Feb. 27 – The State Administration of Foreign Exchange (SAFE) of Jiangsu Province is becoming stricter  on rules regarding new foreign invested enterprises (FIE) to prevent abuse.

In the past, local companies and individuals have been caught setting up offshore companies and using it to incorporate in China and take advantage of the benefits offered for foreign investors. These offshore companies have also been used for money laundering and transferring assets from China to overseas.

Following the SAFE circular issued November 16, 2007, foreign investors are advised to provide a shareholders chart that lists individual shareholders. The SAFE will not issue a foreign exchange registration certificate should there be a Chinese shareholder listed.

Moreover, investors coming from tax heavens such as Hong Kong, British Virgin Islands, and Mauritius, will be subject to additional scrutiny compared to investors from other countries.

To register as a new FIE, the following sets of documents may be submitted to the local SAFE:

Option 1

• Foreign investor’s incorporation certificate including all the organization shareholders
• A duly-legalized copy of a foreign investor’s shareholder structure. For corporate shareholders include the corporate shareholders incorporation certificate and shareholder structure.
• Passport copies of each shareholder.

It should be noted that the FIE should write a letter confirming that shareholders in all levels are not directly or indirectly controlled by s Chinese resident or organization registered in China

Option 2

• Foreign investor’s incorporation certificate including all the organization’s shareholders
• A letter issued by lawyer in the country where the foreign investor registered certifying the following information: a) The documents provided by foreign investor are true and valid. b) The complete structure of  FIE to persons attached with the letter. It should also include the following sentence: “The shareholders in all levels are not directly or indirectly controlled or share-held by Chinese resident, or organization registered in China. “