China Taxation Resources


Chines Tax Resources

Tax System of China

Generally, any tax in China may be of the following types:

Enterprise Income Tax

Individual Income Tax

Consumption Tax, Value Added Tax, and Business Tax

Deed Tax, Land Value Added Tax, Resource Tax, Tax for making use of Urban and Township Land, Stamp Duty, Tax for Occupying Farmland, and Real Estate Tax.

Enterprise Income Tax

The income coming from internal and external sources of China fall under the liability of enterprise income tax. A special example is a business whose ownership lies with people belonging to other parts of the world. When an income comes by selling products, giving services, transferring assets, then the income can be taxed.  Also, cash flow by remittances, royalties, allowances, lease, interest and other kinds of non-functional is taxable.

It is absolutely lawful to subtract particular kinds of expenses from the revenues generated. As the following:

Taxes

Cost

Any deficit caused by an enterprise


However, there are some exceptions as well. Such exceptional expenses are not allowed to be deducted from the income by the virtue of Tax Law. Typically, a tax rate for an enterprise is 25%.

There may be enterprises that do not work on a large scale. Hence, for such enterprises preferential enterprise tax is imposed. Such enterprises may be defined as:

Any enterprise of industry which returns a profit of at most RMB 300,000 every year and owns a staff consisting of maximum 100 people. Also, the worth of all the belongings sums up to at most RMB 30,000,000. There would an imposition of 20% tax rate on such an enterprise.

Any enterprise of industry which returns a profit of at most RMB 300,000 every year and owns a staff consisting of maximum 80 people. Also, the worth of all the belongings sums up to at most RMB 10,000,000. There would an imposition of 20% tax rate on such an enterprise.

Any enterprise being technologically advanced and encouraged by the State for this purpose and subjected to latest regulations of certain regions will be liable to only 15% tax rate.

It is allowed to credit the foreign taxation, by some law of restrictive nature, where ever a payment of tax is made to a body ratified for receiving the foreign tax.


Individual Income Tax

Individuals belonging to China and other that are belonging to other parts of the world but having their source of income derived from China are liable to taxes on individual income. Income of an employed person, cash flow of businesses, and types of individual incomes other than these such as remunerations, all fall in the domain of individual source of income. The subjects of World-Wide taxation basis, are the local people of China and the people who are not the nationals of China but are residing in China for more than five continuous years.  However, matters concerned to scenarios other than these, are subjected to different rules.

Each month the inquiry of individual income tax is conducted. A growing rate of tax, spanning over 5%-45% in 9 tax brackets is charged on the income coming from pay or wages. In cases where the income comes in the form of cash flow of business, the growing rate of tax implied may be from 5%-35% in 5 tax brackets. The rest of the sources of income of individuals may have to undergo a rate of 20%. 

Value Added Tax

This tax is applicable on an individual who works for either products selling, repair services, production, or replacement of goods in China. Also the import of goods from other parts of the world into China is liable to a tax. When the differences of input and output VAT is estimated, we get the final value of VAT.

Individuals involved in tiny businesses, then such individuals have to pay a 3% VAT. The following may be termed as persons working for small businesses:

Individuals in businesses that involve production of goods or supplying services, whose sale is lesser worthy than RMB 500,000 every year and can be taxed as well.

Individuals in businesses that involve wholesaling of goods or goods’ retailing, whose sale is lesser worthy than RMB 800,000 every year and can be taxed as well.


All other types are categorised under the General tax payers. For them, the rate of tax is 17% VAT.

Some specific types of goods when marketed or imported, are liable to tax rates of 13% and 6% VAT.

VAT is not applicable on exporting items. Hence, if any VAT has been paid mistakenly, it can be refunded by placing a request.

Business Tax

This tax is applicable on any business that is involved giving services that are taxable, moving the intangible property or putting on sale a property that cannot be shifted in the boundaries of China. The taxable services are:

Insurance and Financial Assistance

Transport services

Services related to sports, entertainment and culture.

Services for construction

Telecommunications and post services

Other services related to Industry


A taxation of business is implemented on any business’s gross revenue. However, under the China Tax Law, any expenditure on the gross cash flow is deducted from it. Services related to industries may be liable to a tax of 3%-20%, where the value may be decided depending upon the kind of service.

Consumption Tax

This tax is applicable on businesses that are centring upon producing and processing of commission or entering luxurious goods into China from other parts of the world. The people linked with such businesses have to pay tax. The luxury items may be any of the following: tobacco, alcohol, liquor, jewels, equipment of golf, cosmetics, chopsticks of wood, fancy watches, making floors with wood, motor cars, cycles and their equipment, fireworks, oil products etc.

There are 14 different classes of products that can be subjected to tax. However, the rate may vary from product to product.

Stamp Duty

Some specific documents need to be kept secure, for securing them a stamp duty can be imposed on them under the laws of PRC. Contracts about transferring the ownership of any asset, accounts or books of business etc. are examples of such documents.

Deed Tax

This tax is applicable at the time of transferring or entitling the possession title of any business or land.

Land VAT

This tax is applicable on any benefit gained on transferring or entitling the right of land, structures, buildings and relevant framework.

Real Estate Tax

This tax is applicable if any real estate’s ownership belongs to a person or that person is a mortgagee of that real estate. The worth will be derived by calculation of land, buildings, and rental incomes’ worth.

Resource Tax

This tax is applicable on a person who is assigned the task of mining natural resources or other inorganic materials or works for producing salt in China.

Withholding Tax

This tax is applicable on non-resident businesses not having any formation in China and with a Chinese source income. Such businesses will be liable to a withholding tax of 10%. Income coming from dividends, rent, royalty, interest, gains made by transferring assets etc. are included in such Chinese sources of income. A representative will withhold these incomes who is authorised to distribute the relevant incomes.

Note: Our services include the experts of taxation, who will prove helpful in resolving matters regarding taxation for our clients who have entered the market of China or plan to trade their items and services in China.