How to Comply with Accounting Regulations After ODI Funds Flow Out to Singapore? A Clear Guide!

How Should Companies Handle Accounting After ODI Funds Are Transferred Out of China to Singapore? You’ll Understand After Reading This!

As global economic integration deepens, more and more Chinese enterprises are choosing to invest overseas through the Overseas Direct Investment ODI model, aiming to expand business operations, optimize resource allocation, and enhance international competitiveness. Due to its stable financial environment, strategic geographic location, and strong economic ties with China, Singapore has become a preferred destination for many companies seeking to transfer ODI funds abroad.

According to the latest data released by the State Administration of Foreign Exchange in 2025, China’s outward direct investment continues to grow steadily, with a significant increase in the proportion of funds flowing into Southeast Asia. The Monetary Authority of Singapore MAS also reported that in the first quarter of 2025, the number of investment applications from mainland China increased by more than 25% year-on-year, reflecting strong interest from Chinese companies in the Singaporean market.

However, successfully transferring funds overseas is only the first step. The key to long-term operations lies in how companies handle their accounting practices in a compliant and reasonable manner. From a practical perspective and drawing on recent policies and experiences, this article aims to help companies smoothly complete their financial reporting after ODI funds are transferred to Singapore.

1. Clarify the Purpose and Route of Outbound Funds

Before transferring funds overseas, companies must ensure that all ODI-related approvals or filings are complete, including documents from the National Development and Reform Commission NDRC, the Ministry of Commerce MOFCOM, and the State Administration of Foreign Exchange SAFE. These documents serve not only as the legal basis for capital outflows but also as critical references for subsequent accounting.

For example, in 2025, a manufacturing company based in Zhejiang Province established a subsidiary in Singapore to build an overseas RD center via ODI. Before the transfer, the company had obtained the project filing from NDRC, the overseas investment certificate from MOFCOM, and the foreign exchange registration certificate from the bank. These materials played a vital role in later financial reporting, particularly in tax declarations and explanations of fund usage.

2. Accounting Treatment for Outbound Investment Funds

Once funds are transferred out of China, companies should make the following accounting entries

1. Debit Long-Term Equity Investment or Other Receivables

If the investment is used to establish a subsidiary or acquire equity, it should be recorded under Long-Term Equity Investment.

If the funds are in the form of loans or petty cash, they should be classified under Other Receivables.

2. Credit Bank Deposit

This reflects the fact that the funds have been transferred from the domestic bank account.

3. Foreign Exchange Translation Differences

Since funds are typically transferred in RMB while the overseas entity uses Singapore dollars or US dollars, the amount must be converted using the spot exchange rate at the time of recognition. Any resulting exchange differences should be recognized in the current period’s profit or loss.

Additionally, companies should maintain a comprehensive overseas investment ledger that records the purpose, timing, exchange rate, and supporting documentation for each transaction, facilitating future audits or tax inspections.

3. Financial Reporting for the Overseas Entity and Consolidation

After the funds arrive in Singapore, the overseas entity must establish proper accounting records in accordance with local accounting standards-typically IFRS or SFRS Singapore Financial Reporting Standards.

For the domestic parent company, if it has control over the overseas entity, the subsidiary must be included in the consolidated financial statements. In August 2025, the Ministry of Finance issued a notice emphasizing the need for enhanced financial information management for overseas investments, requiring companies to ensure completeness and accuracy in consolidated financial reporting.

This means that after setting up an overseas entity, companies must establish standardized financial systems and regularly submit financial reports to the parent company. In practice, it is advisable to engage professional financial service providers to assist with complex matters such as multi-currency accounting, tax compliance, and cross-border fund management.

4. Tax Compliance and Cross-Border Capital Supervision

After funds are transferred overseas, companies must also focus on tax compliance. Under Chinese tax law, income from overseas investments must be declared and taxed accordingly. However, companies may benefit from tax credits to avoid double taxation.

In Singapore, several tax incentives were introduced in 2025 to attract foreign investment. For example, qualified technology companies may enjoy a preferential tax rate of 10%, with the first three years potentially tax-free. When planning taxes, companies should fully consider the tax treaty between Singapore and China and strategically arrange the timing and method of profit repatriation.

Additionally, SAFE maintains supervision over the subsequent use of ODI funds. Companies are required to regularly report the use of funds to SAFE, ensuring that the actual use aligns with the originally filed purposes and preventing cases of disguised capital transfers.

5. Practical Recommendations

1. Establish a Clear Mechanism for Fund Usage Documentation

Before each fund transfer, prepare a detailed investment plan and retain relevant contracts, invoices, and bank receipts after the transfer.

2. Conduct Regular Financial and Tax Audits

Both the domestic parent company and overseas subsidiaries should carry out regular internal audits. If necessary, engage third-party institutions for compliance reviews.

3. Collaborate with Professional Institutions

Work with accounting firms, tax advisors, and cross-border legal experts to ensure full compliance throughout the investment process.

4. Monitor Policy Developments

For example, SAFE’s 2025 policies encouraging ODI fund repatriation and Singapore’s subsidies for foreign enterprises should be closely followed, allowing companies to adjust financial strategies accordingly.

Conclusion

Successfully transferring ODI funds to Singapore is only the first step in a company’s internationalization journey. To truly achieve its strategic goals and avoid potential risks, a company must ensure standardized and orderly practices in terms of fund usage, accounting treatment, tax reporting, and compliance management.

For enterprises, building a robust financial management system is not only a regulatory requirement but also a foundation for stable and sustainable operations.