How to Repatriate Profits from China? This is a common concern for foreign investors doing business in China. Once your business is established in mainland China and you are making a profit, you will probably want to repatriate the proceeds at some point. Tax implications and tax planning are important considerations for determining the optimal profit repatriation strategy. Finding the most efficient way to repatriate your company’s profits is essential for any firm operating in China.
Transferring Money Outside of China as an Individual
Unlike the Dollar or the Euro, the Chinese currency Renminbi cannot be transferred directly. It has to be exchanged into the foreign currency first. There are limits on how much can be exchanged per day. Whereas Chinese individuals can only exchange and thus transfer USD 50,000 per year outside of China (up to USD 2,000 per day, but not exceeding USD 50,000 a year), those regulations do not exist for expats. The process of getting money overseas, however, is complicated for expats as well. There are several options to transfer money outside of China, which will be described below.
1. Local Banks. The first option is a money transfer with a local bank.
2. Exchange Agencies. Another way of transferring money overseas is via specialized companies, which are entitled to do so.
Capital and Dividend Repatriation for Companies
For foreign companies with subsidiaries in China, profit repatriation from their subsidiaries has always been an important and challenging issue. There are several ways to repatriate profit from China, the most obvious being for a company’s China-based entity to pay dividends directly to its foreign parent company. However, this is subject to certain prerequisites, only profits that have undergone annual audit can be repatriated using this channel, ensuring that the gross profit will be subject to 25 percent CIT. Dividends are subject to a further 10 percent withholding CIT when distributed to foreign investors.
It is very important to carefully plan your profit repatriation strategy, which should begin when you setup your business. In that way you can use royalties, loans, transfer pricing and other fees and cost sharing to repatriate money. Keep in mind that these are general guidelines and it is important to ask proper advice for your own specific business situation. Tannet together with its partners can investigate your case and look for an optimal legal and fiscal set-up.
Contact Us
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.comt, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
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