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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15308
Experience:  15years with H & R Block. Divisional leader, Instructor
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We are a company in California who plans to wire money to China

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We are a company in California who plans to wire money to China to pay our supplier. The outgoing money is in US$ and the recipient received in CNY (the bank will convert the currency for us). My question is whether there is any tax implication from BOTH US AND Chinese government regarding this. To my understanding, there is 20% witholding tax for incoming money to US from abroad. How about outgoing money? Thanks

Robin D :

Hello and thank you for using Just Answer,
I cannot speak to the China tax on the money that you are paying but for US tax purposes, foreign vendors providing either services outside the U.S. or providing tangible personal property (goods) to United States company, the W-8 BEN must be completed, no treaty benefits need to be claimed and there is no need for a U.S. taxpayer ID.
You should request that every foreign vendor fill out the W-8 to confirm two things: i) that they are a foreign vendor not subject to U.S. tax reporting and/or backup withholding, and ii) that your company conducted the necessary step of confirming the foreign status of the vendor. For this purpose, the foreign vendor need only complete Part 1, lines 1-4, and sign and date the bottom of the form. The form must be filled out and signed by an employee/officer/director of the company who is authorized to sign. It ensures that you verified that the company is truly a foreign entity and not subject to withholding. This form is kept in your internal files and provides you with a record that you did meet the requirements of the law by verifying the foreign status of the company.

Customer:

Hi Robin,

Robin D :

Hello

Customer:

Thanks for the comprehensive answer from US taxation side, I wonder whether you know from China taxation side

Robin D :

I am not a China expert ( we don't really have any one here that is) I can tell you that your company would not have a tax obligation to China as long as you are only making purchases from the company there.

Robin D :

The 2012 corporate tax rate for domestic and foreign companies is 25%. You would only be obligated if your company had a presence in China.


Small companies pay 20% corporate tax in certain cases.




Robin D :

I thank you in advance for a positive rating and please come back if any of us can assist you with tax situations.

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