Profit Repatriation: How to Get Your Money Out of China

April 9, 2021 Leave a comment By The Incorp China Team

As China’s economy continues to grow, it appears to foreign companies as an increasingly attractive place to do business. China is the only major economy to have grown during 2020, a year remembered by many for the coronavirus pandemic and concomitant economic recession. But as foreign businesses invest in the China, a growing number of them are also looking for the most efficient way to bring their profits back home. r repatriating funds are different for individuals and companies, regarding both the preconditions one must meet and limits on the amount transferred. Here, we will can compare the regulations for companies and people:

For Companies

There are three methods by which a Wholly Foreign Owned Enterprise (WFOE) can remit its profits across borders: paying dividends, intercompany payments, or granting loans to a related foreign firm.

Repatriation with dividends

Transferring profits through dividend payments can only be done once the follow conditions have been met:

You have paid the corporate income tax of 25%.
The annual audit report has been completed.
Accumulated losses from previous years have been recovered.
All registered income has been included into the WFOE.
10% of the WFOE’s after-tax profits have been put into a mandatory surplus fund. (This is not necessary if the fund has already reached 50% of registered capital).

Intercompany payments

A WFOE can repatriate money to the parent company by including such funds in intercompany transactions. However, this method is a trade-off: because cash transfers of this nature face fewer preconditions, they may face heightened scrutiny from Chinese officials, necessitating thorough record-keeping on your part.

Loans to related foreign company

A WFOE can also extend loans to a related foreign business. A maximum of 30% of the parent company’s equity can be extended if both companies have an equity sharing relationship, have been established for at least a year, and comply with foreign exchange rules.

For Individuals

Most individuals who have a legitimate employment contract and duly pay their taxes will not find it very troublesome to repatriate their earnings back home. Methods differ slightly depending on the size of the amount being repatriated.

Small amounts

Any amount smaller than RMB 200,000 is allowed to be carried on your person as you leave China, while sums exceeding that figure have to be declared as you transit through customs. If you are leaving on short notice, keep in mind that foreign nationals have a withdraw limit of only US$500 per day.

Large amounts
Those sending larger amounts our of country must supply their bank with their employment contract, valid identification, payslips, work permit, and tax payment documents (including Tax Identification Number).

Once all necessary documents are received, the bank will make an application to China’s State Administration of Foreign Exchange (SAFE), which exercises strict control on money entering and exiting the country. Once the application is accepted, the predetermined sum of money can be transferred to a foreign account of your choice. This can be done by the bank itself or a wiring service, such as Western Union.

Choosing the right method for you

All methods of profit repatriation in China are fluid and frequently changing. They are different from province to province, city to city, and sometimes even vary between local district within the same city. To find the best plan for you, it would be best for us to provide a complimentary consult to clearly understand your needs.

Incorp China