Paying Dividends from China: Rules, Withholding Tax and Currency Control
- Roman Verzin
- May 15
- 3 min read
Updated: Aug 8
Your Chinese company made a profit.
Now you want to take some money out — as dividends.
Can you?
Yes. But it’s not immediate.
Let’s break it down — step by step.
Step 1 — Pay your taxes first
Before paying dividends, the company must:
✅ Pay Corporate Income Tax — usually 25%
✅ Set aside 10% of profit into a legal reserve fund
This reserve is mandatory until it reaches 50% of registered capital.
It stays in your books — not to be used freely.
After this, the remaining profit is available for dividends.
Step 2 — Prepare audit and tax clearance
You’ll need:
Full-year audit report
Completed annual tax filings
Tax clearance from local authorities
Board resolution approving the dividend
All of this takes time.
Usually a few months after your fiscal year ends.
So if you plan to take dividends — prepare before audit season begins.
Step 3 — Withholding Tax (WHT)
China charges WHT on outbound dividends.
Standard rate: 10%.
But many countries have double tax treaties with China.
They may reduce WHT to 5% or even 0% —
depending on your country of tax residence.
So:
✅ Check the treaty
✅ Prepare your tax residency certificate
✅ Don’t assume 10% by default
Step 4 — Sending the dividend abroad
Once the audit is done and WHT is paid:
✅ The tax bureau gives final approval
✅ The bank checks all documents
✅ Then the money can be sent — directly to the shareholder account
Important:
Dividend must come from declared and taxed profit
Payment must go to shareholder, not a third party
SAFE (State Administration of Foreign Exchange) may review documents again
Do you really need to take dividends?
This is the key question.
In many cases — you don’t.
Why?
Because cash inside China is useful.
You can use it for:
Next procurement cycle
Paying local suppliers
Staff salaries
Office or warehouse rent
Service providers
Among these, using profit for procurement is especially efficient.
Example:
Let’s say your company in Egypt sends $100 to your Chinese entity.
You’ll pay import taxes in Egypt based on that $100 —
Maybe 5% duty + 14% VAT = $19 tax.
But if your Chinese company already has $10 profit —
you can pay part of the supplier invoice from that profit.
Now you send only $90 from Egypt.
Your import taxes are based on $90 — not $100.
You just saved $1.90 in tax. Legally.
Of course, this is simplified.
But the logic is valid.
Should you keep funds in China?
In many cases — yes.
China is an export-driven economy.
Many businesses need RMB liquidity to buy goods locally.
So even if you don’t use the funds now —
you may use them later.
Keeping some reserves in China gives you:
Flexibility
Speed
Better pricing in procurement
Final thoughts
✅ Yes, you can take dividends from China
✅ But it takes time, taxes, and paperwork
✅ Make sure the profit is declared, audited, and cleared
✅ Always check tax treaty rates
✅ And think twice before moving cash out
Because often —
keeping the funds inside China is the smarter move.
In the next article, we’ll explain how foreign employees can get work visas in China:
What conditions your company must meet,
How many expats you can realistically hire,
And what you need to prepare in advance.
Need help planning your group structure or repatriating profits?
Talk to us — we’ll help you make the smart move.
