May 2024 Monthly Tax Update for China

The People’s Bank of China and the State Administration for Market Regulation have issued the Administrative Measures on Beneficial Owner Information to enhance market transparency and prevent money laundering. Entities must record beneficial ownership information through registration systems by November 1, 2024. There are exemptions for certain entities. This system aims to improve business environment and prevent irregularities.

The People’s Bank of China (PBOC) and the State Administration for Market Regulation (SAMR) have jointly issued the Administrative Measures on Beneficial Owner Information (hereinafter referred to as the “Measures”), which will take effect from November 1, 2024.

These measures are designed to enhance market transparency, maintain market and financial order, and prevent money laundering and terrorist financing activities.

The Measures require entities other than individually owned businesses, including companies, partnerships, and foreign company branches, to record beneficial ownership information through relevant registration systems after November 1, 2024. Enterprises registered before November 1, 2024, have a one-year grace period, meaning they must complete beneficial ownership information filings before November 1, 2025.

Additionally, for registered entities with a registered capital not exceeding RMB 10 million (or its equivalent in foreign currency) and where all shareholders or partners are natural persons, there is an exemption. If there are no natural persons other than shareholders or partners exercising actual control over the entity or benefiting from it through means other than equity or partnership interests, these eligible entities can read and confirm a commitment letter in the system to be exempted from further reporting of beneficial ownership information.

It’s important to note that there may be more than one natural person considered a beneficial owner and any natural person meeting the criteria should be filed as a beneficial owner. If none of the criteria can identify a beneficial owner, the person responsible for daily management should be treated as the beneficial owner.

As a significant measure to optimize the business environment in China, the establishment of the beneficial ownership information filing system will enhance information symmetry and mutual trust among business entities, improve transaction security and efficiency, and help prevent irregularities such as shell companies, false capital injections, and nested shareholding. This system aligns with established international practices.

This article is republished from China Briefing. Read the rest of the original article.

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