After the withholding and payment of taxes is "replaced from business tax with value-added tax", when domestic enterprises pay royalties to non-resident enterprises, in addition to the need to withhold and pay corporate income tax, they must also withhold and pay value-added tax. , urban construction tax and education surcharge, etc.

The value-added tax withheld and paid by domestic enterprises shall be paid to the competent state tax authority where the domestic enterprise is located, and the urban construction tax and education surcharge withheld and paid shall be paid to the competent local tax authority where the domestic enterprise is located. The corporate income tax withheld and paid by domestic enterprises shall be paid to the competent national tax authority or local tax authority in charge of the domestic corporate income tax respectively.

1. What is the tax basis for withholding and paying corporate income tax and business tax on royalties paid by overseas institutions?

The tax is calculated by converting the foreign currency into local currency and multiplying it directly by the corresponding tax rate, and then pays the non-resident corporate income tax. Unless the property is transferred, no relevant taxes shall be deducted. According to the subject amount agreed in the contract, the taxable liability for this part of the tax lies with the foreign enterprise. If the paying enterprise pays it on its behalf, it shall not be listed before tax.

2. What is royalty:

Royalty income refers to a taxable income subject to my country’s personal income adjustment tax. It refers to the income obtained by units and individuals from providing or transferring various patent rights, know-how, copyrights, trademark rights, etc. to others for use. Without permission, no unit or individual may use the concession rights owned by units or individuals to seek benefits for themselves. They can only be used if the concession owner agrees to transfer or allow use and pays a certain usage fee. Therefore, royalty income is an exclusive income of the franchise owner and an integral part of corporate and individual taxable income.

Legal basis: "Notice of the State Administration of Taxation on Issues Concerning the Implementation of Royalty Clauses in Tax Agreements" Article 1: The definition of royalties in tax treaties clearly includes the use of industrial, commercial, and scientific equipment. For payments (i.e., rental income related to my country’s tax law), the relevant income shall be subject to the provisions of the royalty clause of the tax agreement. If the tax rate stipulated in a tax treaty is lower than the tax rate stipulated in tax laws, the tax rate stipulated in the tax treaty shall apply.