How do mainland subsidiaries pay corporate income tax when distributing after-tax profits to Hong Kong holding parent companies?

Mainland subsidiaries are withholding agents, and the enterprise income tax is withheld and remitted according to the total after-tax profits distributed to the Hong Kong parent company multiplied by 10%. See the Enterprise Income Tax Law and its implementing regulations for relevant provisions, as follows:

People's Republic of China (PRC) enterprise income tax law

Article 3 A resident enterprise shall pay enterprise income tax on its income from sources inside and outside China.

Where a non-resident enterprise establishes an institution or place in China, it shall pay enterprise income tax on the income obtained by its institution or place from China and the income generated outside China but actually related to its institution or place.

If a non-resident enterprise has no institution or place in China, or if it has an institution or place, but its income has no actual connection with its institution or place, it shall pay enterprise income tax on its income originating in China.

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Article 19 When a non-resident enterprise obtains the income specified in the third paragraph of Article 3 of this Law, the calculation method of its taxable income is as follows:

(1) Income from dividends, bonuses and other equity investments, as well as interest, rent and royalties, shall be regarded as taxable income in full;

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Article 27 The following income of an enterprise may be exempted from or reduced from enterprise income tax:

(1) Income from agriculture, forestry, animal husbandry and fishery projects;

(two) the investment and operating income of public infrastructure projects supported by the state;

(three) income from engaging in qualified environmental protection, energy saving and water saving projects;

(4) Income from qualified technology transfer;

(5) Income as stipulated in the third paragraph of Article 3 of this Law.

Regulations on the Implementation of the Enterprise Income Tax Law of People's Republic of China (PRC);

Article 91 If a non-resident enterprise obtains the income specified in Item (5) of Article 27 of the Enterprise Income Tax Law, the enterprise income tax shall be levied at the reduced rate of 10%.