Profit Repatriation in China
The most common challenge encountered by Foreign Invested Enterprises (FIEs) is how to repatriate funds out of China. Since China’s policies regarding foreign exchange control are strictly regulated, repatriating funds is generally considered to be a difficult task. It is important that these firms prepare a solid repatriation strategy in order to reduce their tax burden.
In a going concern situation, the most common methods of repatriating funds out of China include (1) Issuing Dividends to the Parent Company, (2) Service Fees, Royalties and Reimbursements, and (3) Outbound Intercompany Loans. When choosing one of these repatriation strategies, it is important to understand (a) the amount of taxes that are required to be paid, (b) the specific requirements of the repatriation strategy and (c) which mandatory procedure is to be followed.
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