China is one of the biggest markets in the world and is attracting more and more global investors to move into the China market. In order to run the business in a most cost efficient way, it is necessary for the foreign investors to understand all the potential relevant tax costs that would be incurred in China before making an investment decision. In addition, different type of investment activities will trigger different types of taxes.
Major Taxes in China
The major taxes applicable to foreigners, foreign investment enterprises ("FIEs") and foreign enterprises ("FEs") doing business in China are as follows:
1. Tax on income
Corporate income tax ("CIT") - standard tax rate is 25%, but the tax rate could be reduced to 15% for qualified enterprises which are engaged in industries encouraged by the China government (e.g. New/high Tech Enterprises and certain integrated circuits production enterprises). Tax holiday is also offered to enterprises engaged in encouraged industries. Other CIT incentives are also available for tax resident enterprises in China.
Withholding income tax on payments to non-residents - a concessionary rate of 10% is currently applicable to interest, rental, royalty and other passive income.
Individual income tax ("IIT") - progressive rates range from 3% to 45%.
2. Tax on transactions (turnover tax)
Value-added tax - applies to the sale of goods, except real estate properties, and the provision of labour services in relation to the processing of goods and repair and replacement services within China. The standard tax rate is 17% with certain necessities taxed at 13%.
Consumption tax - applies to 14 categories of consumable goods, including tobacco, alcoholic drinks, cosmetics, jewellery, fireworks, gasoline, diesel oil, tires, motorcycles, automobiles, golf equipment, yacht, luxury watch, disposable chopsticks and wooden floorboard. The tax is computed based on sales price and/or sales volume.
Business tax - applies to the provision of services (excluding processing services and repair and replacement services), the transfer of intangible properties and the sale of real estate properties in China. Tax rates range from 3% to 20%.
3. Tax on property
Real estate tax - a tax imposed on the owners, users or custodians of houses and buildings at the rate at either 1.2% of the original value with certain deduction or 12% of the rental value.
4. Tax levied by the Customs
Customs duties - duties are imposed on goods imported into China and are generally assessed on the CIF (cost, insurance and freight) value. The rate of duty depends on the nature and country of origin of the imported goods.
5. Tax levied by finance department
Deed tax - a tax levied on the transferees or assignees on the purchase, gift or exchange of ownership of land use rights or real properties, with the tax rates generally range from 3% to 5%.
Tannet Services Include:
Tax Declaration;
Tax Planning;
Annual Tax Advisory;
Application and Advisory for Tax Preferences;
Individual Income Tax Declaration for Foreigners;
Customs Duty and Goods Tax Advisory;
Consultancy of the Latest China Taxation rules and regulations.
Contact Us
If you have further queries, don’t hesitate to contact Tannet anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com or www.companies-registry.net, 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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