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China’s move towards e-chops and real name verification

by Robynne Tindall
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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 license in China

Chinese offices have been promoting the application and use of electronic chops (e-chops) and electronic business licences since April 2020. This change implies that hard copy company certificates, including 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 electronic documentation.

In this article, Hawksford introduces the most common scenarios where foreign companies operating in China need to complete real-name verification for legal and financial representatives. The 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.

launchpad CBBC

About e-business licences and CA certificates

Certification Authority (CA) certificates are commonly issued by the State Administration for Market Regulation (SAMR) in the form of USB keys, and used for bookkeeping, tax declaration and annual reporting purposes. However, as of 1 April 2021, the Shanghai SAMR stopped issuing CA certificates, and all newly-established companies must now apply for the so-called e-business licence, which is necessary for tax declarations and annual reporting. 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 in order 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 Chinese person to apply for the e-business licence by signing a confirmation letter and providing their (the legal representative’s) email address. A legal representative may use the e-business licence themselves, or authorise a maximum of five Chinese individuals to manage the licence.

A foreign legal representative may authorise a local Chinese person to apply for the e-business licence by signing a confirmation letter and providing the legal representative’s email address

Applying for and using e-chops

Under 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 an e-chop that is legitimate under PRC laws
  • At the Bank of Communications in Shanghai as part of a pilot program for opening bank accounts
  • In the (near) future: for company set-up registration, tax-related matters, social insurance and housing funds
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Online application for and verification of e-chops can be completed via Shanghai governmental or semi-governmental systems. These systems also cover functions such as e-company chop management 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.

In order 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 China requires legal representatives to complete real-name verification by asking them to visit the bank personally and show their passport/ID card in view of the bank’s CCTV cameras. Alternatively, 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 number under their name in order to receive 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 real-name verification at the bank.

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Tax registration

In order to further optimise the effectiveness of public tax services and prevent or mitigate the risks of tax law enforcement, the tax authorities in China are actively promoting real-name verification at different stages of the taxation process.

The tax agent of a newly established company will need to conduct real-name verification at the tax bureau in order to verify the company’s fapiao type and obtain fapiao and a tax U-key for future tax operations.

Both Chinese and foreign legal representatives and finance personnel are required to conduct real-name verification to activate an e-business licence and other functions of the online tax platform. Examples include:

  • Chinese legal representatives/finance personnel may conduct real-name verification online or visit the tax bureau, while foreign legal representatives/finance personnel must visit the tax bureau with their passport to complete the real-name verification process
  • Considering 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 personnel’s Chinese mobile number for temporary verification purposes
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Business operation

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 finance personnel perform real-name verification as early as possible to facilitate future tax operations.

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