Path made smooth again

| BY

clpstaff &clp articles

A new regulation from the foreign exchange regulator has returned the right of foreign-invested holding companies to re-invest their dividends in China

On March 29 2011, the State Administration of Foreign Exchange (Safe) issued a Circular which had a significant effect on foreign-invested holding companies seeking to re-invest their income in China (see Safe, Circular on the Operating Guidelines for Issues Relevant to Requests for Confirmation of Capital Verification Required in the Re-investment of Foreign-invested Companies with an Investment Nature (国家外汇管理局关于外商投资性公司再投资所涉验资询证有关问题操作指引的通知) and 'Rocky road for foreign-invested holding companies', CLP September 2011).

Under this Circular, before making re-investments of legitimate income earned in China, holding companies (Holdcos) must first increase their own registered capital by the same amount. This meant that overseas shareholders of PRC Holdcos needed to pay 10% withholding income tax for the earnings used to increase the Holdcos' registered capital.

This premium content is reserved for
China Law & Practice Subscribers.

  • A database of over 3,000 essential documents including key PRC legislation translated into English
  • A choice of newsletters to alert you to changes affecting your business including sector specific updates
  • Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
For enterprise-wide or corporate enquiries, please contact our experienced Sales Professionals at +44 (0)203 868 7546 or [email protected]