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China China Company Registration Wholly Foreign Owned Enterprise China WFOE Registration Guide (18) - Setting up Different Bank Accounts And Their Functions of a WFOE
KNOWLEDGE|
1. |
Temporary Capital Account |
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Before the official incorporation of a FIE, if it needs cash urgently for the purpose of pre-incorporation expenses, it can choose to set up a Temporary Capital Account. This account is to temporarily receive funds directly related to the investment in China. However, this account is not a necessity. It should be based on the needs and requirements of the company and approval by the State Administration of Foreign Exchange (SAFE). Functions: (1) The funds in the Temporary Capital Account can only be used to pay rental, utilities, and other payments with regard to the pre-incorporation of the FIE. The funds cannot be used for payment of employee salaries and payments relating to the operations of the business. This is because at this point of time, the company has not been officially set up. (2) The funds in the Temporary Capital Account is to be injected directly by the investing party and constitutes part of the total registered capital of the FIE. (3) The funds in the Temporary Capital Account can only be transferred to other bank accounts and no cash withdrawal is allowed. (4) When there is a need to use the funds in the Temporary Capital Account, approval must be obtained from the State Administration of Foreign Exchange (SAFE). In practice, however, it is very difficult to set up such a Temporary Capital Account mainly because the local banks do not have the knowledge and experiences. |
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2. |
Capital Account |
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A FIE shall set up a formal capital account after its incorporation. The function of capital account is to receive registered capital injections from foreign investors. Foreign exchange registration for foreign direct investment shall be completed prior to the establishment of the capital account. |
| 3. | RMB Basic Bank Account |
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A FIE shall set up one RMB Basic Bank Account after its incorporation. RMB Basic Bank Account enables a FIE to conduct day-to-day transfer and funds settlement, as well as receipts and payments of cash. A company can only have one basic bank account. Functions: (1) RMB Basic Bank Account can be used for RMB collections and payments and cash withdrawals. (2) Salaries and bonus payments can only be paid from the basic account. |
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4. |
RMB General Settlement Account |
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The RMB General Bank Account is similar to the RMB Basic Bank Account and can be used for RMB collections and payments. However, cash transactions and payments for salary and social insurance are not allowed. A FIE can set up multiple general accounts.
Functions: (1) For large companies, it is advisable that the RMB General Bank Account is to be used solely for fund collection purposes while the RMB Basic Bank Account can be used for payment salaries and bonus payments can only be paid from the basic account. (2) For smaller companies, it will not be necessary to have both accounts. The RMB Basic Bank Account will be able to satisfy the needs of its day-to-day operations. |
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5. |
Foreign Currency General Settlement Account |
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This account is a foreign currency fund collection and payment account. Functions: (1) Funds collected from customers for services or sale of goods can be transferred directly to the Foreign Currency Settlement Account. (2) When using this account to make payment, the company has to submit both invoice and contract relating to the payment, in order for the transaction to be approved. Approval is granted by the Bank. |
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Disclaimer All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage. |
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