China company tax filing (WFOE) refers to the taxes need to be paid by WFOEs (wholly foreign owned enterprises) after business registration and during operations. Taxes provide the most important revenue source for the Government of the People's Republic of China. As the most important source of fiscal revenue, tax is a key component of macro-economic policy, and greatly affects China's economic and social development. Company incorporated in China should fill the relevant taxes after registration in line with the laws and regulations. The following are the common taxes that a WFOE should pay attention to.
Business Tax
Business tax is mainly levied on technology service companies. It is also one of the major taxes that WFOEs need to pay for registration. Business tax is generally levied according to the invoice value of service industry×5%. Some foreign trade companies engaged in commission agency services may also be involved in making out service industry invoices. Service invoices can be applied to the tax authorities according to the business scope of a company.
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Value-added Tax (VAT)
VAT is mainly levied on WFOEs that sell goods and provide labor services. The tax rates are divided as follows:
(1) 0%: mainly for export products. China does not impose VAT on export products, and the tax rate is 0%;
(2) 3%: for small-scale companies selling products according to their tax-included sales amount;
(3) 13%: the objects of taxation are agricultural products and industries related to the national economy and people’s livelihood, such as water, electricity, etc.;
(4) 17%: for medium and large-scale companies whose annual sales amount reaches RMB 800,000 according to the value-added portion of sales.
Corporate Income Tax (CIT)
After the Income Tax Integration, WFOEs and domestic-funded companies pay the corporate income tax according to their net profit×25% in the course of business operations. The corporate income tax is pre-paid on a quarterly basis, and finally settled at the end of each year.
Individual Income Tax (IIT)
After a WFOE recruits its employees, those employees whose salaries reach a certain base are required to pay individual income tax. The individual income tax is withheld and remitted by WFOEs. The tax base for employees from Mainland China amounts to RMB 3,500, and the tax base for expatriate staffs and employees from Hong Kong, Macao and Taiwan amounts to RMB 4,800. Revenues above the tax base are taxed at progressively higher rates, up to a maximum of 45%.
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