How to open offshore accounts for non-resident companies in Chinese banks?
Tags: Hong Kong, China, NRA account, Chinese banks, offshore companies.
Hong Kong is a world financial center while China is a factory center, which requires financial interaction with international partners by using offshore (Hong Kong) companies
Hong Kong, as a special administrative region of China, has become the most important financial and cultural center of Asia in recent decades. Hong Kong is the gateway for foreign businesses to low-cost manufacturing structures and the huge market potential of China. Since Mainland China is interested in attracting investment into its economy, it has created, promoted and developed an outstanding environment for non-resident companies to do business in Hong Kong.
The main advantages of using Hong Kong companies are the following:
The territorial principle of taxation - no obligation to pay taxes if the company does business out of Hong Kong; China considered to be overseas territory;
There is only one type of tax payable - income tax, and no tax on capital gains, dividends or interest (and, as mentioned above, this tax will not be paid if the profits were not made in Hong Kong);
Low taxation for doing business in Hong Kong (8.25% on the first 2 million HKD profits and 16.5% on the rest);
Ease maintenance of the company, minimal annual reporting requirements;
With all the tax preferences, Hong Kong is not an offshore zone per se and recognized and respected by companies and banks from all over the world.
Therefore, the usage of a Hong Kong company can help minimize the amount of taxes paid, as well as greatly simplify the work with Chinese partners, because companies registered in Hong Kong are considered reputable in Asia. And it should be noted that Hong Kong is not a "tax haven", so it is not included in the "black" list as offshore zone.
2) Advantages of opening an account in Chinese banks for offshore (Hong Kong) companies
If a company's business is connected with China or other Asian countries, it is more convenient to have an account in Asia for the convenience of working with partners. First of all, of course, we are talking about banks in China and Hong Kong.
However, opening an account with a bank in Hong Kong is not an easy thing to do, especially in recent years with increasing watchdog’s regulation trend. Moreover, one of the requirements for opening an account in Hong Kong is a personal visit to the bank by the director of the company. This rule is applied to all banks in Hong Kong which makes it even more troublesome and demanding.
Compared to Hong Kong, China has a number of advantages for opening a corporate bank account:
First, the requirements for opening are much lower than in Hong Kong banks;
Secondly, the account can be opened remotely, i.e. the director doesn't need to come to the bank in person;
Thirdly, if the account of a Hong Kong company is opened in China, it will be much easier for the company to obtain offshore status and avoid paying income tax.
Certainly, banks are most willing to open accounts for companies registered in Hong Kong, but in the meantime there is a list of priority jurisdictions to which banks are also glad to open accounts. Such countries include the UK, British Virgin Islands, Seychelles, Cayman Islands, Marshall Islands, Singapore and some others.
Considering the fact that for some people travelling to Hong Kong might be an extra obstacle, remote account opening in China is a more favourable option.
3) NRA account
The NRA account (Non-resident account) is opened for foreign companies in banks in China. Such an account is opened in convertible currencies (USD, EUR, HKD, etc.).
Transactions on these accounts are under simplified currency control, the submission of contracts/invoices to the bank is required only for transactions with high-risk countries.
NRA accounts can be opened by all Chinese banks, but in fact only a few major banks open accounts for non-resident companies routinely: OCBC (China), Agricultural Bank of China, Standard Chartered, HSBC, DBS, China Merchant Bank, Bank of China, etc.
Usually, opening an account requires the director to visit the bank in person, but a number of banks allow remote account opening through a visit to the bank by a local representative.
Thus, NRA account is a unique tool for handling payments both within and outside of China.
4) OCBC (China) as a perfect choice for opening an NRA account
OCBC Bank is the longest established Singapore bank, formed in 1932 from the merger of three local banks, the oldest of which was founded in 1912. It is now the second largest financial services group in Southeast Asia that has more than 470 branches and representative offices in 19 countries and regions.OCBC Wing Hang Bank (China) Limited is directly owned by OCBC Wing Hang Bank Limited, a wholly owned subsidiary of OCBC Bank based in Singapore. Headquartered in Shanghai, OCBC Wing Hang China has more than 20 branches and sub-branches across 14 cities in China.
Previously, opening a corporate account with a bank in China or Hong Kong required the director to visit the bank in person. However, the Covid-19 pandemic has made its adjustments and some banks, such as OCBC (China), have started offering a remote account opening procedure, which is a lifesaver for many companies that need to open an account in China but whose directors cannot yet get to China. The account would be opened via video interview if the bank approves the rest of the package of documents.
In addition, this bank is quite loyal to many nationalities, so there is an opportunity to open an account for companies whose directors or shareholders are citizens of Turkey, UAE, Russia and some other countries.
In addition to this, the bank has no strict criteria for the size of the share capital. If a company can provide a strong business proof, showing that the company actually has an active business, the decision on opening an account is likely to be positive.
5) Bank account opening procedure with OCBC (China)
Usually the whole procedure takes 5-7 weeks. So, let us describe it step by step:
a) First of all, the bank requests a number of documents from the client:
- Corporate documents of a company;
Several documents from company’s director (scan of a passport, address proof, CV);
Business proof, that might be different contracts, invoices, bank statements from another bank, company website, presentation of the services or photo and description of the products etc. If the company is new, then it’s possible to provide a business proof of a related company.
b) Then it usually takes 3-4 days to receive pre-approval from the bank that means the bank is ready to open an account for this company and the account opening procedure can be continued;
с) After reviewing the client's documents, the bank prepares account opening forms and sends them to the client by post (usually DHL). The client just needs to sign these forms, attach copies of corporate documents and send them back to the bank.
d) The final step is a video interview with the bank to confirm the identity of the director. Previously it was necessary for the director to come to the bank in person, and now there is an option for a video interview. If the interview is successful, the bank opens an account for the client.
e) After about 5 working days, the bank issues tokens and sends them to the client.
However, the remote opening procedure has its own peculiarities. According to bank rules, within 2 months after opening an account, the Director of the company must visit the bank with the passport and company documents to confirm the opening and the account continues to work. But if the director is unable to visit the bank by this time limit, for the final verification an attorney can be appointed an attorney who will come to the bank with the company documents, passport of the director and confirm the opening of the account.
If the client doesn't know anyone in China who can act as an attorney, an intermediary agency can provide such a person. After verification through an attorney, the director doesn't need to come to China afterwards. Moreover, if the client from the beginning agrees to an attorney service, he can send all the documents, including the documents for the appointment of an attorney and the original passport to the bank before opening an account. So, when the account is opened, the attorney comes to the bank (not two month later), and in that situation the director doesn’t even have to go through a video interview!
If the account is not verified within two months of opening, it will be suspended until such time as the verification is performed.
6) Advantages of opening with OCBC bank
So, let's look at the benefits of opening an account with OCBC (China) one more time:
Remote account opening option in case the director is unable to enter China and visit the bank in person;
Quite simple account opening procedure: the client only needs to provide a number of documents of the company and the director, and then sign the forms sent by the bank and send them back;
No need to provide notarized, legalized or apostilled documents;
Possibility to open an account for companies incorporated in a number of jurisdictions other than Hong Kong and for various nationalities including Turkey, Russia, UAE, etc;
High level of confidentiality guaranteed by the bank: Chinese banks do not exchange information with the tax authorities of the most countries;
No need to show the ultimate beneficial owner of the company: the bank asks only for information about the director and shareholder of the company;
Fast and easy communication with the bank manager: after opening an account a personal bank manager is provided to the company, and communication with him is proceed in a personal chat room created only for your company;
Chinese companies may not be on the list of partners of the company who wants to open an account: working with Chinese counterparties is not a mandatory condition for opening an account;
The possibility to use all financial instruments, including L/C, on the same footing with resident companies;
Fast payments with Chinese suppliers and customers: using a Chinese bank, it is easy and fast to make payments with partners in China.
7) Conclusion
To summarize, Hong Kong is the largest financial center in Asia and a port to the huge Chinese market. Using a Hong Kong company in China can help to optimize taxation, and an NRA account opened with a bank in China may help to do this as well.
Account opening in OCBC Bank (China) is an excellent option for many companies incorporated both in Hong Kong and in other jurisdictions since this bank is a reliable financial structure, time-proven, and has a number of advantages such as possibility of remote account opening, loyal attitude to many nationalities, simple opening procedure, high level of confidentiality, etc. Using such an account makes doing business easy both in and out of China!
Sino Services company will be glad to help you with opening a corporate account with OCBC and other banks in China, Hong Kong, Singapore, Malaysia and Indonesia!