China has specific regulations regarding the repatriation of profits out of the country. Here are some key points:
Profit Repatriation Process: Foreign-invested enterprises (FIEs) in China can repatriate profits as dividends to overseas investors. However, there are several compliance procedures to follow, including a special audit, withholding Corporate Income Tax (CIT) filing, and record filing with the tax bureau for outbound payments exceeding US$50,000.
No Extra Limits for Service Fees: There are generally no extra limits for outbound payments of service fees, as these are considered current account items.
USD 50,000 Quota: The State Administration of Foreign Exchange (SAFE) maintains a USD 50,000 quota for individuals' requests for foreign currency. During periods of high capital outflows, banks may increase scrutiny and require additional paperwork to clarify the intended use of the funds, effectively slowing capital outflows.
Repatriation Methods: Companies and individuals have multiple options for repatriating profits, each with its own prerequisites and limits. For example, individuals can carry up to RMB 200,000 or US$5,000 equivalent out of the country, but larger amounts require declaration. Companies can also extend loans to related foreign companies or use other methods to repatriate profits.
Tax and Legal Requirements: Repatriating profits involves paying a 10% withholding tax and 6.72% VAT and surcharges on interest income. The Corporate Income Tax (CIT) paid in China may be used to offset tax liability in the foreign country if a Double Tax Avoidance agreement (DTA) is in place.
These points highlight the regulatory environment and procedures for taking profits out of China.
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