For multinational corporations operating in China, repatriating cash from
their subsidiaries has always been an important but challenging
issue.
China maintains a strict system of foreign exchange controls,
meaning funds flowing into and out of China are tightly regulated.
Other laws and regulations – such as the Company Law,
relevant tax regulations, as well as China's transfer pricing
rules – impose additional barriers to profit repatriation as
well.
In this environment, businesspeople need to understand and
incorporate a profit repatriation strategy from the very beginning
to ensure access the profits earned.
There are several ways to repatriate profits from China. The
most obvious method is for the company's China-based entity to
pay dividends directly to its foreign parent company. However, this
is subject to certain prerequisites.
