

Profit Repatriation from China FIE

KiKi闯外贸

2025-09-03

导读：Click the Text in Blue on the Top, Follow us!

Click the Text in Blue on the Top, Follow us!

The profits obtained by the foreign investors within the territory of the PRC can be freely remitted out according to the Foreign Investment Law of the PRC. However, foreign invested enterprises (FIE, foreign invested limited liability companies) must meet certain conditions and complete specific procedures when applying to remit out the distributed profits (dividends) to overseas shareholders. The most easily overlooked condition is whether the overseas shareholders have fulfilled their capital contribution obligations in accordance with the provisions of the articles of association of the foreign invested limited liability company.

According to Article 210 of the Company Law of the PRC, the basic principle for profit distribution of a limited liability company is to distribute profits in proportion to the capital contribution actually made by the shareholders except for cases where all the shareholders have agreed not to distribute profits in accordance with the proportion of their capital contributions. It means that a limited liability company shall not distribute profits to the shareholders who have not made actual capital contributions unless otherwise agreed by all the shareholders.

As there are strict foreign exchange controls in China, inflow and outflow of foreign exchange funds are strictly regulated by the foreign exchange administration authorities. For foreign invested limited liability companies, if the overseas shareholders fail to fully pay their subscribed registered capital in accordance with the provisions of the company's articles of association, even though all the shareholders have agreed not to distribute profits in proportion to the capital contribution actually made by the shareholders, the distributed profits (dividends) still cannot be legally repatriate to the overseas shareholders. Therefore, the shareholders of a foreign invested limited liability company should make sure that their subscribed registered capital have been fully paid up in order to avoid troubles on profit repatriation later.

Foreign invested limited liability companies shall meet the following basic conditions when applying for profit repatriation with the banks:

The shareholders have fully paid their subscribed registered capital in accordance with the provisions of the company's articles of association.
The financial statements of the company for the last year have been audited and an audit report has been issued. (A special audit report will be required for remittance of accumulated profits for previous years.)
The company's accumulated losses of the previous years have been made up in accordance with relevant laws and regulations.
The company has accrued the statutory reserve fund in accordance with the Company Law of the PRC. (When a company distributes the annual after-tax profits, it shall allocate 10% of its profits to its statutory reserve fund until the accumulated amount reaches 50% of the registered capital of the company.)
The company has completed its FDI equity registration on time (annual report).
The shareholders of the company have signed the shareholders’ resolution on profit distribution.
The company has withheld and paid the withholding income tax on the profits (dividends) distributed to the overseas shareholders. (If there is no double taxation avoidance agreement available, the withholding corporate income tax rate will be 10%. Foreign individual shareholders currently are exempt from withholding individual income tax.).
The company has completed the tax record filing for outbound payments in accordance with relevant laws and regulations. (It is required when the profits to be repatriated exceed USD50,000).

KAIZEN Group is equipped with experienced and highly qualified professional consultants and is therefore well positioned to provide professional advices and services in respect of the formation and registration of company, application for various business licences and permits, company compliance, tax planning, audit and accounting in China. Please call and talk to our professional consultants for details.