be marked as advance payments or partial payments in Chinese characters in the "remarks" section of the reporting document.

04

Q: When an enterprise conducts business operations within the scope of its business license but has received no other official document attesting to that，is it allowed to make payments related to the services trade?

A: Government requirements must be complied with when domestic institutions or individuals carry out activities related to the trade in services. Wherever there is a requirement for approval，ratification，registration，or filing，such procedures need to be properly complied with before foreign exchange receipts and payments related to the services trade are made.

05

Q: When a domestic institution uses domestic foreign exchange to pay freight fees to international forwarders or forwarding agents，is the bank required to review the transaction documents and keep them on file?

A: No. When a domestic institution uses foreign exchange from domestic sources to make payments on freight fees to international forwarders or forwarding agents，the paying bank shall make verification and keep the transaction documents.

06

Q: When handling a series of foreign exchange receipts and payments related to the services trade，is it necessary for the bank to endorse the documents for each transaction after review?

A: When reviewing documents related to foreign exchange receipts and payments under the current account，financial institutions can decide at their own discretion whether to affix their official chop or otherwise endorse each receipt or payment according to their internal control requirements and actual business needs. But they need to keep the review materials for future reference，in accordance with existing regulations.

07

Q: Are insurance agents and brokers permitted to make settlements or purchases of foreign exchange related to their insurance operations?

A: When insurance agents or insurance brokers handle foreign exchange collection and payment on behalf of their clients，funds should be  transferred in the original currency except for compensation payments for which foreign exchange can be purchased or settled.

08

Q: Is it necessary to register as part of the catalogue of trade in goods when an enterprise has no imports or exports but handles foreign exchange receipts and payments for the trade in services?

A: Where an enterprise has no import or export business but just handles  foreign exchange receipts and payments related to the service trade，registration under the catalogue of trade in goods is not required.