The prohibition on the investment in loop structures has now been removed. Inward foreign loans received from foreign lenders will no longer be subject to the restriction that:.
Thus all clients who are either currently invested in loop structures or who have been unable to make investments as a result of the loop structure restrictions, should carefully consider the impact of the proposed relaxations on their current or future investments. The changes to the exchange control rules do not affect section B. These changes are also not industry specific, as is the case with B.
These structures must still be regularised with the FinSurv. Additionally, where assets are contributed by a South African corporate to an offshore structure FinSurv approval will still be required as this would continue to constitute an externalisation of South African assets.
It is particularly important for investors to seek professional legal advice regarding the impact of the proposed tax changes on existing loop structures. This is because the proposed changes are intended to address potential tax leakage arising from the relaxation of loop structures.
Article 30 In operations of foreign exchange business, financial institutions shall subject themselves to the inspection and supervision by the exchange control department. Financial institutions engaging in foreign exchange business shall file with the exchange control department their foreign exchange balance sheets, foreign exchange profit and loss statements and other financial accounting statements and data.
Article 31 For terminating the operation of foreign exchange business, financial institutions shall apply to the exchange control department for approval. Financial institutions approved to terminate the operation of foreign exchange business shall make liquidation of foreign exchange creditor's rights and debts, and hand in the foreign exchange business license for cancellation.
Chapter V Renminbi Exchange Rates and Exchange Market Article 32 A single managed floating system on the basis of the supply and demand in the market shall be adopted to the Renminbi exchange rates. The People's Bank of China shall, according to the prices shaped in the exchange market among banks, publish the exchange rates between Renminbi and major foreign currencies. Article 33 Foreign exchange market transactions shall follow the principle of openness, fairness, impartiality and good faith.
Article 34 The currency varieties and forms of foreign exchange market transactions shall be specified and adjusted by the exchange control department of the State Council.
Article 35 The authorized bank for dealing in foreign exchange and other financial institutions engaging in foreign exchange business are transactors in the foreign exchange market among banks.
The authorized bank for dealing in foreign exchange and other financial institutions engaging in foreign exchange business shall determine the foreign exchange buying and selling prices for their customers and handle the foreign exchange business according to the rates and floating ranges published and specified by the People's Bank of China.
Article 36 The exchange control department of the State Council shall exercise supervision and administration on the foreign exchange market throughout the country according to law.
Article 37 The People's Bank of China shall exercise adjustment and control with regard to the foreign exchange market according to the needs of the monetary policies and the fluctuations of the foreign exchange market.
Financial institutions engaging in foreign exchange business beyond the approved scope without authorization shall be ordered to make corrections by the exchange control department with confiscation of their illegal earnings, if any, and a fine from one to five times the illegal earnings, or a fine from , to , yuan if there is no illegal earnings.
Where the circumstances are serious or no corrections have been made within the specified time, they shall be ordered to make consolidation or be revoked of their foreign exchange business licenses by the exchange control department. Where a crime is constituted, they shall be investigated for the criminal responsibility. Article 41 The authorized bank for dealing in foreign exchange who fails to handle the foreign exchange settlements or sales in accordance with provisions of the state shall be ordered to make corrections and criticized by circulating a criticism notice by the exchange control department with confiscation of their illegal earnings and a fine from , to , yuan.
Where the circumstances are serious, they shall be suspended from the business of foreign exchange settlements and sales. Article 42 Financial institutions engaging in foreign exchange business who violate the control of Renminbi exchange rates, foreign exchange loan and deposit interest rates or foreign exchange market, shall be ordered to make corrections and criticized by circulating a criticism notice by the exchange control department with confiscation of their illegal earnings, if any, and a fine from one to five times the illegal earnings, or a fine from , to , yuan if there is no illegal earnings.
Where the circumstances are serious, they shall be ordered to make consolidation or be revoked of their foreign exchange business licenses by the exchange control department. Article 46 Domestic institutions who, in violation of the administration on foreign exchange accounts, open foreign exchange accounts inside or outside China without permission, lend or transfer their foreign exchange accounts, use each other's foreign exchange accounts in collusion, or use the foreign exchange accounts for other purposes than those approved shall be ordered to make corrections and criticized by circulating a criticism notice by the exchange control department with cancellation of their foreign exchange accounts and a fine from 50, to , yuan.
Article 47 Domestic institutions who, in violation of the administration of foreign exchange verification and cancellation, forge, alter, lend, transfer or repeatedly use export verification and cancellation certificates, or fail to go through the specified verification and cancellation procedures shall be given a warning and criticized by circulating a criticism notice by the exchange control department with confiscation of their illegal earnings and a fine from 50, to , yuan.
Article 48 Financial institutions engaging in foreign exchange business who violate provisions of Article 28 or 38 of these Regulations shall be ordered to make corrections and criticized by circulating a criticism notice by the exchange control department with a fine from 50, to , yuan. Article 49 Where any party concerned refuses to accept the penalty decision made by the exchange control department, he may, within 15 days from receiving the notification of the penalty decision, apply for reconsideration to the exchange control department at the immediately higher level, which shall make a reconsideration decision within two months from receiving the reconsideration application.
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