In the wake of continuously development of global economic integration, more and more foreign enterprises invest and establish companies in China. When these foreign invested enterprises (FIEs) become profitable, their shareholders will require them to distribute profits in the form of dividends. Prior to paying dividends to their overseas shareholders (non-resident taxpayer in China), the FIEs (domestic resident taxpayer in China), shall act as a withholding agent, and withhold and pay relevant tax.

Q：	My company is registered in Beijing, China, and wholly owned by an overseas company as well. Recently, the board decided to pay dividends to our overseas shareholder. Can we go to the bank and transfer the funds directly?
A：	No. Before transferring the funds, the resident taxpayer needs to withhold and pay relevant tax on behalf of the non-resident taxpayer, and if the amount to be paid exceeds USD50,000, the resident taxpayer also needs to ask tax authority to issue Payment Record Form.
Q：	What are the taxes need to be withheld and paid?
A：	In connection to distributing dividends to overseas shareholders,  only enterprise income tax needs to be withheld and paid. If the shareholder is an individual, the individual income tax shall be withheld and paid.
Q：	What is the rate of withholding enterprise income tax for paying dividends?
A：	The rate of withholding enterprise income tax for paying dividends to overseas shareholder ranges from 0 to 15%, depending on whether the country in which overseas shareholder is registered has tax treaty with China, whether overseas shareholder fulfill the requirements of enjoying the treatment under tax treaty agreement.
Q：	The country in which our overseas shareholder is registered  has  signed tax treaty  with  China, how to enjoy the tax treaty?
A：	The overseas company which  fulfills the requirements shall authorize its withholding agent (ie. its domestic subsidiary) to fill in the Report Form of the Tax Resident Identity Information of Non-Resident Taxpayers (Applicable to Enterprises) to verify its tax residency in its own country, and shall fill in and submit Report Form of the Information on Non-Resident Taxpayers' Enjoyment of the Treatment under Tax Agreements (Enterprise Income Tax, Form A) to enjoy the preferential rate under tax treaty.
Q：	In order to enjoy the tax rate under tax treaty, what documents should we prepare?
A：	The overseas company needs to ask the tax authority of the country in which it is registered for issuance of tax resident certificate, then translate it into Chinese; while the domestic subsidiary needs to obtain the power of attorney from its overseas shareholder as its agent.
Q：	After obtaining the approval for enjoying the treatment under tax treaty, what documents should we prepare for withholding and paying the enterprise income tax?
A：	The domestic company needs to provide  the Resolution of the Board and its Chinese version to file the record, a written application (applicable to contracts of withholding at source) according to the format required by tax authority, and fill in Report Form of the People's Republic of China for the Withholding of Enterprise Income Tax to declare and pay tax.
Q：	My company is paying dividends exceeding USD50,000, what should we prepare to obtain the Payment Record Form?
A：	The required documents  may  be a little bit different  in  different cities,  but generally necessary documents include but not limited to the following: Resolution of the Board in which it is decided to distribute dividends; The Audit Report of the years in which the profits will be distributed issued by the third party, the duplicate of the financial report of the month in which the resolution of the board is issued; The Articles of Association of the tax resident; The Annual Enterprise Tax Returns and tax payment receipts of the year in which the profits will be distributed; Capital Verification Report for each capital injection, and share transfer agreement (if any); The undistributed profits form made by the tax resident itself. The specific materials and requirements are subject to the local tax authority.
Q：	Is there anything else should be paid attention to?
A：	In accordance with the Company Law of China,  before the company distributes its current year profit-after-tax, it shall draw 10% of the profit-after-tax as discretionary reserve. When the company’s cumulated discretionary reserve exceeds 50% of the registered capital, it can stop drawing.