There is a very common structure in the cross-border business community: registering a company in Hong Kong and then using that Hong Kong company to hold a controlling stake in a company on the mainland.

Historically, the purpose of doing so was clear—to take advantage of tax incentives for foreign-invested enterprises and reap the policy benefits of “fake foreign investment.”

Following the implementation of Order No. 837, the compliance foundation for this business model was completely undermined.Return investments have been explicitly included within the scope of outbound investment regulation; structures lacking valid ODI procedures will face compliance risks in both mainland China and Hong Kong.

If you or your clients are using this architecture, we recommend reading this article carefully. There’s a link to a free assessment at the end of the article—be sure to claim it.

I. What Is Return Investment?

Return Investment = Domestic residents/enterprises establish a company overseas → The overseas company then invests in establishing a business back in China.

Typical Architecture:

This structure is extremely common in the cross-border e-commerce sector. Many sellers have their operational entities based in mainland China, while their payment-receiving entities are based in Hong Kong—and then use the Hong Kong company to hold a controlling stake in the mainland company, creating a “fake foreign-invested” shell.

II. Three Core Risks Facing Return Investments Under Order No. 837

Risk 1: Lack of ODI procedures; the architecture itself is non-compliant

When you established your Hong Kong company from within mainland China, you did not file for ODI registration (because at the time you thought it was “just setting up a company”). Following the implementation of Order No. 837, the entire chain—from source to end—has been brought under regulatory oversight. An overseas company without ODI registration that goes on to hold a controlling stake in a mainland company—that entire chain is operating “unprotected” from start to finish.

Risk 2: Freeze by the Bank

When conducting KYC and anti-money laundering reviews, banks will look beyond a company’s shareholder structure. If they discover that your Hong Kong company is an “offshore shell company” owned by the ultimate beneficial owner and lacks ODI filing documents, the bank has the right to freeze the account and restrict transactions.

Risk 3: Retroactive Tax Assessments by the Tax Authority

When the Mainland tax authorities conduct a review of related-party transactions, if they discover “transactions lacking commercial substance” between your domestic company and its Hong Kong holding company (such as profit-shifting arrangements like cost sharing or brand licensing fees) without supporting ODI and transfer pricing documentation, you will face back taxes and fines.

III. At a Glance: The Difference in Return on Investment Before and After Order No. 837

IV. Three Pathways for Compliance Remediation

Option 1: Reapply for ODI Filing (Recommended)

If your Hong Kong company has a genuine business record, you should act quickly to complete the ODI filing before Order No. 837 takes effect.

Applicable conditions:

• The Hong Kong company has business transactions and operational records.
• The source of funding is clear, and the industry is not subject to foreign investment restrictions.
• The company hasn't been in business for very long (the sooner you file the retroactive registration, the higher the approval rate).

Action: Submit an ODI filing application to the National Development and Reform Commission and the Ministry of Commerce → Register the transaction with the State Administration of Foreign Exchange → Compliance completed.

Option 2: Restructuring—Transferring the Hong Kong Company to a Mainland Chinese Entity

If the conditions for reissuing an ODI are not met (e.g., the company has been in operation for too long or its cash flows are complex), you may consider restructuring the company.

Proposal: Transfer the individual’s equity interest in a Hong Kong company to an affiliated enterprise in mainland China that has completed ODI filing. The mainland enterprise becomes the parent company of the Hong Kong company, and the individual’s ownership becomes indirect.

Applicable conditions:

• Domestic affiliated companies are operating normally and have independent business operations.
• Capable of completing ODI registration or already has a record of ODI registration

This approach is more flexible than directly reapplying for an ODI, but it requires addressing the tax implications of the equity transfer at the same time.

Path 3: Break It Down—Disrupt the Return Investment Chain

Break down the structure in which a Hong Kong company holds a controlling stake in a mainland company into two separate entities, thereby severing the round-trip investment chain.

Proposal: The mainland company will revert to being wholly domestically owned (with shares held directly by natural persons), while the Hong Kong company will operate independently, handling functions such as collections and brand licensing. Related-party transactions between the two companies will be conducted through genuine commercial contracts (such as service trade and licensing agreements).

Applicable conditions:

• Mainland companies are inherently capable of reverting to a domestically-owned structure
• There are indeed genuine business dealings between the companies in the two locations.

This approach takes the longest and involves the most complex plan, but it offers the highest level of compliance—it meets the requirements of Order No. 837 while preserving the flexibility to operate in both locations.

If you have any questions, please feel free to contact us:Cell phone: 18676749275 ｜ WeChat: qcygscszk

V. Which path should your architecture take? Don’t guess—let the experts help you decide.

All three approaches sound reasonable, butEvery company’s situation is different—the length of time a Hong Kong company has been in operation, its business turnover, the source of its capital, its industry classification in mainland China… Any one of these variables can affect the choice of the final solution and the likelihood of approval.

The cost of making your own judgment is too high; if you choose the wrong path, at best your application will be rejected and you’ll waste several months, and at worst, you’ll trigger an audit risk.

VI. Qi Cai Ying: Experts in Compliance for Return-Investment Structures

Qicaiying Group has specialized in cross-border tax and financial compliance and structuring for over 10 years, offering:

• ✅ Compliance Assessment of the Return Investment Structure: Assess the risk level of the existing architecture under Order No. 837
• ✅ ODI Filing Reissuance Agency Services: If the conditions are not met, conduct a feasibility assessment before proceeding.
• ✅ Organizational Restructuring Plan: Designing the Optimal Transition Path from “Fake Foreign Investment” to a “Compliant Structure”
• ✅ Transfer Pricing Documentation: Provide compliance documentation to support related-party transactions

🔍 Compliance Assessment of Return Investment Structures

Want to know how much compliance risk your Hong Kong-to-Mainland China corporate structure poses under Order No. 837?
Not sure whether to go through the reissuance, reorganization, or spin-off process?
Contact us today to schedule a free, one-on-one professional assessment.

The evaluation includes the following:

• Risk Level of the Current Architecture (Low/Medium/High)
• The Best Remediation Path for You (with Reasons)
• Optimal Timeline (Avoiding Peak Review Periods)

If you have any questions, please feel free to contact us:Cell phone: 18676749275 ｜ WeChat: qcygscszk

Notes when adding “Architecture Assessment” , Qicaiying Consulting will arrange for a senior expert to conduct an in-depth assessment for you.
Spots for this free assessment are limited and will be allocated on a first-come, first-served basis, so we recommend securing your spot as soon as possible.

About Enterprise Caiying Group

Established in 2015 and headquartered in Shenzhen, Qicaiying Group specializes in providing one-stop financial, tax, and corporate compliance services to cross-border e-commerce companies and businesses expanding overseas. Its services cover Hong Kong/ overseas company registration, bank account opening, cross-border financial and tax compliance, ODI filing, structural planning, compliance rectification for return investments, VAT/EPR registration, bookkeeping services, and corporate identity planning. The group has served over 500,000 enterprises to date.

If you have any questions, please feel free to contact us:Cell phone: 18676749275 ｜ WeChat: qcygscszk