Enterprise income tax should be paid by all enterprises and other income receiving organizations (excluding sole proprietorship enterprises and partner ship enterprise) within China. It shall be calculated on the basis of a tax year which shall commence on January 1 and end on December 31 of each calendar year.
The Enterprise Income Law of the People’s Republic of China has come into force as of January 1, 2008. Foreign-funded enterprises as resident enterprises shall pay income tax on the basis of their taxable amount of income. For a non-resident enterprise having no office or establishment inside China, or for a non-resident enterprise whose incomes have no actual connection to its institution or establishment inside China, it shall pay enterprise income tax on the incomes derived from China.
Any foreign-funded enterprise which has no establishment or office in China but derives profits (dividends), interest, rental, royalties or other income from sources in China shall pay an income tax at a rate of 20%.
Provisions on tax preference for foreign-funded enterprises
1.Tax reductions and exemptions of any productive foreign-funded enterprises with a scheduled operation period of more than 10 years shall be exempt from enterprise income tax in the first and second year from the first profit making year, and subject to enterprise income tax at a rate reduced by one half from the third year to the fifth year.
The scheduled operation refers to the period from the date of actually commencing production and operation by the foreign-funded enterprise, including the trial production and operation.
In general, “the first profit making year” mentioned here is determined pursuant to the following principles:
(1) If the enterprise gains profits in the year of opening business, the year of opening business shall be deemed as the first profit making year irrespective of the period of actual operation of that year.
(2) For any enterprise that incurs losses at the beginning of its business, the tax year in which there are profits remaining after the losses are offset shall be deemed as the first profit making year.
(3) If the enterprise suffers losses in a year during the statutory tax reduction/exemption period, the tax reduction/exemption period shall be calculated successively.
2. Any foreign-funded enterprise engaging in agriculture forestry and animal husbandry or established in remote and underdeveloped areas may, upon the expiry of such tax exemption/reduction period, enjoy a 15%-30% reduction of the amount of enterprise income tax payable for 10 more years if the enterprise’s application is approved by the competent tax authority of the State Council.
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.
Previous：Corporate Finance and Taxation Services in China
Next：China Accountant