The State Administration of Taxation (SAT) has released the Public Notice on March 26, 2015 regarding certain corporate Income Tax matters on Outbound Payments to Overseas Related Parties.
Public Notice 16 states that outbound payments to overseas related parties should follow the arm’s length principle, and also specifies various circumstances where payments, service fees or royalties paid to overseas related parties would not be deductible for corporate income tax (CIT) purposes. Substance and documentation are also specifically addressed.
Tax authority will be looking at the arm’s length nature of outbound payments such as royalties, service fees and management fees as per Public Notice 16 regarding certain corporate income tax matters on outbound payments to overseas related parties.
