The withholding tax rate is 10 % for all interest, rentals, royalties and other income of foreign enterprises. Interest income received by FIEs in China is subject to the applicable business tax rate of 5 %.
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Q: What type of treasury management business operations need the approval of the People’s Bank of China?
Generally, any Chinese entities, including foreign invested enterprises ("FIEs") or establishments of foreign enterprises, specially engaged in the business of Loaning and Financing should obtain approval from the People's Bank of China. The People’s Bank of China is the central bank of China. Foreign companies or FIEs, require additional approval by the Ministry of Foreign Trade and Economic Cooperation ("MOFTEC") and State Administration of Foreign Exchange (“SAFE”).
Related FAQs From the topic Treasury Management
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1.How much is the tax rate on financial products in China?2383
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2.There are different cases in which deductions can be made on interest payment. What happens with interest paid during the establishment of foreign enterprise period?2382
During the start-up period, interest on borrowing for establishment or construction should be treated as capital expenses. It can be included in the original price of relevant assets, which may be depreciated or amortised in future years. The interest paid annually, after the commencement of business operations, will be deducted as current expenses in the relevant taxable years.
During the production or business operation period, interest on loans to purchase equipment and expand operations should be treated as capital expenses if the borrowings are invested before actual use by taxpayers. Should there be any interest accrued after the actual use of the relevant assets or properties, the amount paid may be deducted from the taxable income of taxpayers. Any interest on borrowings for working capital is deductible as other expenses.
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3.In the jurisdiction of China, there exists different tax exemptions for doing business in China. What are they?2381
The most important tax exemptions are interest on government bonds. The interest received from government bonds by foreign enterprises or FIEs are exempt from income tax. However, any gains from the transfer of such bonds will be consolidated with the taxpayers other income to determine their tax liabilities.
Capital gains come from the sale of certain public company shares.. Any capital gains from the sale of B shares or overseas stocks issued by Chinese companies are exempt from income tax if the relevant shares are not held by establishments or legal entities of foreign enterprises in China. The dividends received by foreign enterprises from overseas stocks of Chinese companies are also exempt from income tax in China. Business tax on certain inter-bank loans of local currency Renminbi (“RMB”) loans between foreign banks or foreign invested banks approved to conduct business in China may also be exempt from business tax.
