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Cross-Border Transactions / SAFE in China
At PHC Advisory we assist Clients with a full range of outbound and inbound cross-border payments.
Cross-border payment transactions from China require both tax compliance and approval under the State Administration of Foreign Exchange (SAFE) framework before a bank can process the transfer, with each category of payment carrying its own registration requirements, timing, and documentation to prove the authenticity of the underlying transactions and tax compliance.
Services
Dividend Distribution
Profits generated by local subsidiaries can be repatriated to the parent company through dividends. Dividend distribution requires to follow local administrative and regulatory frameworks, especially from the tax perspective: dividend payments trigger tax obligations, and the paying entity must withhold the required tax before remitting the amount.
At PHC Advisory we support Clients during the process of dividend distribution, from the preliminary audit coordination to the tax and regulatory filings before the payments. In addition, we help with applying for preferential treatment granted by tax treaties, if available.
Interest
Cross-border intercompany loans between related parties are a common way to provide finance and funds to a subsidiary. Under the arm’s length principle, interest shall be paid on such loans, which trigger tax obligations when the recipient of the loan pays interest to the overseas lender.
At PHC Advisory we assist Clients in structuring intercompany lending arrangements, manage the required statutory and administrative filings, prepare the proper transfer pricing documentation to support the applied interest rate, and handle tax formalities when the interest is paid overseas. We also assist with applying for preferential treatment granted by tax treaties, if available.
Royalties
Royalties refer to payments made by a company to an IP owner for the use of trademarks, patents, technical know-how and other IP rights. Cross border royalties require careful planning, since they trigger tax obligations at the time of the payment.
At PHC Advisory we guide Clients in preparing licensing agreements, assess the applicable royalty rate with benchmarking studies, prepare the required transfer pricing documentation and handle tax formalities when the royalties are paid overseas. We also assist with applying for preferential treatment granted by tax treaties, if available.
Capital Gains
Capital gains are income sourced when disposing equity and assets previously owned. Capital gains arising from cross-border equity deals by a non-resident seller are generally taxed in the jurisdiction where the transferred company is located, with treaty exemptions available under some double tax arrangements.
At PHC Advisory we advise Clients on the tax treatment of equity disposals at the structuring stage, assess treaty eligibility, handle tax formalities and manage interactions with the competent tax authorities.
Director Fees
Director fees refer to remuneration paid to directors of a company. Where fees are paid to a non-resident individual, tax obligations may arise, especially over the individual income tax of the recipients in the relevant jurisdiction where the company is located.
At PHC Advisory we advise Clients in dealing with payments of director fees, and handling tax formalities of director remuneration across jurisdictions to maintain the full compliance of such transactions. We also assist in applying for preferential treatments granted by tax treaties, if available.
Pensions
Pensions refer to the periodic payments received by an individual upon retirement. Cross-border pension arrangements raise questions about social security totalization agreements, the tax treaty treatment of pension income, and the deductibility of contributions in the paying jurisdiction, each relevant to multinational employers and internationally mobile employees.
At PHC Advisory we advise Clients on tax and social security treatment of pension arrangements across China, Vietnam, India, Italy, and the UAE, identifying applicable totalization agreements and structuring contributions to avoid double exposure.
Financial Payments
Cross-border financial payments for goods and services paid to overseas entities require compliance with relevant regulations and involve Customs, banks and tax authorities. Cross-border payments for services are under additional scrutiny and require the handling of relevant withholding taxes.
At PHC Advisory we advise Clients on structuring and compliance requirements for cross-border financial payments, preparing the documentation needed to support the outbound transfer, and handle tax formalities and the application of tax treaties’ preferential treatments, if available.
Tax - Withholding
Cross-border outbound payments for dividends, interest, royalties, capital gains and service fees require an assessment of the tax obligations deriving from the transaction. In most cases, such payments would require the payer to handle withholding taxes to be deducted from the gross amount.
At PHC Advisory we advise Clients on the correct withholding tax rate for every category of cross-border payment, apply available tax treaties’ preferential treatments, prepare the withholding tax return, and liaise with the tax bureau where the position is challenged.
Why PHC Advisory for Cross Border transactions?
At PHC Advisory we assist Clients with a full range of outbound and inbound cross-border payments – structuring the transaction, applying the right double tax agreement, preparing the required documentation, and coordinating with the bank and the tax bureau to get the payment through.
Who We Serve
- Multinational groups
- Foreign-invested enterprises paying overseas parents or suppliers
- Group treasury teams
- Mid-market corporates
- Foreign companies with subsidiaries in China
- Business owners and entrepreneurs
FAQ's
Both tax compliance and approval under the State Administration of Foreign Exchange (SAFE) framework, supported by documentation proving the authenticity of the underlying transaction.
