On the Issue of Adjusting RMB by Foreign Exchange of Foreign Capital

Postdate: 2016-11-08

Foreign investment in foreign-funded enterprises shall normally be invested in foreign currencies as capital stock and must pay in full its statutory capital registered in the government sector, that is, the registered capital, in accordance with Chinese laws and regulations. The form of payment of share capital may be in the form of a physical or a cash form, except as otherwise provided in an enterprise contract (or agreement). It may be fixed assets, liquid assets or intangible assets. assets. Depending on the acceptance of the business (including investors). This article only on foreign investment in the current part of the conversion of the problem, that is, the issue of swap foreign exchange share capital, to talk about personal views.


1. There is no conflict with the existing legislation. According to the laws of the People's Republic of China, a shareholder of a foreign-related enterprise may carry on business activities as a normal legal person, provided that he has paid the statutory capital registered in the government registration and management authority as the registered capital. And the paid-up capital embodied in the registered capital shall be entrusted to the Chinese CPA for verification and verification in accordance with the provisions, that is, to carry out the statutory capital verification procedures. As a capital verification to determine the amount of foreign investment, naturally formed the assets of enterprises exist, to participate in corporate capital movement. As long as the registered capital is not withdrawn during the effective period of operation (except for the approval of the government), that is to say, if the accounting treatment does not directly or indirectly reduce the "paid-in capital" project, its normal capital movement, including the conversion of foreign currency and Renminbi Activities, in the present is not inconsistent with the provisions of our laws.


Second, in line with normal business rules. As a foreign investment in equity, it embodies the company's assets (including fixed assets, current assets and intangible assets), fixed assets in a certain period of time still retains the physical form of the original, and intangible assets is only a conceptual Of the intangible patent exists, but the current assets, as the name suggests is to carry out the movement, that is to say can participate in the normal business capital movement, that is, from one form into another form, is the main material basis for business activities one. Therefore, regardless of the foreign currency or RMB content embodied in the current assets can only revolve around the normal business activities of enterprises, enterprises due to the balance of foreign exchange needs, the foreign exchange and RMB legitimate swap is consistent with the principle of capital movement, is a normal operation Activities.


Third, the accounting treatment of the correct embodiment. As the accounting treatment of foreign exchange adjustment, China's accounting principles have been clearly defined, that is, the swap price and the accounting price (exchange rate) the difference between the exchange gains and losses can be directly or indirectly (ie deferred items) column As a profit and loss treatment, in order to correctly reflect the business activities of the entire situation. This part of the foreign exchange adjustment of course, including the investment part of the treatment (see the State Administration of Taxation in February 1990 Wang Shu tax [1990] 25 document requirements). In view of the distinction between "business profit and loss" and "business profit and loss", so in the display of accounting statements, the profit and loss of the part of the independent reflection, so that the business results of the enterprise to make a correct understanding and analysis and evaluation.


Fourth, the tax implications. Foreign exchange as a foreign currency and RMB or other foreign currency conversion - that is, equity swap, whether transferred or transferred out of the exchange will also produce the same difference. And the difference as long as the grams are reflected in the profit and loss, then the company's operating profit and loss will accurately reflect, that is in the calculation of "taxable income" in the correct inclusion of the treatment. However, in the enterprise when the proceeds of the current foreign exchange into the deferred income, it may hide a false loss or false profit, it would have to analyze the current foreign exchange swap is required in accordance with the normal operation of the enterprise Foreign exchange balance to deal with it.


To sum up, China's foreign-related enterprises will convert the share capital of the shareholders of the RMB foreign exchange swap business, as long as it is in accordance with the normal business needs of the foreign exchange balance to deal with, in accordance with the statutory procedures for transactions, the correct accounting principles of exchange gains and losses , Then, this fund movement is also a normal economic activities, in line with the law of the normal turnover of capital does not affect the healthy development of foreign-related enterprises. (From "Foreign Taxation" 1990 the tenth period)