ARTICLE · 19 DECEMBER 2017

China Withholding Tax Clarified

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China's tax authority issued a new rule (Announcement 37) to clarify a number of issues concerning withholding tax (WHT) related to dividends and asset sale (including share transfer).

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In brief

China's tax authority issued a new rule (Announcement 37) to clarify a number of issues concerning withholding tax (WHT) related to dividends and asset sale (including share transfer).
- WHT on dividend is not due at the time of declaration until actually paid;
- WHT can be settled in phases for asset sale involving multiple payments, and WHT is not due until the cost is fully recovered;
- Exchange rate is now determined by three different situations of WHT filing for income in a foreign currency.
The new rule will take effect from 1 December 2017.

In detail

China State Administration of Taxation ("SAT") has issued Announcement 37, effective from 1 December 2017, addressing some particular issues concerning withholding taxes ("WHT"). The new measures aims at removing WHT filing bureaucracy and clarifying certain technical issues in WHT filings. The new rule applies only to passive income, but not active income like service fees from an

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