If the service fee is paid overseas, according to the Provisional Regulations on Business Tax and its detailed rules, the payment enterprise shall withhold and remit the business tax payable by the domestic service receiving enterprise.
Involving technology transfer business, it shall be handled in accordance with the following provisions:
The Notice of State Taxation Administration of The People's Republic of China of the Ministry of Finance on Implementing the Decision of the Central the State Council on Strengthening Technological Innovation, Developing Hi-tech and Realizing Industrialization (Caishuizi [1999] No.273) stipulates that units and individuals engaged in technology transfer and technology development (including foreign-invested enterprises, research and development centers established by foreign investors, foreign enterprises and foreign individuals).
The Notice of People's Republic of China (PRC) State Taxation Administration of The People's Republic of China and the State Administration of Foreign Exchange on Domestic Institutions and Individuals Paying Technology Transfer Fees No More to Submit Business Tax Certificates (Guo Shui Fa [2005] No.28) stipulates that since May 19, 2004, domestic institutions and individuals may be exempted from providing business tax certificates when purchasing foreign exchange from their foreign exchange accounts or paying technology transfer fees under royalties. However, the tax certificate of income tax (including enterprise income tax and personal income tax) provided by the competent tax authorities should still be submitted in accordance with the Notice of State Taxation Administration of The People's Republic of China, State Administration of Foreign Exchange of the People's Republic of China on Relevant Issues Concerning the Submission of Tax Certificates for Sale and Payment of Foreign Exchange under Non-trade and Partial Capital Items (Huifa [1999] No.372).
2. Enterprise income tax:
Domestic enterprises that pay royalties shall pay 10% of the enterprise income tax in full in accordance with the relevant provisions of the enterprise income tax law and its implementing regulations.
If domestic enterprises pay labor fees, it is necessary to consider whether the labor services provided by overseas enterprises are in China or abroad. If the labor service is completely overseas, according to the relevant provisions of the Enterprise Income Tax Law and its implementing regulations, there is no need to pay enterprise income tax in China. If overseas enterprises need to provide services in China, it depends on whether the country providing services is a country that has signed a tax treaty with China.
If it is a country that has signed a tax treaty with China, it is necessary to judge whether it constitutes an institution or place in China. If it does not constitute a permanent establishment, it is not necessary to pay enterprise income tax in China according to the agreement; If it does constitute a permanent establishment, it shall pay enterprise income tax according to the income from labor services in China.
For enterprises in countries and regions that have not signed tax treaties with China to send employees to provide services in China, it usually constitutes institutions and places in the above sense. Income belonging to institutions and places, whether they constitute permanent institutions or not, shall be subject to enterprise income tax at the rate of 25%.
Under normal circumstances, the distinction between technical service fees and royalties should be judged according to the relevant provisions of the Notice of State Taxation Administration of The People's Republic of China, People's Republic of China (PRC) on Relevant Issues Concerning the Implementation of Royalty Clauses in Tax Treaties (Guoshuihan [2009] No.507).
3. According to Article 10 of the Notice of People's Republic of China (PRC) State Taxation Administration of The People's Republic of China on Printing and Distributing (Guo Shui Fa [2009] No.3), when a withholding agent and a non-resident enterprise sign a business contract related to the income specified in Article 3 of these Measures, if the contract stipulates that the withholding agent shall bear the tax payable, the tax shall be calculated after the tax-free income obtained by the non-resident enterprise is converted into tax-free income.
Therefore, if the contract stipulates that the tax shall be borne by the domestic enterprise, the enterprise shall calculate the withholding after the tax-free income is converted into tax-included income.
4. Whether the business tax and enterprise income tax withheld and remitted by overseas enterprises can be deducted back to their own countries depends on their specific regulations.