How to Pay & Use Registered Capital Under the New Company Law From July 1?

Since July 1st, China’s new Company Law has officially taken effect! The big news for entrepreneurs is that the registered capital must now be fully paid within five years upon company registration.

How to pay the registered capital?

If the company’s shareholders are individuals, they need to transfer funds from their personal accounts to the company’s corporate account;

If the company’s shareholder is another company, the transfer from the shareholder’s company account to the company’s corporate account must be marked as “investment funds”. Then, the stamp tax must be declared and paid at the tax bureau.

The registered capital can be paid in one lump sum or in batches  within five years. The key is to ensure that all the paid-in capital is completed within five years.

Once the capital is paid in, can you use it for personal purposes?

Yes, but with caution! This money is primarily meant for investment, company growth, and daily operations.

1. Investment

You can use the registered capital to purchase office space, vehicles, production and transportation equipment, and more.

2. Daily operational expenses

From equipment purchases to payroll, taxes, invoices, service fees, rent, and travel expenses, you can draw from this fund.

3. Debt repayment

If your company owes money to lenders or shareholders, you can utilize the registered capital for repayment.

However, always adhere to legal regulations when using registered capital. Ensure every expenditure is properly documented with legitimate invoices and receipts  to facilitate audits by tax authorities.

Remember, bosses, the company’s funds are not your personal funds. Always maintain accurate records and sound financial management practices!