It seems that the foreign exchange payment for importing technologies is only a foreign exchange management issue. However, there are laws and regulations on the management of the technology import and taxation in China, so enterprises shall also pay attention to those requirements.
Overall, enterprises shall pay attention to 3 aspects related to the foreign exchange payment for importing technologies: the management of importing technologies, foreign exchange, and taxation.
When importing technologies, the importer shall check the category of the imported technology. According to the relevant laws and regulations, China set 3 categories on the management of the imported technologies, which are, Prohibited, Restricted and Free. In view of this, the importer shall check whether the imported technology is listed in the “Catalogue of Technologies Prohibited or Restricted to Be Imported”. If it belongs to the Restricted category, then the importer shall apply for the technology import license at the commercial authorities. If it belongs to the Free category, then the importer shall register the contract at the commercial authorities, and obtain the certificate of registration of the technology import contract.
Then when shall the importer to use the license or certificate in the foreign exchange payment procedures? In the past, where a single payment is more than 50,000 USD, the importer shall provide the license or certificate to the branches of SAFE or the bank. In Sep. 2013, the “Detailed Rules for the Implementation of the Guidelines for the Foreign Exchange Administration of Trade in Services” prescribes that where a single payment is more than 50,000 USD, for the imported technologies belong to the Restricted category, the importer shall provide the technology import license, but for the Free category, there is no requirement on the submission of the certificate of registration of the technology import contract.
Although “Regulations on Administration of Import and Export of Technologies” (“Regulations”) has stipulated the responsibility for the importer to register the contract for Free category technologies, since the foreign exchange administration authorities would not require importers to provide the certificate of registration of the technology import contract, in practice, many enterprises would no longer register the relevant contracts, or consider the requirements and restrictions as stipulated in the “Regulations” and the relevant judicial interpretations. This understanding is wrong. The “Regulations” is the current effective law, which means the requirements for importing Free category technologies are still implementable. If an enterprise fails to register the contract or consider the relevant requirements and restrictions, it might face the following disadvantages/risks: (a) according to “Announcement on Issues concerning Taxation Recordation for Foreign Payments under Trade in Services and Other Items” (Guo Shui 2013 No.40) jointly issued by SAT and SAFE, and other relevant regulations, the enterprise might not apply for the reduction or exemption of enterprise income tax; (b) if the commercial authorities would strengthen the management of the registration of such contracts, or the afterwards supervisions, then the enterprise might be risky; (c) the taxation authorities might challenge the rationality of the price and the legitimacy of the relevant provisions. Therefore, from the perspective of compliance management, it would be better for enterprises to consider the relevant laws and regulations, and register the contracts timely.
Last but not least, for the tax certification documents related to the import of technologies. According to Guo Shui 2013 No.40, if the price in the contract is above 50,000 USD, the importer shall file to the local competent taxation authorities, and obtain the tax record, with which the importer could pay the price to the overseas exporter.