Above-the-line distributions are expenses charged to China operations, usually by the foreign parent directly, and thus are legitimate fees for which an invoice is presented to the China business as part of its normal operational procedure.

These can include: royalty charges for trademarks or patents owned by the parent; ?foreign management expertise,? full expenses and pay for any head of office or overseas personnel visiting China, even if just for a short period; and royalty fees for technology transfers interest on loans, including penalties for late payment.

Above-the-line distributions need to be agreed upon and identified in the articles prior to submission to the authorities for approval of an operation?s business license. When levying such charges onto a China business, it is important to be aware that such payments are subject to Chinese tax (amounts vary depending upon the service), prior to the China entity being able to remit back to the foreign parent. But even accounting for this, the amount of money able to be remitted back to the parent pre-tax can be quite significant with careful preparation and planning.

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