Cross-border money movement is usually the part of a China setup that foreign founders underestimate. The company can be registered, staffed and profitable, and still be stuck if the account structure and the foreign-exchange procedures were never planned.
Hainan's Free Trade Port framework includes measures aimed at making cross-border financial services more workable, and the multi-function free trade account arrangements often referred to as EF accounts are part of that direction.
This guide explains what these arrangements are for, what still applies regardless, and how to plan cross-border flows for a Hainan company.
Start with the flows, not the account type
The useful starting point is a map of the money, not a product name. For most foreign-invested companies there are four flows to plan:
- Capital in. Shareholder contributions from overseas into the company.
- Trade settlement. Payments to overseas suppliers and receipts from overseas customers.
- Service and intercompany payments. Fees, royalties or management charges between the China entity and related parties abroad.
- Profit out. Dividends to overseas shareholders.
Each flow has its own documentation and tax treatment. A single account type does not resolve all four, and treating them as one problem is why companies get surprised.
The account structure a Hainan company normally needs
Regardless of the framework available, a foreign-invested company in Hainan works with the standard building blocks first.
A basic RMB settlement account handles domestic operations, tax payments and payroll.
Foreign direct investment information registration, completed through a bank, records the foreign investment in the company.
A capital account is normally required to receive capital contributions from overseas shareholders, and the use of those funds is subject to the applicable rules.
Settlement arrangements for trade apply where the company imports or exports.
The free trade account arrangements sit alongside these rather than replacing them. Ask the bank to lay out the full structure before opening the first account, so the sequence does not have to be redone.
What the free trade account framework is for
The intent behind multi-function free trade account arrangements is to make legitimate cross-border activity more efficient: clearer segregation of cross-border flows, and settlement and foreign-exchange handling designed for companies whose business genuinely crosses borders. For the mechanics, eligibility and second-line quota rules, see our dedicated Hainan EF account guide.
Three things are worth being clear about.
Availability depends on the bank. These are arrangements offered by participating institutions under the applicable rules. Not every bank offers the same capability, and eligibility depends on the company's activity and profile.
They do not remove compliance requirements. Cross-border payments still require the underlying transaction to be genuine, documented and consistent with the company's business. Efficiency in processing is not an exemption from substantiation.
They are not a tax arrangement. Account structure and tax eligibility are separate questions, assessed on different criteria. A convenient account does not create eligibility for the 15% corporate income tax rate, and a qualifying tax position does not simplify bank onboarding.
If a proposal presents an account structure as a way to reduce tax or to avoid documentation, treat that as a warning rather than an opportunity.
What always applies to cross-border payments
Whatever the account framework, these principles hold.
The transaction must be real. Payments abroad need an underlying commercial substance: goods actually supplied, services actually performed, a genuine investment.
Documentation supports the payment. Contracts, invoices, and the applicable tax and foreign-exchange documentation. Banks ask for the paperwork that evidences the transaction, and assembling it after the payment is requested is the slow path.
Tax treatment follows the payment type. Dividends, interest, royalties and service fees each have their own source, withholding and VAT treatment. The contract wording and the actual transaction should be reviewed before the first payment, not after a question is raised.
Related-party terms need to be defensible. Intercompany charges should be on arm's length terms and documented as such.
Profit distribution depends on clean accounts. Dividends can only be paid out of properly determined results, which means the bookkeeping and tax filings have to be in order first.
How can a Hainan company pay an overseas supplier?
The company normally pays from its own bank account under a real purchase or service contract. Before the payment date, ask the bank which account to use and which records it will review. An EF account, if available, may change the settlement route; it does not turn an undocumented transfer into an acceptable payment.
For goods, prepare the contract, commercial invoice and applicable shipping or customs records. For services, keep the agreement, invoice and evidence of the work delivered, and confirm any tax or foreign-exchange steps with the accountant and bank. The document list depends on the transaction and the bank, so check it before promising an overseas supplier a payment date. If you are setting up an import-export business, see our trading WFOE guide.
Practical planning sequence
- Map the four flows for your business, with expected volumes and counterparty countries.
- Choose the bank with those flows in mind, before finalising the address and scope.
- Confirm the full account structure and the sequence for opening.
- Complete foreign direct investment information registration and the capital account before shareholder funds are sent.
- Set up the documentation routine for each recurring payment type at the start.
- Confirm the tax treatment of each intercompany payment type before the first one is made.
- Keep bookkeeping current, because profit repatriation depends on it.
Where companies run into difficulty
Sending capital before the structure exists. Funds arriving without the correct account and registration in place create problems that take time to resolve.
Paying from the wrong party. Contributions or payments made by an entity other than the registered shareholder or contracting party.
Improvised intercompany charges. A management fee introduced late in the year without a contract, a service record or transfer pricing support.
Assuming a framework overrides substance. Expecting an account arrangement to make an undocumented payment acceptable.
Leaving dividends until the shareholders need cash. Repatriation requires the accounts, filings and documentation to be ready, and that preparation cannot be compressed.
Related reading
- Hainan EF account: how cross-border settlement actually works
- Open a business bank account in China
- How to repatriate profits from China
- China registered capital rules and the five-year deadline
- Hainan substantive operation: what the test requires
Official sources
- State Administration of Foreign Exchange
- People's Bank of China
- 2026 Hainan Free Trade Port Investment Guide
- Hainan Free Trade Port policy updates
Account availability, eligibility and procedures are determined by the participating banks and the rules in force, and they change over time. Confirm the current position with the bank and obtain tax advice for cross-border payments.
Read our editorial standards and corrections policy
Thanks for your feedback.
