China company accounting and tax compliance need to be complied with in order to maintain your business in China. Making sure your company is fully compliant with tax requirements will not only allow your company to operate efficiently, knowing that future costs are placed upon you will be paid, but also will allow you to foster a strong positive business ethos throughout all your operations, both for internal and external observation.
For many foreign invested enterprises, tax compliance in China is a challenge. China Accounting Standards is different from other western countries and the registration to the local tax bureau and other legal taxation bureaus might seem complicated. Every business operating in Mainland China is required to prepare their annual audit according to China Accounting Standards. Furthermore, the annual audit has to be in Chinese RMB. The following are some useful information for your reference.
Features of Tax System in China
1. Standard corporate income tax (CIT) rate in China is a flat 25% on all corporate profits;
2. A special CIT of 15% applies if the enterprise is classified under high technology status or if enterprise incorporated in certain regions of China such as Guangdong, Hainan, etc.
3. Capital gains are also taxed at CIT of 25% although losses can be carried forward for 5 years. This is extended to 10 years for Chinese enterprise with “High and New Technology” status and science and technology small and medium sized enterprises. No carry-back is allowed.
4. There is no tax consolidation regime in China for CIT purposes.
5. China levies a withholding tax of 10% on dividends, interest and royalties.
6. With effect from May 2018, the VAT rate in China is 16% for sales of goods, importation of goods, leasing of tangible movable property, repair and processing services. A reduced rate of 11% applies to transportation services, sales and leases of immovable property, basic telecommunications services, construction services, postal services, agricultural products and water and gas supplies.
7. Individual income tax (IIT) rate in China ranges from 3% to 45%.
Tax Filing Requirements
1. Companies in China must prepare financial statements for annual statutory audit under Chinese GAAP framework following company setup;
2. VAT returns must be filed monthly and submitted before the 15th day of the following month.
3. All enterprises must file their interim tax returns with the local authorities within 15 days of the end of each quarter, while annual tax returns must be submitted within 5 months from the end of the tax year. They must be filed in the Chinese language, or in both Chinese and English.
4. If the taxpayer fails to pay tax, a late payment surcharge may be imposed on a daily basis at the rate of 0.05% of the amount of tax in arrears, from the date that the tax payment is defaulted.
Tax compliance in China is often a major hurdle for foreign enterprises, with tax laws in Chinese and vast differences in tax treatment, filing and payment procedures, depending on the business activity and location of business. Having a reliable tax agent can save you significant time and money as well as the hassle of navigating the complex tax systems and regulatory framework. Tannet’s Tax and Finance Service Center is ready to help at any time.
Contact Us
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
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