From business licences to opening a bank account, as more and more services shift online, real-name verification has become an essential part of company operations in China. Here's how real-name verification might affect you getting your e-chop or e-business licence in China.
Chinese offices have been promoting the application and use of electronic chops (e-chops) and electronic business licences across the country since April 2020. This change implies that hard copy company certificates, including the business licences, could soon become history. However, complications can arise if a company's representatives need to complete real-name verification before applying for and using the electronic documentation.
This article introduces the most common scenarios where foreign companies operating in China need to complete real-name verification for legal and financial representatives. This article also details the application procedure for e-business licences and e-chops to help foreign-invested enterprises (FIEs) make a seamless transfer to digital when establishing a business in the Chinese market.
E-business licence and CA certificates
CA (Certification Authority) certificates are commonly issued by the PRC SAMR (State Administration for Market Regulation) in the form of USB keys. They are used for bookkeeping, tax declaration, and annual reporting purposes.
However, as of 1st April 2021, the Shanghai SAMR stopped issuing CA certificates. All newly established companies must now apply for the so-called e-business licence, which is necessary for tax declaration and annual reporting. The implementation timing is different from city to city. For example, in Beijing, e-business licences have been issued already starting last year, while in other cities, they are not yet applicable.
E-business licences have the same legal effect and functions as hardcopy business licences and can be used in most aspects of the company’s compliance operations.
Below are the most common scenarios where legal and financial representatives require real-name verification.
E-business licence application
Legal representatives must complete real-name verification to obtain an e-business licence. If the legal representative is a foreigner, they may visit the local SAMR office in person for onsite real-name authorisation.
Alternatively, a foreign legal representative may authorise a local person to apply for the e-business licence by signing a confirmation letter and providing their (legal representative’s) email address.
Below is a quick summary of the legal representative’s real-name verification process:
“Legal representative clicks the link sent over by the SAMR, uploads certain company and personal information, scans a generated QR code by using WeChat or Alipay and then uploads more personal information through the WeChat or Alipay APP.”
The legal representatives may use the e-business licence themselves or authorise a maximum of five Chinese individuals to manage this licence.
The application of an e-business licence is not particularly new to established companies abolishing the CA certificates. Certain changes of the existing companies, such as cross-district relocation, will invalidate the current CA certificates; thus, the application of e-business licences becomes necessary.
In Beijing, the legal representative’s real-name verification can only be done at the SAMR office to e-business licences.
Applying for and using e-chops
Under the PRC regulations, e-chops may be used in the following scenarios:
- The signing of contracts, agreements, resolutions, or any other documents where the counterparty or the company itself accepts e-company chop that is legitimate under the PRC laws
- At the Bank of Communications in Shanghai as a pilot program for opening bank accounts
- In the (near) future: for company setup registration, tax-related matters, social insurance, and housing funds, and other banks which will accept the use of e-chops.
- Online application and verification of e-chop can be completed via Shanghai governmental or semi-governmental systems. Those systems also cover functions such as e-company chop management, usage, specimen verification, and formal filing with the Public Security Bureau.
Online application and verification of e-chop can be completed via Shanghai governmental or semi-governmental systems. Those systems also cover functions such as e-company chop management, usage, specimen verification, and formal filing with the Public Security Bureau.
However, only the “company chop” and the “financial chop” (under limited circumstances) can be generated electronically and verified online.
To apply for an e-chop, a company must first obtain an e-business licence or a CA certificate. Therefore, the real-name verification of the legal representative, as stated above, will also be required when applying for an e-chop.
Opening a bank account
Almost every bank in the PRC requires legal representatives to complete real-name verification by asking them to visit the bank personally and show their original passports/ID cards in view of the bank’s CCTV cameras.
Alternatively, the bank officers may visit the SAMR registered office of a company and take photos with the legal representative or call or take a video with the legal representative to confirm their intent to open a bank account.
A legal representative should also have a personal Chinese mobile phone number under their name to receive phone calls and messages from the bank. Failure to do so may cause you to have to repeat real-name verification.
Some company changes that need to be registered with the SAMR, such as relocation or a change of legal representative, may also make it necessary for the legal representative to repeat the real-name verification at the bank.
To further optimise the effectiveness of public tax services and prevent or mitigate the risks of tax law enforcement, the tax authorities in the PRC are actively promoting the real-name verifications at different stages of the taxation process.
The tax agent of a newly established company will need to conduct the real-name verification at the tax bureau to verify the company's fapiao type, obtain fapiao and a tax U-key for future tax operations.
Both Chinese and foreign legal representative and finance responsible person are required to conduct real-name verification to activate an e-business licence and other functions of the online tax platform, in particular:
- Chinese legal representative/finance responsible person may conduct real-name verification online or visit the tax bureau, while foreign legal representative and finance responsible person must visit the tax bureau with their passport to complete the real-name verification process.
- Due to the impact of the Covid-19 pandemic, some foreign representatives may not be able to visit China to complete the real-name verification process. Some local tax authorities have chosen to send a text message with a verification code to the foreign legal representative's/finance responsible person’s local mobile number for temporary verification purposes.
Company representatives must carry out real-name verification before handling any operational tax matters, e.g., applying for an extra fapiao amount. Failure to complete real-name verification may lead to slower dealings with the tax authorities in processing the company tax matters.
Integrated tax administration relies on verified real-name taxpayer information. Some local tax authorities may also have individual measures in this regard. From a compliance perspective, it is strongly recommended that legal representatives or the financially responsible person perform the real-name verification as early as possible to facilitate future tax operations.
How can Hawksford help
Hawksford is an established provider of company registration and outsourced corporate services in China. With more than 100 multilingual professionals based in Shanghai, Beijing, Suzhou, Guangzhou, and Shenzhen, we can offer the very best local knowledge to international clients, help them successfully establish WFOEs (Wholly Foreign Owned Enterprises), representative offices (ROs), and joint ventures (JVs).
With over ten years of in-depth know-how in China, we offer our clients a complete suite of setup and company secretarial services, including business licence applications, seals and licence management, and bank account opening. In addition to that, we advise clients on e-business licence and e-chops applications. We assist during the real-name verification process and other company changes. Meanwhile, we take the burden of regulatory, financial and tax compliance, and corporate governance, so you can focus on managing your business interests.
*This article was prepared by Hawksford China team and was first published on China-Britain Business Council's Focus Magazine.
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