ODI and Circular 37, offshore economic substance, PRC tax resident enterprise risk, related-party transactions and transfer pricing, CRS, withholding tax on repatriated profits, PE, Hong Kong/Singapore bookkeeping, founders' tax residency. 10 questions scored 0 to 2 each, for a total of 0 to 20, sorted into low, medium or high risk. You can request the full report afterwards.
Registering an offshore entity is only the starting point. What decides whether you can raise funds, list, repatriate profits and pass bank and investor due diligence is the whole compliance chain. This check uses 10 self-scored questions: yes/done scores 0, unsure scores 1, no/not done scores 2, for a total of 0 to 20, then sorted into low, medium or high risk. The questions cover the ten areas where things most often go wrong in practice.
ODI outbound investment filing (through the NDRC, MOFCOM and SAFE channels) governs how a mainland company's money and equity leave China compliantly. Where an individual's special purpose vehicle is involved, Circular 37 registration also applies. In round-trip investment or VIE structures, whether the Circular 37 SAFE registration is in order is close to a standard due diligence question in any financing. Offshore companies (BVI, Cayman and the like) also face economic substance (ESR) requirements: a shell with no staff, activity or decision-making commensurate with its income can be fined in its place of incorporation and refused or closed by banks.
Several tax issues are often overlooked. An offshore or Hong Kong company whose place of effective management is in mainland China may be treated as a PRC tax resident enterprise. Related-party transactions must follow the arm's length principle and be backed by transfer pricing documentation. Overseas accounts are subject to CRS due diligence and reporting to the country of residence. When profits are repatriated as dividends, service fees or royalties, withholding tax applies and you need to check whether a tax treaty reduces it. Foreign operations also need a permanent establishment (PE) review. Hong Kong and Singapore companies must keep books, have audits and file returns on time, and maintain a real operating footprint that matches the business. Finally, the tax residency of founders and shareholders, worldwide taxation and any renunciation plans often shape personal tax far more than the corporate structure does.
The tool rates your total as low, medium or high risk and lists every "no/not done" answer as a red flag for priority remediation. The score only reflects gaps you report yourself and is no substitute for due diligence. Even without hard red flags, "unsure" items should still be checked on the facts.
It depends on who is investing and how the shares are held. Outbound investment by a mainland company usually goes through the ODI procedures. Where a mainland individual sets up or controls an offshore special purpose vehicle that may invest back into China, Circular 37 is the key registration. The two apply to different parties; if your structure touches both, check each separately. One does not replace the other.
Some offshore jurisdictions require companies carrying on relevant activities to have adequate local staff, expenditure and decision-making to show they are not mere shells. Failing the test can lead to penalties, information exchange and even loss of tax residency. Holding companies with passive income need to assess this carefully.
If its place of effective management is in mainland China, there is a risk it will be treated as a PRC tax resident enterprise and taxed under PRC rules, including corporate income tax. The answer depends on facts such as where decisions are made, where the books are kept and where directors perform their duties, not on the nameplate at the registered address.
Deal with the red flags first: if ODI/Circular 37 is missing, assess how to regularise it; if ESR is missing, add substance or restructure; if transfer pricing and PE reviews are missing, prepare the documentation and draw clear business boundaries; if bookkeeping and audits are behind, bring the Hong Kong/Singapore accounting and tax cycle up to date. Before a financing, listing, profit repatriation or equity incentive plan, carry out formal structure and tax due diligence.