In the wake of continuously development of global economic integration, cross-boarder co-operations among enterprises are getting more and more frequent, and introducing and learning foreign advanced technology becomes an important investment of domestic enterprises for the purpose of making up their own deficiency. The overseas business partner will send experts to China for technology support. This kind of technology support is normally deemed as domestic labour service, and the technology service fee and consulting fee is regarded as domestic labour income. When domestic resident enterprises (the resident) are paying the labour service fees to overseas non-resident enterprises (the non-resident), withholding taxes are involved, and absence of withholding obligation will cause tax risk.

Q：	My company is registered in Beijing, China.  Recently, we signed a technology service contract with a non-resident company, and according to the contract, the non-resident will send technicians to my company and give technical advice and guidance. We are planning to pay technical service fee to its overseas bank account. Can we go to the bank and transfer the funds directly?
A：	No.  The technical service fee that your company is going to pay is  domestic labour income of the non-resident. Before paying the domestic labour service fee to the non-resident, the resident needs to withhold and pay relevant taxes on behalf of the non-resident, and if the amount to be paid exceeds USD50,000, the resident taxpayer also needs to apply with tax authority for Payment Record Form.
Q：	What are the taxes need to be withheld and paid?
A：	In relation to paying labour service fee to overseas non-resident, the resident enterprise normally needs to withhold and pay enterprise income tax, VAT and surcharges on behalf of the non-resident.
Q：	What is the rate of withholding enterprise income tax, VAT and surcharges respectively for paying labour service fee?
A：	The rate of withholding VAT for labour service fee is 6%, and the rates of surcharges for urban construction tax, education charge and local education charge are 7%, 3% and 2% respectively on the base of VAT. The rate of withholding enterprise income tax for paying labour service fee to overseas non-resident is normally 25%, but the income tax may be levied at lower rate or even exempt under some special circumstances (for example, the non-resident does not have permanent establishment in China, or although the non-resident has permanent establishment in China, it may enjoy lower rate under tax treaty agreement).
Q：	How to determine whether a non-resident labour dispatch enterprise has permanent establishment in China?
A：	Whether the labour dispatch enterprise is deemed of having a permanent establishment, the State Tax Administration year 2013 No. 19 ‘Announcement on Relevant Issues Concerning Enterprise Income Tax Collection on Non-resident Labour Dispatch Enterprises Providing Labour Services’ has provided a detailed guidance. But the final decision is made by competent tax authority.
Q：	The non-resident labour dispatch company  that has signed  contract with us locates  in a country that has tax treaty with China, if it is deemed as having a permanent establishment in China, and wants to enjoy treatment under tax agreement, how to apply?
A：	The non-resident is required to follow relevant procedures of the tax treaty agreement, including to determine whether it has permanent establishment based on agreement clauses, and to file the record to competent tax bureau. The non-resident which fulfills the requirements shall authorize its withholding agent (i.e. the resident) 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 B) to enjoy the preferential rate under tax treaty. Meanwhile, in order to prove the non-resident is the tax resident of its own country, it 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 resident company needs to obtain the power of attorney from the non-resident as its agent.
Q：	What should draw our attention to in connection with the Payment Record Form?
A：	The following issues should be drawn attention to: After obtaining the Payment Record Form, the full payment shall be made one-off in the bank, multiple payments for one Payment Record Form is not acceptable. After obtaining the Payment Record Form, the full payment shall be made one-off in the bank, multiple payments for one Payment Record Form is not acceptable. Information of the paying bank and the recipient bank must be reviewed very carefully, as the bank will make the payment strictly following the information on the Form. Should a single payment is USD50,000 or less, there is no need to obtain the Payment Record Form.
Q：	My company is paying the technical service fee 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: Original technical service contract and its Chinese version; Tax Payment Record Form for Goods or Services (digital); A written application stating all information required by tax authority; Other required documents and information. The specific materials and requirements are subject to the local tax authority.