When is withholding tax charged in China?

Withholding Tax (WT) is charged on an array of service fees billed by a company in its home jurisdiction to a company (either a client or subsidiary) in China for services provided by the former to the latter. As corporate income tax (CIT) cannot be charged to a company that is non-resident, WT takes its place. The levied rate of WT varies considerably depending upon the service provided. Foreign investors are advised to consult with professionals as to the applicable WT rates per type of service. However, as a rule of thumb, this is generally between 10-20 percent of the total invoice value. In many cases, the DTA mechanism can halve this amount. Service fees charged by a parent company for the use of trademarks by its subsidiaries, for example, may be remitted to the parent at a rate lower than the standard 10 percent Withholding Tax levied in China.