Getting your money out of China: repatriation, FX rules and withholding tax

Money leaves a Chinese company lawfully by four routes: dividends, fees for services and royalties, loans, and a capital reduction or liquidation. Dividends are the main one. Once losses are made good and 10% of profit has gone to the statutory reserve, the bank remits them without SAFE approval, less 10% withholding tax, or 5% under some treaties.

“Can I get my money back out?” is the question foreign investors ask second and should ask first. The answer is yes: through specific channels, in a specific order, each with its own gate. Build the company without them in mind and you meet them at the worst moment.

The folklore says money goes into China and does not come out. The rules say otherwise. China does not restrict current international payments and transfers, and income such as dividends and service fees is a current-account item (Foreign Exchange Administration Regulations, Articles 5 and 52).^⁠[1] A commercial bank handles a profit remittance on the documents, with no application to SAFE. The real constraint is documentary: every renminbi that leaves has to be traceable to a taxed, audited, contracted transaction. Companies that struggle to repatriate usually have unbilled revenue, expenses without fapiao, or a shareholding that does not match who actually paid the capital in.

What are the four ways money leaves a Chinese company?

Route	Tax in China	The gate
Dividend(利润汇出)	10% withholding to a foreign company, 5% under some treaties; 20% to a foreign individual	Losses made good, 10% to the statutory reserve, a resolution, a tax filing above US$50,000, and audited statements at the bank
Service fee or royalty	Deductible for the Chinese company; withholding tax and VAT may apply on the payment	A real contract, real services or rights, an arm’s-length price, and a tax filing above US$50,000
Loan	Interest carries withholding tax and VAT	A lending registration with SAFE and a cap tied to the lender’s equity; or, inbound, a borrowing cap and registration
Capital reduction or liquidation	Gains taxed as the case requires	Creditor notice, tax clearance and the bank’s outflow control record

How do you pay a dividend out of China?

In a fixed sequence, and the bank checks each step.

1. Close the year. Prepare the annual financial report and have it audited: the Company Law requires the report to be audited by an accounting firm in accordance with law (Article 208),^⁠[2] and the bank reviews the company’s own audited financial statements before it remits a profit at all, with the tax filing form as well above US$50,000 (Capital Account Guidelines 2024, section 7.12.2; SAFE Huifa [2017] No. 3, item 7).^⁠[4,5]
2. Settle the corporate income tax. The annual return and reconciliation are due within five months of the year end, which for a calendar year is 31 May (Enterprise Income Tax Law, Article 54).^⁠[3]
3. Make good past losses, then fund the reserve. Current profit first makes up losses, and 10% then goes to the statutory reserve (法定公积金) until it reaches 50% of registered capital. A limited liability company then distributes in proportion to paid-in capital, unless all the shareholders agree otherwise (Company Law, Article 210).^⁠[2]
4. Pass the resolution. The shareholders resolve to distribute, and the board must pay within six months of the resolution (Article 212).^⁠[2] A distribution made in breach of the rules must be returned by the shareholders who received it, and those shareholders, with the directors, supervisors and senior managers responsible, are liable for any loss to the company (Article 211).
5. File for tax before the first payment. A single outbound payment of more than US$50,000, dividends included, needs a tax filing first;^⁠[11] since 2021, one filing before the first payment covers every payment under the same contract.^⁠[12]
6. Remit through the bank. The bank reviews the resolution, the audited statements and the tax filing form, and checks that past losses have been made up, then pays.^⁠[5]

The statutory reserve is not distributable. When it is converted into capital, at least 25% of the registered capital before the conversion must stay in it (Article 214),^⁠[2] which is one more reason not to inflate registered capital: it sets the size of a reserve you cannot pay out.

How much tax is withheld on a dividend?

10% for a foreign company, withheld by the Chinese company when it pays. The statutory rate for a non-resident enterprise is 20% (Enterprise Income Tax Law, Articles 3, 4 and 37), reduced to 10% (Implementing Regulations, Article 91).^⁠[3,6] A treaty can cut it to 5%, but only on its own terms: under the Mainland-Hong Kong Arrangement and the China-Singapore treaty the beneficial owner must be a company holding directly at least 25% of the paying company’s capital (Article 10(2) of each),^⁠[7,13] and it must have held that 25% at every point in the twelve months before the dividend.^⁠[14]

Beneficial ownership is tested, not assumed. Factors that count against a holding company include an obligation to pass more than 50% of the income to third-country residents within twelve months, business activity that is not substantive, and no tax or a very low effective rate on the income where it is received (STA Announcement 2018 No. 9, Article 2).^⁠[15] A holding company with no staff, no premises and no function beyond holding the shares is the case these factors describe. Treaty relief is self-assessed and claimed through the withholding filing, with the evidence kept for later inspection; if the claim was wrong, the tax is recovered from the non-resident (STA Announcement 2019 No. 35, Articles 3, 7 and 16).^⁠[16] The risk sits with you, after the money has moved.

A foreign individual shareholder pays 20%. Dividends a foreign individual receives from a foreign-invested enterprise have been taxed at 20% since 1 September 2026, withheld by the company; the exemption that applied from 1994 was repealed from that date.^⁠[8] What that means for a founder paying themselves is in tax-residency traps for remote founders.

What if you reinvest the profit in China instead?

Two rules reward it. A foreign investor that reinvests distributed profits directly in a project not prohibited to foreign investment pays no withholding tax on them until the investment is recovered, when the deferred tax falls due (财税〔2018〕102号).^⁠[17] And profits reinvested directly between 1 January 2025 and 31 December 2028, in an encouraged industry and held for at least five years, earn a tax credit of 10% of the amount reinvested (MOF, STA and MOFCOM Announcement 2025 No. 2).^⁠[18] Neither gets money out. Both change the arithmetic of whether to take it out now.

How do service fees and royalties get out?

As an expense rather than a distribution. A dividend comes out of profit after tax; a genuine fee for services, software, a brand or technology is deductible, so it reduces the corporate income tax before anything is distributed. That is why groups charge their Chinese subsidiaries for them, and why the tax authority looks closely at the charges: where dealings between related parties do not follow the arm’s-length principle and reduce taxable income, the authority may adjust them (Enterprise Income Tax Law, Article 41).^⁠[3]

• It has to be real. A written contract, evidence the service was delivered or the right exists, and a fee a third party would pay. A retrofitted agreement to justify payments already made is exactly what an audit looks for.
• Income tax depends on where the work is done. Service income is sourced where the services are performed, so a non-resident performing services entirely outside China, with no taxable presence there, owes no Chinese income tax on them. Royalties and interest are sourced where the payer is (Implementing Regulations, Article 7).^⁠[6] Royalties therefore carry 10% withholding.
• VAT applies either way. A service or intangible sold by an overseas supplier to a Chinese buyer is taxable in China unless the service is consumed on site abroad (VAT Law, Article 4; Implementing Regulations, Article 4(1)).^⁠[9,19] The rate for services and intangible assets is 6% (Article 10), and the Chinese buyer withholds it (Article 15).^⁠[9]
• File above US$50,000, once per contract. The same tax filing as for dividends,^⁠[11,12] and the bank will not pay without it.

Can the Chinese company lend money out, or borrow from abroad?

Both, under separate caps. Since 20 April 2026, a Chinese company registered for at least a year may lend to a foreign company that holds shares in it, to one it holds shares in, or to one under the same parent, directly or indirectly. It registers with its SAFE branch before lending; the outstanding balance may not exceed its latest audited owner’s equity multiplied by 0.6, with foreign-currency lending counted one and a half times, so a dollar loan is capped at about 0.4 times equity; and the registered amount must be used within two years (PBOC and SAFE, 银发〔2026〕63号).^⁠[10] This is a route money actually leaves by, and it is usually repaid, so it is a timing tool rather than a substitute for a dividend.

Borrowing from abroad runs the other way and sits on the capital account. Under the macroprudential method the cap applies to a risk-weighted balance: net assets × a leverage ratio of 2 × an adjustment parameter,^⁠[5] which has been 1.75 since 13 January 2025,^⁠[20] so 3.5 times net assets. Debt repayable within a year counts one and a half times and foreign-currency debt adds half its amount again, so the sum actually borrowed is lower. A foreign-invested company may instead choose, at its first registration, the older method capped at the difference between its total investment and its registered capital, and may later switch to the macroprudential method but not back. The loan is registered with SAFE at least three working days before drawdown.^⁠[5]

Interest on related-party debt is deductible only up to a debt-to-equity ratio of 2:1, or 5:1 for a financial enterprise; the excess cannot be deducted in that year or carried into a later one (Enterprise Income Tax Law, Article 46; 财税〔2008〕121号).^⁠[3,21] Interest paid abroad carries 10% withholding and 6% VAT.^⁠[6,9]

How do you get the registered capital itself back?

By a capital reduction or by liquidating the company. Unused registered capital is not spending money you can wire home. A reduction requires notice to creditors within 10 days and a public announcement within 30, and creditors may then demand payment or security (Company Law, Article 224).^⁠[2] Liquidation runs through tax clearance and deregistration, and the bank then remits the proceeds against the record SAFE’s system generates for the outflow.^⁠[5] Both take months, and the tax bureau reviews what the company has filed on the way out. The steps are set out in how to close a company in China.

That is the sharpest argument for modest registered capital. A limited liability company formed since 1 July 2024 must have its subscribed capital paid in within five years of establishment (Company Law, Article 47), and one registered on or before 30 June 2024 must, before 30 June 2027, bring any later payment date forward to 30 June 2032 or earlier (State Council Order No. 784, Article 2).^⁠[2,22] An inflated figure is money you are committed to sending in, and the only ways back are a dividend, a reduction or liquidation. How to choose the figure is in what registered capital is.

What should you decide before the first invoice?

• Who holds the shares. The shareholder’s jurisdiction and form set the dividend rate for the life of the company: a company or an individual, and whether a treaty applies. Restructuring later is a taxable event.
• How much registered capital. It sets the statutory reserve’s ceiling, the equity side of the thin-capitalisation ratio, and how much money is committed to a slow exit.
• Where value is created. If real services, systems or intellectual property sit offshore, contract and charge for them properly from the start.
• How you will be paid. Salary, director’s fees and dividends are taxed differently in China and at home. See tax-residency traps for remote founders.

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