Withholding Tax in China

Withholding Tax in China
Updated Regulations

Key Concepts & Regulations

Key concepts and regulations
What is withholding tax?
Withholding tax is not a type of tax but a method of collecting taxes.
Many kinds of taxes can be withheld:
Individual Income Tax
Corporation Income Tax
Stamp Duty, business tax etc.

When is the tax withheld?
The receiver of payment is not a registered tax payer
in China.
The tax is paid by the payer on behalf of the receiver.

Today’s focus:
Regulations and payment procedures concerning withholding tax when payment is made out of China for non-trading related activities.
E.g. Dividend, interest, royalty, service fee, property transfer payments, etc…

Two taxes are usually withheld:
Income tax for a corporation or an individual
Corporate Income Tax (CIT)
Individual Income Tax (IIT)
Business tax

CORPORATE INCOME TAX is determined by:
the nature of payments
the number of days in China
the service venue

Corporate Income Tax

Corporate Income Tax
* Must provide tax bureau with relevant supporting documents if:
- The seller has controlling power of the intermediary company;
- The tax rate in the jurisdiction of the intermediary company is less than 12.5% or tax exempted.
Tax authorities may disregard the existence of an intermediary company if the purpose of this company is for tax avoidance. Therefore, the sale of the company will be subject to Chinese tax.

INDIVIDUAL INCOME TAX is determined by:
the nature of payments
the number of days in China
the service venue

Individual Income Tax

Business Tax is determined by:
whether the transaction is subject to business tax or not.

Business Tax

Business Tax
* Business tax paid cannot be regarded as deductible expenses for corporation income tax.

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Withholding Tax in China

by NCO China on Jan 19, 2011

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Withholding Tax in China — Presentation Transcript