Recent Chinese tax regulation updates regarding outbound remittance

1. One record filing for multiple remittances under one contract

In the past, separate tax record filing for each outbound remittance exceeding USD 50,000 is required, although the outbound remittances are under the same contract.

According to State Administration of Taxation & State Administration of Foreign Exchange Announcement (2021) No. 19 issued on 29 June 2021, domestic institutions and individuals who need to make multiple outbound remittances under the same contract would only be required to conduct the tax record filing for outbound remittance once before the first remittance payment. The official interpretation (please refer to http://www.chinatax.gov.cn/chinatax/n810341/n810760/c5166114/content.html for details) of the Announcement further clarifies, if the tax record filing for outbound remittance has been conducted before the issuance of this Announcement, no record filing for outbound remittance would be required for the subsequent remittances under the same contract.

2. Cancelation of the Local Tax Surcharges related to Withholding Value Added Tax (VAT) and Consumption Tax (CT)

Transactions subject to VAT and CT in China are in general subject to Local Tax Surcharges on top of the VAT and CT paid. For instance, services provided by overseas entities to Chinese entities may be subject to VAT. The Chinese entities, as service recipients, therefore may have to withhold VAT as well as Local Tax Surcharges for such transactions.

However, with the issuance of the Urban Maintenance and Construction Tax Law, State Administration of Taxation Announcement (2021) No. 26 and Ministry of Finance and State Administration of Taxation Announcement (2021) No. 28, effective from 1 September 2021, 1) import of goods; or 2) labor, services or intangible assets sold by overseas entities or individuals to domestic entities would not be subject to Local Tax Surcharges (i.e., Urban Maintenance and Construction Tax, Education Levy and Local Education Levy) on top of the related VAT and CT paid.