China Tax Resources
China Tax Systems
The following are the common classifications of tax in China:
Individual Income Tax
Enterprise Income Tax
Value Added Tax, Business Tax, and Consumption Tax
Stamp Duty, Deed Tax, Resource Tax, Tax for using Urban and Township Land, Real Estate Tax, Tax for Occupying Farmland and Land Value Added Tax.
Individual Income Tax
The individual income tax is applicable on all the locals of China as well as the foreigners whose source of income is acquired from China. The source of income may include the income for employment, revenue generating from any business and other forms of income generated for individuals or remunerations. The local people of China along with the people from foreign countries living in China over a duration of 5 years continuously, are subjected to World-Wide tax basis. In situations other than these, some specific rules are applied.
An assessment for income tax of individuals is usually done every month. The progressive rate of tax which is imposed on wages and salaries may be from 5% to 45% in 9 tax brackets. Whereas, the progressive rates of tax on income generated from business may vary from 5% to 35% in 5 tax brackets. On the types of individual incomes other than business and salaries, a typical rate for tax of 20% is imposed.
Enterprise Income Tax
When income is generated from inner and outer sources of China, the income are subjected to enterprise income tax. This may especially include businesses that are owned by foreigners. The types of income that can be taxed are incomes generated from sources like selling goods, services provisions, shifting properties. It may also include revenue generated from sources like dividends, royalties, income on lease, aid, interest and rest of the incomes that are not functional.
Some types of expenses are given permission to be subtracted from the incomes generating from sources. These include the following:
Any loss when the source of income is an enterprise
However, there some other types of expenses that cannot be subtracted under the Tax Law. The typical rate of tax for income generated from enterprise is 25%.
For enterprises that are not large enough, preferential enterprise income tax is suitable.
If the enterprise is industrial in nature with a yearly profit of not more than RMB 300,000, a work force of at most 100 persons and the assets altogether not worthier than RMB 30,000,000, then the imposed tax rate would be reduced to 20%.
If the enterprise belongs to any other type but has a yearly profit of up to RMB 300,000, at most 80 persons working in it and the worth of all the assets is lesser than or equal to RMB 10,000,000, then the imposed tax rate would be reduced to 20%.
The enterprises that are famous as being encouraged by the state as high and advanced technological enterprises and new sets of rules of some areas are imposed on them, such enterprises will be subjected to a tax rate of 15%.
The permission is given crediting the foreign tax under some limited law because situations may arise where the authority of foreign tax is paid a tax.
Value Added Tax
Value Added Tax is imposed on persons who are responsible for selling certain goods, or involved in providing services of repairing, manufacturing, or replacing in the bounds of China. Entering goods into China is also included in VAT. The calculation of VAT is done by subtracting the output and input VAT.
The persons entitled to pay tax on a small scale are liable to charge of 3% VAT. Such persons paying tax on small scale are defined as follows:
Who are working for manufacturing goods or providing services whose worth of sale that can be taxed on a yearly basis is lower than RMB 500,000.
Who are involved in business of wholesale or retailer goods and the yearly sales that can be taxed is lower than RMB 800,000.
The rest of the taxpayers fall within the type of general tax payers and the tax rate for them is usually 17% VAT.
When marketing and importation of some particular goods is done, a tax rate of 13% and 6% VAT will be imposed on them.
The goods to be exported are not subjected to any VAT. Therefore, if anyone has given VAT, he/she can request for a refund.
Business tax is imposed on person working on businesses that involves providing services that can be taxed, shifting belongings that are intangible and property selling that cannot be moved in the bounds of China.
The services that can be subjected to tax include the following:
Services for construction
Insurance and financial services
Services of post and telecommunications
Services relevant to culture, entertainment and sports.
Other Industrial services
The imposition of business tax is done on the total productivity of a business, while the expenses on the total revenue of the business are permissively subtracted, as mentioned by the China Tax Law. The tax rate for service industries may be from 3% - 20%, and the value may vary from type to type of the service.
Consumption tax is imposed on person who is a part of a business that involves the production and commission processing or importing of particular goods that are generally unnecessary and for luxury purposes in the bounds of China. Such luxurious consumer goods may include alcohol, tobacco, liquor, cosmetics, jewels, fireworks and crackers, pearls, accessories of golf, luxurious watches, wooden chopsticks that can be disposed, flooring done with solid wood, motorcycles and cars and their accessories and refined products of oil etc.
The items liable to tax can be classified into 14 different types, with different rates of taxes subjected on each.
There are certain documents that are required to be subjected to stamp duty for the purpose of their security under the PRC laws. These documents may include different agreements, documentations regarding moving the ownership of property, business accounts and books etc.
While transferring or assigning the proprietorship title of the land or business, a deed tax is imposed.
Land VAT is imposed on person responsible for realising the profits on assigning or moving the land right, buildings and related frameworks in the bounds of China.
Real Estate Tax
Real estate tax is imposed on person who has the ownership or mortgage of a real estate, which is derived from the estimation of typical worth of the land, structures or income due to rent.
Resource tax is imposed on person involved in extracting inorganic materials, and other natural resources or is indulged in the manufacturing of salt in China.
If there are enterprises that are not residents of the region, and do not have any setup in China, but the source of income is China, then a withholding tax of 10% will be applicable. Such sources of income derived from China may include income of remittance, royalty, rent, interest, profit from moving assets and other incomes. These incomes will be held by an agent of withholding who has to disburse the concerned incomes.
Note: We provide the services of tax expertise that help clients in different complicated issues of tax, who have stepped in the market or are intending to sell their goods and services in overall China.