How much tax you should pay to wire a service fee out of mainland China?

[Anonymous]

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if the service happened in mainland China, then A needs to declare the payment and pay the VAT (at the rate of 6%) and company income tax (at the rate of 10%) to the tax office and then ask for a TAX-PAID proof from the Chinese tax office. When remitting the service payment, A should bring the corresonding service contract and the TAX-PAID proof to the bank to submit the payment. Will Company B, the Spanish company need to pay company income tax on their end in Spain? No, since there is international tax treaty between China and Spain, companies do not need to pay income taxes in both countries. Therefore, with the TAX-PAID proof from China tax office, Company B does not need to pay company income tax in Spain for the transfer. But rather, B has already paid the relevant taxes in China by having the amount of tax deducted from the payment before A wires it to B.

2) if the service happened in Spain, then A can directly wire the payment to B and leaves B to declare and pay company income tax according to the tax law and regulations in Spain.

For similar business transactions between a company in mainland China and the other in another country/region, tax should be handled in accordance with the corresponding tax agreement.

Find the “List of Tax Agreement to Avoid Double Tax Taxation Between P.R.C & Other Regions” here http://www.chinatax.gov.cn/chinatax/n810341/n810770/common_list_ssty.html

(Reference link from China national tax office website )

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[Anonymous]

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Hello Abby

Very interesting article, thank you for posting.

I’d like to ask a question. We work with a company in the Philippians, they provide online work for us, digital design, creating marketing materials etc. for international use. We’re based here in China.

In this case, (they work physically in the Philippians), am I correct in thinking then, that they pay the tax in the Philippians?

Thanks again.

Michael

[Anonymous]

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Michael wrote:

Hello Abby

Very interesting article, thank you for posting.

I’d like to ask a question. We work with a company in the Philippians, they provide online work for us, digital design, creating marketing materials etc. for international use. We’re based here in China.

In this case, (they work physically in the Philippians), am I correct in thinking then, that they pay the tax in the Philippians?

Thanks again.

Michael

Hi Michael, thanks for your attention and feedback by sharing your company’s case!

According to your description, yes, as the service happens in the Philippines, your vendor company in the Philippines should pay the tax on their side in the Philppines for such income they receive from your Chinese company, since there is also such tax agreement in between PRC and the Philippines. Your company in China does not need to declare tax for paying such service fees out to the Philippines and these payments would belong to your company’s expenses.

[Anonymous]

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Hi Abby,

I appreciate your fast reply, thank you.

This is how it was explained to me, but it’s great to get confirmation.

Thanks again

Michael

[Anonymous]

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Michael wrote:

Hi Abby,

I appreciate your fast reply, thank you.

This is how it was explained to me, but it’s great to get confirmation.

Thanks again

Michael

Sure Michael, pleasure all mine. Wish you great business in China! Welcome to connect with me anytime should you have any business inquiries in Hainan!

[Author]

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