USD 50,000 is where the bank stops: four files decide whether your Chinese subsidiary can pay you

USD 50,000 is where the bank stops: four files decide whether your Chinese subsidiary can pay you
Roberto GILARDINO
Roberto GILARDINO
Senior Partner — International Corporate, Tax & Trust Law at Horizons Corporate Advisory

November 12, 2026
Since 1 January 2026 China’s first Value Added Tax Law and its implementing regulations, published on 30 December 2025, state where a service is consumed: a service sold by a foreign company to a Chinese company counts as consumed in China, unless consumed on the spot abroad. For a parent that invoices its Chinese subsidiary for services or royalties, that rule sits beside income tax withheld by the subsidiary and a tax filing for each contract whose payments exceed USD 50,000 (about EUR 44,100 at the ECB rate of 30 September 2026). The bank then checks the documents before the money leaves, and the invoice is paid when the four agree.

What changed
The VAT Law taxes a service sold into China at 6 per cent, unless the law lists it at another rate, and makes the Chinese buyer the withholding agent where the foreign seller has no establishment in China (articles 4, 10, and 15; Implementing Regulations, article 4).

The corporate income tax regulations, in the text of 6 December 2024, treat an amount as due for payment when the payer books it as a cost on an accrual basis (article 105). The subsidiary’s obligation to withhold therefore arises when the invoice enters its accounts, not when the money is sent.

The tax filing itself became simpler in 2021. Under an announcement of 29 June 2021 one filing covers a contract, made online before the first payment; the bank receives its number and a verification code, and the fifteen-day review by the tax office that the 2013 rules allowed has been abolished.

What it means for your company
Imagine a parent that signs two agreements with its Chinese subsidiary: one for services rendered by its own staff abroad and in China, one for a licence of its technology. Each invoice meets four rules.

Income tax. A company with no establishment in China pays tax on its Chinese-source income, at a statutory rate of 20 per cent reduced to 10 per cent, and the Chinese payer withholds it at each payment or when payment falls due, then remits it within seven days; where nothing is withheld, the parent must pay it itself. Services performed outside China are not Chinese-source income, so the part of the fee earned abroad carries no withholding; the royalty and the part performed in China do.

Deductibility. Management fees paid between enterprises are not deductible, and the tax authority may adjust payments for intra-group services that bring the subsidiary no economic benefit; its rules list six such cases. An invoice that describes a service in general terms invites that reading.

VAT. The subsidiary withholds the VAT on the service fee, the part performed abroad included, unless the service is consumed on the spot abroad.

The licence. A technology import contract is registered online with the commerce authority within sixty days of taking effect or, where the fee is a royalty, of the first royalty base. The registration certificate is the document the bank and the tax office ask for.

The bank. Current-account payments are not restricted, but each must rest on a genuine and lawful transaction. Up to USD 50,000 per payment the bank in principle examines no documents; above that amount it confirms that the parties, the amount, and the nature of the transaction match the payment requested. A recharge of costs advanced or shared between related companies should in principle not exceed twelve months.

What to do, and when
Before signing: write each agreement so that the service, its place of performance, and its benefit to the subsidiary can be read from the text; where the contract is in a foreign language, prepare the Chinese translation the filing requires, and have it stamped.

Before the first payment: the subsidiary makes the tax filing online for each contract above the threshold and gives the bank the number and the verification code; a licence of technology is registered first.

At booking: the subsidiary withholds income tax and VAT when the invoice is accrued, and remits within seven days.

During the year: keep evidence, month by month, that each service was rendered to the subsidiary and used by it.

At year-end: recharge shared costs within twelve months, and reconcile what was invoiced, withheld, filed, and paid.

A payment out of China is the last page of a file that begins with the contract.
In brief
Since 1 January 2026 a service sold to a Chinese company is consumed in China unless consumed on the spot abroad; the Chinese buyer withholds the VAT.
Income tax at 10 per cent is withheld on Chinese-source income when the cost is accrued; services performed abroad are not Chinese-source.
Above USD 50,000 per payment the bank checks the documents, and each contract needs one online tax filing before the first transfer.

Sources. Value Added Tax Law of the People’s Republic of China, in force 1 January 2026: articles 4, 10, and 15. Implementing Regulations of the Value Added Tax Law (State Council Order No. 826, published 30 December 2025, in force 1 January 2026): article 4. Enterprise Income Tax Law: articles 3, 4, 27, 37, 39, and 40. Implementing Regulations of the Enterprise Income Tax Law, text of 6 December 2024: articles 7, 49, 91, and 105. State Administration of Taxation, Announcement No. 6 of 2017 on special tax investigations and adjustments: articles 34 and 35. State Administration of Taxation and State Administration of Foreign Exchange, Announcement No. 40 of 2013: articles 1, 2, 3, and 9. State Administration of Taxation and State Administration of Foreign Exchange, Announcement No. 19 of 2021 of 29 June 2021. Foreign Exchange Administration Regulations (State Council Order No. 532, 2008): articles 5 and 12. State Administration of Foreign Exchange, Guidelines on Foreign Exchange Business under Trade in Services (Huifa [2020] No. 14): article 49. Regulations on the Administration of Technology Import and Export (State Council Order No. 331): articles 17 and 20. Ministry of Commerce, Measures for the Administration of the Registration of Technology Import and Export Contracts (Order No. 3 of 2009): articles 6, 7, and 8. Terms: tax filing for outbound payments (对外支付税务备案); withholding agent (扣缴义务人); non-resident enterprise (非居民企业); authenticity review (真实性审核).

Note 1. Why the bank reads the contract. On 1 January 1994 China unified its exchange rate, and in December 1996 it accepted the obligations of Article VIII of the International Monetary Fund’s Articles of Agreement: payments for current transactions, services and royalties among them, may not be restricted. Chinese law adds that each such payment must rest on a genuine and lawful transaction, and the bank confirms it by reading the contract, the invoice, and the tax filing against the transfer. In 2015 China’s foreign-exchange reserves fell by USD 342.3 billion, and the review of outbound payments carries that memory. Sources: Foreign Exchange Administration Regulations, articles 5 and 12; State Administration of Foreign Exchange, Huifa [2020] No. 14; the reading of them is the author’s.

What this newsletter does. Corporate, tax and trust law across Asia and the CIS, with the cultural reading that explains why each rule exists. Written by the people who work in those countries, for the people who decide from somewhere else.

If your group invoices a Chinese subsidiary, write to me here.

The one-page sheet ‘Paying a parent from China: the file before the first transfer’ goes to anyone who asks for it in a message.

The question you have not asked yet.

This article is general information, not legal advice; it reflects the law as at 12 November 2026.