Foreign invested enterprises (FIEs) incorporated in China may repatriate profits from China when they have generated profits. However, China’s mainland maintains strict controls on foreign exchange. Repatriation of profits from China will be tightly regulated. Before profits repatriation, the FIE shall satisfy certain conditions and complete certain procedures, which are listed as follows.

1. Offset Losses of Previous Years
   
   A FIE shall offset or make up the losses of previous years in accordance with the law before profit distribution. If the aggregate balance of the company's statutory common reserve is not enough to make up the losses of previous years, the current year's profits shall first be used to offset the losses before the statutory common reserve is withdrawn.
   
   
2. Withdraw Statutory Common Reserve
   
   A FIE shall withdraw 10% of the net profits as its statutory common reserve in accordance with the Company Law of the PRC until the aggregate balance of the common reserve has already accounted for over 50% of its registered capital.
   
   
3. Audit
   
   A FIE can only repatriate the net profits acquired last year after its financial statements of last year has been audited. In case the FIE wants to remit the accumulated profits of previous years, an additional special audit report will be required.
   
   
4. Reach Profit Distribution Resolution
   
   The shareholders of a FIE shall reach a resolution on the distribution of net profits. For the distribution of accumulated profits of the previous years, the profit distribution resolution shall be reached prior to the special audit.
   
   
5. Withhold Income Tax
   
   A FIE shall withhold and pay enterprise income tax (withholding income tax) at a rate of 10% when it remits the profits to its overseas corporate shareholders. If the country or region where the overseas corporate shareholder is located has signed a double tax avoidance agreement with China, a lower preferential tax rate may apply in accordance with the relevant conditions of the bilateral agreement. At present, individual income tax (withholding tax) is temporarily exempted when a FIE remits the profits to its overseas individual shareholder.
   
   
6. Apply for Tax Filing
   
   In case the amount of profits to be remitted exceeds the equivalent of USD50,000, the FIE shall apply for tax filing with the competent tax authority in the place where it is located.
   
   
7. Remit Profits
   
   A FIE may apply to remit out the profits with its opening bank when it has competed the above procedures.

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