Meaning
A unique alphanumeric identifier issued by the national tax portal confirms that a corporate entity has fully settled its tax liabilities for a specific transaction. This tax clearance verification code is generated automatically during the digital clearance process to simplify cross-border payments. This code replaces the old paper tax clearance certificates.
Digital Validation
When a local subsidiary needs to repatriate service fees to its overseas parent company, the finance team enters the tax clearance verification code into the bank’s transaction system. The bank’s system verifies the code against the tax bureau’s database in real time to confirm that the value-added tax and withholding taxes have been paid. If the status is valid, the bank can proceed with foreign currency exchange and wire the funds.
This automation has reduced the processing time for outbound payments.
Outbound Payment
This system prevents companies from repatriating funds using old tax receipts or duplicate invoices. Each tax clearance verification code is tied to a specific contract and a set payment amount. This linkage prevents the misuse of tax clearances for multiple transactions.
The system is managed under the guidelines of the state taxation administration and the state administration of foreign exchange.
Information Security
The platform uses encryption to secure the data shared between the tax bureau, the commercial bank, and the corporate applicant. This security prevents the forgery of tax records and protects corporate financial information. This digital check is now standard in all major commercial banks.
