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Everything comes to an end. Western people sometimes decide that leaving China is in their best interest. Though the reasons for leaving China can be diverse and are often private, the actual steps which need to be taken by the company and by the person leaving are dictated by the country. While there might already be focus on the steps after China, one must not forget five important steps everyone has to take before leaving China. Importantly, these steps will not only help the company stay compliant, but will also have personal benefits to the person leaving.
Change Legal Representative
There is a chance the person is leaving has been in charge in China as the legal representative of a company. While this position comes with great power, it also comes with great responsibility. Before leaving China, for the continuity of the company, the responsibility must be passed on, since this will ensure the person is no longer legally responsible for what is happening in the company. It is especially beneficial if the individual would like to return to China in the future, without having to worry what has happened with the company during their absence.
To officially change the legal representative, there are roughly three steps that need to be taken. These steps might differ from city to city, however in general they are the same. These administrative steps are:
- The name of the legal representative on the business license needs to be changed
- The tax bureau needs to be notified about the new legal represenative
- The legal representative for the bank accounts needs to be changed
Of course, it is not possible to pass on a legal representative status when there is no successor. As China is modernizing and bureaus are using technology more often, some of these steps can be done electronically when your city allows this. Otherwise, both the current and future legal representative needs to be present at the sign over. It is important to understand that handing over this responsibility gives the successor almost complete control over the company. So, choose wisely.
Closing the Company
When passing on the legal representative is not an option, or if there are more rigorous reasons for leaving China, closing the company is highly recommended. Some reasons for closing a company before leaving China are:
- Taxes keep accruing
- The office address requires to stay active
- The company has a responsibility to file taxes
- The company does not go dormant when there is no business activity
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In other words, not closing the company can be very costly. The nine specific steps for closing a company are described in our previous article, which can be found here. Please keep in mind that even during the closing process the business address needs to be active. Therefore, a company needs to keep paying rent during the process of cancellation. Especially when an individual wants to return to China at some point without having to pay big outstanding invoices, we recommend to close your company. Keep in mind that this step can take up to two years.
Leaving China with a Chinese pension
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When having worked in China on a work permit there is a good chance social insurance was paid. It is most likely that this part of the insurances can be returned to you when leaving China. Employers and employees are expected to pay social insurances and taxes for every salary. The amount that is paid is part of the total cost a company pays for an employee.
Two social insurances can be claimed when leaving China, these are:
- The employee’s part of the pension
- 5% of the total medical fund paid by the employer and employee
Unfortunately, many people forget that reclaiming these funds is an option. Missing this would be a shame as it could amount to a significant sum of money. Please be aware that the funds will be transferred to your bank account in China, so it is important this one is not closed yet!
Close Bank account(s)
Closing a bank account in China is not very difficult, however it is important because it will keep racking up charges even if one does not live in China any more. In order to close a bank account you must go to the same bank branch as where you have opened your bank account with your passport and bank cards. Only this bank will have the right documents to close your account. Please keep in mind that if this is not an option the process of closing your bank account can take quite a while, since the new location first has to receive the right documents from the old branch or the head office.
For the above mentioned steps it is often necessary to still have a bank account. Therefore, we suggest leaving it active until all the other steps in the process of leaving China are finished.
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Cancel SIM Card
Cancelling your SIM card when leaving China might not seem very important, however if you want to return to China in the future and get a new one it definitely must not be forgotten. If the SIM card is not cancelled it will keep being charged by the Chinese provider. Furthermore, after 90 days the provider will take the number back and blacklist you. This will give you trouble when you want to apply for a new SIM card in the future.
To cancel a SIM card you must go to the original location you registered it at with your SIM card and passport. There the process itself is quite sort and while only take a couple of minutes.
Similarly to a bank account having a working phone subscription can be necessary and useful for the other steps in the process of leaving China. Therefore, we also suggest leaving it active until all the other steps in the process of leaving China are finished.
Doing business in China requires everyone to take many steps in order to be compliant. Even leaving China is not something which should be done haphazardly. If you are unsure about how to leave, or need some help with any of the steps above, feel free to reach out to us
- Top 10 China Business Articles 18 February 2019
- Cross-Border E-commerce in China 17 April 2020
- 6 Steps To Growing a Company in China 10 February 2019