All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

China: Tax clearance procedure for certain outbound remittances overhauled



Khoonming Ho and Lewis Lu, KPMG China

On July 9 2013, the State Administration of Taxation and the State Administration of Foreign Exchange (SAFE) jointly issued Announcement 40 to prescribe a new tax registration requirement for Chinese residents making certain payments overseas, effective from September 1 2013. Only a few days later, on July 18, the SAFE issued Hui Fa [2013] No.30 (Circular 30) to provide detailed guidance on remittance procedures. The conversion from the previous advance tax clearance system to the tax recordal filing system could significantly accelerate the outbound remittance process. The scope of Announcement 40 covers cross-border service fees as well as other current account and capital account items under China's foreign exchange regulations.

China has maintained a strict foreign exchange control system that regulates funds flowing in and out of China. Historically, a Chinese payor needs to obtain various tax clearance documents before a remittance application can be accepted by a bank in China. A tax certificate is required for each foreign currency payment exceeding $30,000. Such tax clearance system creates inefficiency in commercial arrangements and slows down legitimate business transactions.

Announcement 40 comes as a government response to promote international service flows. For each covered remittance that exceeds $50,000, the Chinese payor needs to perform a tax recordal filing with its in-charge state tax bureau (ISTB), unless the remittance falls into an exemption list. The ISTB will not review the tax position associated with the remittance during the recordal filing. The purpose of the filing is not to report the Chinese tax position on the remittance, but to notify the ISTB regarding the underlying transaction. Within 15 days ensuring the issuance of the stamped tax recordal filing form, the ISTB will examine the reporting package submitted by the Chinese payor as part of the reocrdal filing and may request additional supporting documents. In the post-filing examination, if the ISTB discovers that the Chinese taxes have not been properly paid, it will issue a notice of tax deficiency to the taxpayer or the withholding agent, and may impose a penalty as well as late payment surcharges.

It is worthy noting that Circular 30 provides that where the Chinese payor need reimburse its overseas affiliate for advances made by the affiliate, the term of the advance payment shall not exceed 12 months. Multinational companies are encouraged to review the term of their impending remittances, proactively communicate with the local SAFE offices and their ISTBs and to understand local practices, prepare tax computations and collect documents to support their tax positions.

Khoonming Ho (


Tel: +86 (10) 8508 7082

Lewis Lu (


Tel: +86 (21) 2212 3421

more across site & bottom lb ros

More from across our site

The Dutch TP decree marks a turn in the Netherlands as the country aligns its tax policies with OECD standards over claims it is a tax haven.
Gorka Echevarria talks to reporter Siqalane Taho about how inflation, e-invoicing and technology are affecting the laser printing firm in a post-COVID world.
Tax directors have called on companies to better secure their data as they generate ever-increasing amounts of information due to greater government scrutiny.
Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
The Malawian government has targeted US gemstone miner Columbia Gem House, while Amgen has successfully consolidated two separate tax disputes with the Internal Revenue Service.
ITR's latest quarterly PDF is now live, leading on the rise of tax technology.
ITR is delighted to reveal all the shortlisted firms, teams, and practitioners for the 2022 Americas Tax Awards – winners to be announced on September 22
‘Care’ is the operative word as HMRC seeks to clamp down on transfer pricing breaches next year.
Tax directors tell ITR that the CRA’s clampdown on unpaid taxes on insurance premiums is causing uncertainty for businesses as they try to stay compliant.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree