Is there a holding requirement before dividends may be pulled from China - even if taxable?

Kurt Morrow's Profile
Kurt Morrow (Marketing Coordinator, Proformative)
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Kurt Morrow
Title: Marketing Coordinator
Company: Proformative
| May 4, 2011

The following question was asked by an attendee at a recent Proformative China M&A, Tax and Structure webinar: Is there a holding requirement before dividends may be pulled from China - even if taxable?  Does fact that we have not yet met our capital contribution requirement to our WFOE in China change that?

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Jinghua Liu's Profile
Jinghua Liu (Special Counsel, Baker & McKenzie)
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Jinghua Liu
Title: Special Counsel
Company: Baker & McKenzie
| May 13, 2011

Before a Chinese company can make dividend distribution to its shareholders, the company should put 10% of its annual profit into a statutory reserve every year until the total amount of the reserve reaches 50% of the registered capital amount. If the registered capital has been paid in full according to the capital contribution schedule, the company can distribute dividend from its retained earnings

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Mike Adhikari's Profile
Mike Adhikari (Owner)
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Mike Adhikari
Title: Owner
Company:
| May 15, 2011

Hi Jinghua Liu
I would appreciate some clarity. What is a "registered capital amount"? When is it not paid in full? What is "capital contribution schedule"?

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