Tax on the dividends expatriation
By Victor Tu   Date:2016-09-18   Read:2041   [ Return ]

By Victor Tu

 

Many foreign investors make money in mainland China by running a WFOE and now they want to distribute the dividends, how could they do and how many taxes do they have to pay? Today, we will walk through this issue in detail.

 

 

The documents requested

 

l  Identification of the shareholders (business license, tax code, address, contact person, phone etc.)

l  Audit report of the financial statements

l  Resolutions of the board of directors‘ meeting

l  Resolutions of the shareholders’ meeting

l  Agreement of WFOE and the shareholders for withholding of tax

l  Corporate Income tax Form

 

 

Calculation of the dividends tax

 

Scenario:

 

A WFOE earned USD500, 000.00 (net profit) for year 2015 and on March 28, 2016, the shareholders (companies) decided to distribute all of the profits.

 

Step 1: Compute the statutory reserve fund 10% of the current year’s net profit

 

      Statutory reserve fund 10% of USD500, 000.00      USD 50,000.00

 

(Note: this part belongs to shareholders, it could be distributed when the company liquidates)

 

Step 2: Compute the distributable profits to the shareholders

 

       Available dividends (USD500K-USD50K)           USD 450,000.00

 

Step 3: Compute the dividends tax on the distribution

 

       Dividends Tax (10% of the distributable profits)      USD 45,000.00

 

Step 4: Compute the Dividends payable to the shareholders

 

       Dividends payable (USD450K-USD45K)            USD 405,000.00

 

So if a WOFE earns USD500,000 net profits, what the shareholders could get in their bank account is only USD 405,000 , the actual rate is only 81% rather than 100%。

 

Please note that for most investors, they are imposed dividends tax rate for 10%, however if they are from countries who sign double tax treaty with China, The rate will vary from 0% to 20% , for example, if the investor comes from Georgia, it enjoys 0% and if it is from Thailand, 20% applies. And other rates include 5%、7%、7.5%、15% etc., it depends on the specific countries.

 

In contrast with a company shareholder, if the investors are individual (natural person), there is no tax dividend, this policy is the only benefit left to the foreign investors. But there is rumor that this policy will be phased out in near future. If you have already set up a WFOE by yourself, please distribute your dividends as soon as possible. Good Luck!

 

And if you have any further questions or concerns regarding dividends, please contact me on victor.tu@victortruman.com

 

 

Keywords: Ningbo accounting, Ningbo Auditor, Ningbo accountants, Ningbo CPA

关键词:宁波会计,宁波审计,宁波会计师,宁波涉外会计,宁波注册会计师

 

Victor & Truman,CPAs  宁波纬度会计师事务所(普通合伙)