How to Comply with Regulations When Transferring Funds from Domestic Companies to Offshore Accounts A Full Process Analysis

Translation

In the context of global economic integration, an increasing number of companies are choosing to transfer part of their funds to offshore accounts in order to diversify assets, optimize tax structures, and improve capital operation efficiency. For domestic Chinese enterprises, how to complete this process in a compliant and smooth manner has become a key concern for many business managers. This article will provide a detailed analysis from the perspectives of policy background, operational procedures, and important considerations.

1. Policy Background and Compliance Prerequisites

In recent years, China has continued to strengthen its regulation of cross-border capital flows, especially through a series of normative documents issued to combat money laundering and illegal asset transfers. For example, in early 2025, the State Administration of Foreign Exchange released a notice on further facilitating cross-border RMB settlements, emphasizing that enterprises must follow the three principles of due diligence - know your customer, understand the business, and perform due diligence - when conducting cross-border financial transactions. This means that when transferring funds overseas, enterprises must ensure the authenticity, compliance, and traceability of transactions.

At the same time, China still allows cross-border capital flows under legal and compliant conditions. For instance, enterprises can legally transfer funds abroad through normal channels such as import/export trade, overseas investment, and service outsourcing. The key lies in whether the enterprise possesses a solid commercial rationale and a fully compliant operating procedure.

2. Common Methods and Applicable Scenarios

1. Outbound Direct Investment ODI

This is currently one of the most mainstream and compliant methods for transferring funds overseas. If a company plans to establish a subsidiary or participate in an overseas project, it may apply for ODI filing and legally remit funds abroad. The entire process typically includes project approval by the National Development and Reform Commission NDRC, licensing by the Ministry of Commerce, and foreign exchange registration at a bank.

For example, in early 2025, a technology company planned to set up a research center in Southeast Asia. After preparing documentation and submitting applications, it successfully obtained ODI approval and completed the fund transfer. This method is suitable for enterprises with clear intentions for overseas investment.

2. Service Fee Payments

If there is a genuine service contract between the domestic company and an overseas entity-such as for technical consulting, market promotion, or brand licensing-the company may transfer funds by paying service fees. It is crucial, however, that complete service agreements, invoices, and supporting documents be provided to avoid being flagged as a fictitious transaction.

3. Cross-Border Trade Settlement

Using import and export trade for fund transfer remains one of the most traditional and widely accepted methods. For example, a company may pay foreign currency when importing raw materials or equipment, or receive foreign currency after exporting products, thereby achieving a reasonable allocation of funds between domestic and international markets. This approach requires the provision of authentic trade documents such as contracts, bills of lading, and customs declarations.

4. Profit Repatriation and Reinvestment

For companies that have already established overseas subsidiaries, profits generated abroad may be repatriated to the mainland via compliant channels or reinvested locally. During this process, companies must comply with tax reporting and foreign exchange management requirements to ensure transparency and accurate data.

3. Detailed Operational Process

The following outlines a commonly used and compliant process for cross-border fund transfers, applicable to most medium-sized and large enterprises

Step 1 Define Purpose and Route

Enterprises should first clarify the purpose of the outbound funds-whether for investment, service payments, or trade settlement-and select the appropriate route accordingly. Different routes correspond to different regulatory authorities and approval processes.

Step 2 Prepare Relevant Documentation

Depending on the chosen route, the company must prepare corresponding legal and financial documents, including but not limited to

Copy of business license

Audited financial reports for the past three years

Overseas investment proposal or cooperation agreement

Contracts, invoices, and payment vouchers

Bank account opening proof and authorization documents

Step 3 Submit Approval Applications

If ODI is involved, the company must submit a project filing or approval application to the NDRC, and also file an overseas investment record with the Ministry of Commerce. Additionally, foreign exchange registration must be completed at a bank.

Step 4 Open Offshore Account and Transfer Funds

After obtaining approvals from relevant authorities, the company may open an offshore account with a cooperating bank or overseas financial institution. Then, according to the approved amount and schedule, the company gradually completes the fund transfer, subject to Know Your Customer KYC and anti-money laundering reviews by the bank.

Step 5 Post-Transfer Monitoring and Reporting

Once the funds arrive in the offshore account, the company must continue fulfilling its reporting obligations, such as declaring foreign exchange inflows and outflows and tracking changes in overseas assets. It should also monitor local tax policies to avoid double taxation.

4. Risk Warnings and Recommendations

Although the above procedures are relatively mature, the following points should be noted during implementation

Authenticity Principle All transactions must be based on real commercial activities. Fabricated transactions are highly likely to trigger regulatory scrutiny.

Compliance First Avoid attempting to circumvent regulations through underground banks or fake invoices, as these actions constitute violations of the law.

Professional Support Enterprises are advised to engage professional legal advisors and accounting firms to assist in the process and ensure full compliance at each stage.

Tax Planning in Advance Fund transfers involve not only foreign exchange control but also cross-border tax issues. A comprehensive tax strategy should be developed in advance.

5. Conclusion

In today’s environment of growing global uncertainty, achieving international capital allocation through compliant channels is both a strategic necessity and a risk management measure for enterprises. As long as companies strictly follow relevant laws and regulations and develop clear strategies based on their own circumstances, domestic enterprises can smoothly and legally transfer funds to offshore accounts. This not only enhances corporate competitiveness but also lays a solid foundation for future expansion into international markets.