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Offshore payment tax filing is a prerequisite for banks to process applications for cash remittances that exceed a specific limit and meet certain criteria. Currently, when an individual or organization in China makes a single payment of more than the equivalent of USD 50,000 to a foreign entity, the payer is required to file a foreign payment tax record with the State Administration of Taxation (SAT), a branch of the local tax authority.
What is a tax filing for foreign remittances?
The filing of offshore payments and disbursements is a process jointly required and managed by the State Administration of Taxation (STA) and the State Administration of Foreign Exchange (SAFE) to monitor the flow of foreign currency capital and to ensure the stability of the country's tax revenues.
Not all outbound payments are subject to the obligation to file a tax return; only outbound payments above a certain amount and meeting certain conditions are subject to the obligation to file a tax return. For eligible transactions, the filing of tax returns for outbound payments is a prerequisite for banks to process applications for cash remittances.
What kind of outbound payments need to be declared for tax purposes?
If an enterprise or individual in China makes a single outbound payment of more than 50,000 US dollars, the payer is required to file a tax return for the outbound payment with the local branch of the State Administration of Taxation (SAT) if the remittance is of the following nature:
1. Income derived by foreign organizations or individuals from trade in services within China. Typical services include transportation, tourism, communications, construction and installation contracting, insurance services, financial services, computer and information services, use and licensing of proprietary rights, sports, cultural and recreational services, other business services, and government services.
2. Remuneration of foreign individual for work in China.
3. Dividends, bonuses, profits, interest on direct debts and guarantee fees, as well as non-capital transfer gains such as donations, compensation, taxes, incidental income, etc., obtained by foreign institutions or individuals in China.
4. Rentals from financial leases, income from real estate transfers, income from equity transfers and other lawful income of foreign investors obtained by foreign institutions or individuals in China.
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PHC Advisory is a company of DP Group: an international professional services conglomerate of companies with approximately 100 experienced professionals worldwide. We offer comprehensive services in tax, accounting, and financial consulting, including financial supervision, financial audit, internal audit, internal control over financial reporting, and support for audited financial statements and annual audits, ensuring clients' financial transparency and compliance.
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The content of this article is provided for informational purposes only, financial advice must be tailored to the specific circumstances on a case-by-case basis, and the contents of this article do not legally bind PHC Advisory with the reader in any way.
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