Reference should be made to the individual tax treaties. The lower rate on royalties applies for the use of or right to use any industrial, commercial, or scientific equipment.
Corporate income tax payable will be withheld at the source, with the payer acting as the withholding agent, who will withhold tax from the amount of each payment when it is due.
Therefore, the withholding obligation arises when income is either remitted or when the payer accrues the amount as a cost or expense.
Correct calculation of tax liability is as follows: If the withholding tax and business tax is borne by the payer, the amount of income should be added up to produce the taxable income.
For income from the transfer of property, the taxable income amount is the balance of the total income amount minus the net value of the property. For other income, the taxable income amount can be calculated according to the formulae of the preceding two items.
Determining tax liabilities Though it is common for overseas non-tax resident entities to provide services for clients in China, or their own subsidiaries located there, whether or not withholding tax applies to their transactions is not always clear.
Even if it is certain that China-sourced income is subject to withholding tax, the correct tax base and rate still may not be apparent.
Enforcement is not uniform in China, with each case and transaction subject to the discretion of local tax authorities.
The actual applicable tax rates are therefore only set once tax officials have completed a review of tax clearance documentation and have issued their final decision. General taxation frameworks provide only a guideline, and more precise estimations can be obtained by narrowing down to the type of service activities provided by overseas entities.
It is advisable that such entities obtain professional consultation when determining the nature of withholding tax for their services. About Us Asia Briefing Ltd.
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Withholding taxes Dividends Interest Royalties Branch remittance tax Wage tax/social security contributions Indirect taxes Value added tax Capital tax Real estate tax Transfer tax China Taxation and Investment (Updated July ) 1.
Detailed description of corporate withholding taxes in Australia. Notes. Dividends paid to non-residents are exempt from dividend WHT except when paid out of profits of a company that have not borne Australian tax (i.e. unfranked dividends).