The State Council amended the Measures for the Reporting of Statistics on International Receipts and Payments, State Council Order  No. 642 (“Circular 642”)3 on 9 November 2013, effective as of 1 January 2014, to require PRC residents to report their (i) foreign financial assets and liabilities and (ii) cross-border transactions.
The reporting obligations apply to PRC residents, including foreign persons within the PRC.
Generally, a PRC resident for this purpose includes:
- an individual who has resided in the PRC for more than one year;
- a PRC citizen who has been absent from the PRC for less than one year4 (but students studying abroad remain liable to report even after one year);
- an enterprise incorporated in the PRC;
- a representative office or branch of a foreign corporation (including banks); and
- a non-resident who conducts economic transactions within the PRC.
Financial institutions are specifically targeted under Circular 642. Also, persons who conduct registration, clearing and custodian services, and dealers in securities and futures, must declare their agency transactions.
Pursuant to Circular 642, PRC residents will need to report to the State Administration of Foreign Exchange (“SAFE”) details of (i) foreign financial assets and liabilities and (ii) economic transactions conducted with non-PRC residents directly or through financial institutions. Circular 642 does not specify what constitutes foreign financial assets and liabilities or what “transactions” need to be reported.
Failure to comply with these reporting obligations will result in fines of up to RMB300,000 for corporations and RMB50,000 for individuals.
Both SAFE and its employees are required to keep any information they obtain confidential from other governmental agencies “except as otherwise provided for by law”. It appears from Circular 642 that its purpose is merely to enable SAFE to collect and maintain “international receipts and payment statistics”. It is not yet known what provisions will be made for the disclosure of the information to other agencies, including tax bureaus.
SAFE is required to issue further implementing rules to clarify exactly what must be reported and how to report it. It is unlikely that these implementing rules will be issued before Circular 642 becomes effective on 1 January 2014, so any implementing rules that come later may be given retroactive effect from that date.