At the beginning of this year, China began implemented a new system of self-reporting for foreign assets by amending two-decade-old regulations which required reporting of foreign transactions. Though these amendments do not add any new reporting requirements for financial institutions, neither the old nor new regulations ever applied to Chinese citizens permanently resident abroad, they don’t violate the privacy laws of foreign countries, and the implementation of the regulations is actually proceeding on schedule rather than being delayed by years, the Compliance-Industrial complex has been quick to saddle it with the inaccurate name of “China’s FATCA”.
For a translation of the regulations and a brief analysis of the impact of the amendments, keep reading. This post probably won’t be of much use to U.S. Persons seeking practical advice for dealing with the citizenship-based taxation mess that the Homelanders have thrown at us; it’s a supplement to my next post that’s actually about China and FATCA.
Analysis
Below, I provide a comparison & translation of China’s foreign asset self-declaration regulations before and after State Council Order #642 of 19 November 2013, which amended them to their present form from the previous version. Primarily, the amendment extends the requirement for self-declaration of foreign assets — which, per Article 2, applies only to Chinese residents, and not non-Chinese residents mentioned in Article 8 — from institutions to individuals, but also clarifies that only financial assets are reportable assets. If I understand correctly, this excludes physical assets (such as fixed plant) not having financial institution counterparties.
One other prominent change was to clarify the legal basis for fines and punishments. In particular, fines for individuals who violate the regulations are no longer at the discretion of the State Administration of Foreign Exchange, but must be in accord with Exchange Control Ordinance Article 48, which limits the fine for an individual to ¥50,000 (~US$8,250). This contrasts with the IRS, which made up its own extra-legal fines for the “Offshore” “Voluntary” Disclosure Program completely out of proportion to the actual tax owed, while Congress looked the other way or cheered them on.
These amendments do not place any new demands on foreign financial institutions besides clarifying their duty to protect customer data, and were reported with little fanfare in the domestic press nearly three months ago (the People’s Daily ran a brief article bragging that “it’s no longer easy for corrupt officials to transfer their assets“). The only impact this should really have on the financial sector is that more people might hire accountants to help them to fill out the forms; nevertheless, the foreign press has been running hog-wild with it and even started calling it “China’s FATCA”.
As usual, search-engine optimisation specialists for accountants & tax lawyers will take any excuse to put those two hot keywords on the same webpage with each other — probably in the hopes of fooling people into clicking through onto their articles in search of information about the actual progress of the alleged Sino-American FATCA IGA negotiations. Of course, as some of their articles are forced to admit (once the reader has been drawn in by the lying headline), the new regulations bear a far closer resemblance to FBAR than FATCA, and unlike either of those U.S. F-words, they do not have extraterritorial effect.
Translation
Passages which were deleted from the regulations are in red and struck out, while passages which were added to the regulations are in green (beside incidental renumbering of articles).
| 第一条 为完善国际收支统计，根据《中华人民共和国统计法》，制定本办法。 | Article 1: These regulations are formulated in accord with the Statistical Law of the People’s Republic of China with the aim of improving international payments statistics. |
| 第二条 国际收支统计申报范围为中国居民与非中国居民之间发生的一切经济交易以及中国居民对外金融资产、负债状况。 | Article 2: The scope of the International Payments Statistical Declaration Regulations includes all economic transactions occurring between Chinese residents and non-Chinese residents and Chinese residents’ external financial asset and liability positions. |
| 第三条 本办法所称中国居民，是指： | Article 3: In these regulations, “Chinese residents” refers to: |
| （一）在中国境内居留1年以上的自然人，外国及香港、澳门、台湾地区在境内的留学生、就医人员、外国驻华使馆领馆外籍工作人员及其家属除外； | (1) Natural persons residing in Chinese territory for one year or more, excluding foreign, Hong Kong, Macau, and Taiwan students and medical care seekers in Chinese territory, and foreign diplomatic and consular personnel stationed in China and their families; |
| （二）中国短期出国人员（在境外居留时间不满1年）、在境外留学人员、就医人员及中国驻外使馆领馆工作人员及其家属； | (2) Chinese persons who leave the country for short periods (time of residence abroad less than one year), students studying abroad, medical care seekers, and Chinese diplomatic and consular personnel stationed abroad and their families; |
| （三）在中国境内依法成立的企业事业法人（含外商投资企业及外资金融机构）及境外法人的驻华机构（不含国际组织驻华机构、外国驻华使馆领馆）； | (3) Firms and institutions with juridical personhood established in Chinese territory according to law (including foreign-invested firms and foreign-capitalised banks), and the Chinese offices of foreign juridical persons (not including the Chinese offices of international organisations or foreign embassies and consulates in China); |
| （四）中国国家机关（含中国驻外使馆领馆）、团体、部队。 | (4) Chinese national agencies (including Chinese embassies and consulates abroad), organisations, and military units. |
| 第四条 本办法适用于中国境内所有地区，包括在中国境内设立的保税区和保税仓库等。 | Article 4: These regulations apply to all domestic regions of China, including free trade zones and bonded warehouses established in Chinese territory. |
| 第五条 国家外汇管理局按照《中华人民共和国统计法》规定的程序，负责组织实施国际收支统计申报，并进行监督、检查；统计、汇总并公布国际收支状况和国际投资状况；制定、修改本办法的实施细则；制发国际收支统计申报单及报表。政府有关部门应当协助国际收支统计申报工作。 | Article 5: The State Administration of Foreign Exchange shall be responsible for the organisation and implementation of international payments statistical declaration in accord with the rules of the Statistical Law of the People’s Republic of China, and shall carry out oversight and inspection; collect statistics on, compile, and publish the status of international payments and the status of international investments; formulate and amend implementation rules for this law; and issue international payments statistical declaration forms and statements. The relevant government departments shall cooperate with the work of international payments statistical declaration. |
| 第六条 国际收支统计申报实行交易主体申报的原则，采取间接申报与直接申报、逐笔申报与定期申报相结合的办法。 | Article 6: International payments statistical declaration implements the principle of declaration by the transaction’s participants, and employs a combined approach of indirect declaration and direct declaration, [as well as] per-transaction declarations and declarations at regular intervals. |
| 第七条 中国居民和在中国境内发生经济交易的非中国居民应当按照规定及时、准确、 |
Article 7 Chinese residents and non-Chinese residents who conduct economic transactions within Chinese territory shall declare |
| 第八条 中国居民通过境内金融机构与非中国居民进行交易的，应当通过该金融机构向国家外汇管理局或其分支局申报交易内容。 | Article 8: Chinese residents who conduct transactions with non-Chinese residents through a domestic financial institution shall declare the transaction details to the State Administration of Foreign Exchange or one of its branches through that financial institution. |
| 第九条 中国境内提供登记结算、托管等服务的机构和 |
Article 9: Chinese domestic institutions which provide depository, clearing, and custodial services and |
| 第十条 中国境内各类金融机构应当直接向国家外汇管理局或其分支局申报其自营对外业务情况，包括其对外金融资产、负债及其变动情况，相应的利润、利息收支情况，以及对外金融服务收支和其他收支情况；并履行与中国居民和非中国居民通过其进行国际收支统计申报活动有关的义务。 | Article 10: All types of Chinese domestic financial institutions shall directly declare to the State Administration of Foreign Exchange or one of its branches the status of their external operations conducted as principals, including their external financial assets and liabilities and their changes, the payments of the corresponding capital gains and interest, and external financial services payments and other payments; and shall fulfil their duties which arise from Chinese residents and non-Chinese residents carrying out international payments statistical declaration activities with them. |
| 第十一条 在中国境外开立 |
Article 11: Chinese non-financial institutions which open accounts outside of Chinese territory shall directly declare to the State Administration of Foreign Exchange or one of its branches the transactions conducted with non-Chinese residents through that account, as well as its balance. (NB: The word for “account” was changed from 帐户 to 账户; the latter more clearly implies “financial account”, but otherwise the words are synonyms, not to mention homophones, so the English translation of the old and new versions remains the same.) |
| 第十二条 中国境内的外商投资企业、在境外有直接投资的企业及其他有对外金融资产、负债的非金融机构，必须直接向国家外汇管理局或其分支局申报其对外金融资产、负债及其变动情况和相应的利润、股息、利息收支情况。 | Article 12: Chinese domestic foreign-invested firms, firms having direct investments abroad, and other non-financial institutions which have external financial assets and liabilities, must directly declare their external financial assets and liabilities and their changes, and the corresponding payments of capital gains, dividends, and interest to the State Administration of Foreign Exchange or its branches. |
| 第十三条 拥有对外金融资产、负债的中国居民个人，应当按照国家外汇管理局的规定申报其对外金融资产、负债的有关情况。 | Article 13: Chinese resident natural persons who possess external financial assets or liabilities shall declare the relevant details of those external financial assets and liabilities in accord with the rules of the State Administration of Foreign Exchange. |
| 第十四条 国家外汇管理局或其分支局可以就国际收支情况进行抽样调查或者普查。 | Article 14: The State Administration of Foreign Exchange and its branches may carry out samples or surveys regarding international payments. |
| 第十五条 国家外汇管理局或其分支局有权对中国居民和非中国居民申报的内容进行检查、核对，申报人及有关机构和个人应当提供检查、核对所需的资料和便利。 | Article 15: The State Administration of Foreign Exchange and its branches have the right to carry out inspection and verification of Chinese residents’ and non-Chinese residents’ declaration details, and the declarants and their related institutions and persons shall provide the information and cooperation required by the inspection and verification. |
| 第十六条 国家外汇管理局及其分支局应当对申报者申报的具体数据严格保密，只将其用于国际收支统计。除法律另有规定外，国际收支统计人员不得以任何形式向任何机构和个人提供申报者申报的具体数据。银行、交易商以及提供登记结算、托管等服务的机构应当对其在办理业务过程中知悉的申报者申报的具体数据严格保密。 | Article 16: The State Administration of Foreign Exchange and its branches shall strictly protect the privacy of concrete data declared by declarants, and shall use them only for international payments statistics. Unless otherwise stipulated by law, international payments statistics personnel may not provide, in any form to any institution or person, concrete data declared by declarants. Banks, dealing firms, and institutions which provide depository, clearing, and custodial services shall strictly protect the privacy of concrete data declared by declarants of which they come to have knowledge in the course of doing business. |
| 第十七条 中国居民、非中国居民 |
Article 17: Chinese residents and non-Chinese residents who |
| 第十八条 国际收支统计人员违反本办法第十六条规定的， |
Article 18: International payments statistics personnel who violate Article 16 of these regulations shall |
| 第十九条 国家外汇管理局根据本办法制定《国际收支统计申报办法实施细则》。 | Article 19: The State Administration of Foreign Exchange shall formulate International Payments Statistical Declaration Regulations Implementation Rules in accord with these regulations. |
| 第二十条 本办法自1996年1月1日起施行。 | Article 20: These regulations shall come into force on 1 January 1996. |
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