How Can Overseas Chinese Inherit and Remit Liquidated Assets from China?

Many people are aware of the $50,000 annual individual foreign exchange limit in China, leading to the misconception that exceeding this amount means it is impossible to remit funds abroad in one go. To bypass this limit, some resort to illegal methods, such as using others' foreign exchange quotas, which not only increases legal risks but also fails to meet the need when large amounts are involved. In practice, many overseas Chinese are unaware that China's foreign exchange regulations include an inheritance transfer system and an immigration transfer system, allowing foreigners or those with foreign citizenship to legally transfer domestic assets abroad. The "Interim Measures for the Administration of the Transfer and Payment of Personal Property Abroad" issued by the People's Bank of China in 2004 stipulate the inheritance transfer and immigration transfer systems. According to these regulations, foreigners inheriting property can apply for inheritance transfer to the foreign exchange administration after liquidation, even if the liquidated assets far exceed $50,000. Upon approval by the foreign exchange administration, the designated bank can handle the foreign exchange purchase and remittance business.
It should be noted that foreign residents only have one opportunity to apply for inheritance transfer.

Relevant Regulations:

According to Article 2 of the "Interim Measures for the Administration of the Transfer and Payment of Personal Property Abroad":
· Immigration Transfer: Refers to the act of a natural person who moves from mainland China to a foreign country, or settles in the Hong Kong Special Administrative Region or the Macau Special Administrative Region, to liquidate their legitimate property in mainland China acquired before obtaining immigration status, and purchase and remit foreign exchange through a designated bank.
· Inheritance Transfer: Refers to the act of a foreign citizen or a resident of the Hong Kong or Macau Special Administrative Region to liquidate inherited domestic assets and purchase and remit foreign exchange through a designated bank.

How to Apply for Inheritance Transfer:

1. Acceptance Agency:

Applicants must apply to the foreign exchange bureau at the last place of residence of the deceased.

2. Required Documents (e.g., Beijing):

Application Conditions:
· Applicant must be a foreign national.
· The deceased must have had Beijing household registration(Hukou).
Documents:
· Written application, including an "Application Form for Personal Property Transfer Business."
o The application should include the applicant's basic information, relationship with the deceased, the deceased's household registration, reasons for applying for inheritance transfer, and detailed information on the source and liquidation of the deceased's property. A two-inch color photo (no specific background required) is also needed.
· Applicant's identification documents.
o For foreign nationals: Valid foreign passport or other nationality proof, and resident ID or other valid ID from the country of residence. Additionally, a proof of settlement issued (or certified) by the Chinese embassy or consulate in the country of residence.
o For Hong Kong or Macau residents: Permanent resident ID or other valid ID, and Mainland Travel Permit or Special Administrative Region passport.
o For Taiwanese residents: Taiwanese resident ID or other valid proof of residence, and Mainland Travel Permit or other exit-entry documents.
· Proof of inheritance (including but not limited to inheritance notarization, will notarization, court judgment, etc.).
· Proof of the deceased's property rights (e.g., property ownership certificate, real estate contract, demolition compensation agreement, contract of lease, property transfer agreement, etc.).
· Applicant’s proof of property ownership after transfer, including net-signed contract for sale, and new property ownership certificate (or notarized application form for real estate registration stamped by the Beijing Municipal Planning and Natural Resources Commission).
· Original tax certificates issued by the tax authority, including but not limited to: original tax bill, tax payment certificate, tax proof for inherited property and cash, etc.
· If entrusted to others, a power of attorney and identification documents of the agent must be provided, including the agreement content and key information such as agent’s and client’s ID numbers and signing dates, signed by both parties.

Practical Issues:

These regulations provide a legal way for foreign citizens or those with immigration status to remit legally acquired property from China. However, in practice, some issues still arise.
Case Overview: Mr. Zhang went abroad to study and work, obtaining permanent residency in 2005. In 2019, he inherited and liquidated a property in China and became a foreign citizen in 2020. After the pandemic, he returned to China to remit the sale proceeds abroad. Despite confirming the possibility with the foreign exchange administration, he was told in person that he couldn’t apply for inheritance transfer because he wasn’t a foreign citizen during the inheritance process. This reveals two potential interpretations of the inheritance transfer definition:
1. Broad Interpretation: Any foreign citizen can liquidate and transfer inherited domestic assets regardless of their status during inheritance or liquidation.
2. Narrow Interpretation: Only assets inherited by a foreign citizen can be transferred. The Beijing foreign exchange administration adheres to this view.
Following the narrow interpretation, foreign citizens like Mr. Zhang, who legally inherit assets in China, would face obstacles in remitting funds abroad.
Article 15 of the "Interim Measures for the Administration of the Transfer and Payment of Personal Property Abroad" states that the People's Bank of China is responsible for interpretation. Clarification on practical issues is expected.

Additional Tips:

In property sale transactions, both parties often split the total price into the sale price and the furniture/renovation cost to reduce taxes. This may appear beneficial initially but poses significant problems during inheritance transfer as tax authorities won’t include the furniture/renovation cost in the tax certificate, making it impossible to remit those funds legally.

For more inofrmation, please feel free to contact
David Gao, Attorney at Law

Tel: 86 13611158067
Email: gaohexin@163.com