Risks of Singapore Companies Opening Offshore Accounts in China Are Huge, Are You Prepared?

English Translation

In recent years, as global economic integration has accelerated, an increasing number of Singaporean companies have chosen to establish operations in China or enter the Chinese market through partnerships. Among these strategies, opening offshore accounts has become a key method for many companies to optimize financial management and improve cross-border settlement efficiency. However, recent financial regulatory developments and corporate cases indicate that the risks faced by Singaporean companies in opening offshore accounts in China are rising, particularly in areas such as compliance, taxation, and capital flow, which warrant serious attention.

First, it is important to clarify what an offshore account is. An offshore account typically refers to a bank account opened in a country or region outside the company’s place of incorporation, used for international business settlements, fund consolidation, or tax planning. For Singaporean companies, which operate in a well-established international financial center with relatively relaxed foreign exchange controls and a low-tax environment, using offshore accounts for global fund allocation is a common practice. However, when these companies open offshore accounts in Chinese banks without fully understanding China’s regulatory framework, they often encounter unexpected challenges.

Recently, China’s State Administration of Foreign Exchange SAFE and the China Banking and Insurance Regulatory Commission CBIRC have introduced several policies to strengthen oversight of cross-border capital flows, especially in areas such as anti-money laundering AML, anti-tax evasion, and combating illegal capital movements. For example, in August 2025, SAFE issued a notice on strengthening prudent management of cross-border capital flows, requiring banks to conduct more rigorous due diligence on non-resident companies opening accounts in China and enhancing the review mechanism for the source and use of funds. This means that even legally compliant foreign enterprises must now provide more detailed business background information and explanations of fund flows when opening and using offshore accounts.

Tax compliance has also become a significant risk factor for Singaporean companies opening offshore accounts in China. At the end of 2025, the State Taxation Administration issued an announcement on strengthening tax management for non-resident enterprises, requiring tax authorities to monitor the capital flows of foreign companies’ domestic accounts more closely. For companies attempting to avoid Chinese tax obligations through offshore accounts, this regulatory upgrade has undoubtedly increased operational complexity and may even lead to tax back payments and fines.

A recent notable case involved a Singapore-based tech company that opened a Renminbi RMB offshore account through a foreign bank’s Shanghai branch after setting up a representative office in China. The account was used to pay local partners for technical services. However, during a subsequent tax audit, the account was found to involve frequent large-scale fund transfers with unclear purposes. As a result, the tax authorities required the company to pay back taxes and imposed a fine. This incident not only disrupted the company’s normal operations but also damaged its reputation in the Chinese market.

Beyond policy and regulatory risks, Singaporean companies may also face issues such as currency volatility and increased complexity in account management when opening offshore accounts in China. In particular, during periods of significant RMB exchange rate fluctuations, companies that fail to properly manage foreign exchange risks may suffer losses from currency conversion, which can affect overall profitability. Moreover, due to differences between China’s financial regulatory system and Singapore’s, companies often need to invest more resources in areas such as account usage, fund transfers, and reporting to ensure compliance.

So, how should Singaporean companies prepare to address these potential risks? First, companies should enhance their understanding of China’s financial regulations, especially those related to cross-border capital flows, foreign exchange management, and tax reporting. Second, when selecting banks and account-opening locations, priority should be given to financial institutions with strong compliance capabilities and familiarity with the needs of foreign-invested enterprises.

Companies should also establish robust internal financial management systems to ensure that every fund transfer is traceable and its purpose clearly defined. It is advisable for companies to collaborate with professional legal, tax, and financial advisors to develop cross-border capital management plans that align with Chinese regulatory requirements. For instance, setting up a local subsidiary or joint venture instead of solely relying on offshore accounts can be a more compliant approach to conducting business in China. This not only helps reduce compliance risks but also supports the establishment of stronger commercial relationships in the local market.

In conclusion, while opening offshore accounts in China can help Singaporean companies improve capital efficiency to some extent, the associated risks cannot be ignored. With the increasing stringency of China’s financial regulatory environment, companies must place greater emphasis on compliance and transparency to navigate the complex cross-border financial landscape successfully. Only by thoroughly understanding the regulatory framework and implementing effective risk control measures can companies achieve a win-win outcome between global expansion and localized operations.