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Taxation in China

Taxation in China

Updated on Thursday 05th May 2016

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The tax system in China divides taxation into taxes for corporations and for individuals. There are a number of different taxes applicable in various fields; foreign investors interested in the business environment applicable by the Chinese authorities can also benefit of the provisions of double taxation treaties signed by China, if they are residents of states which have signed such agreements. Some of the most important taxes in China are: income taxes, property taxes, agricultural taxes, customs duties taxes and others.
 
Companies in China need to comply with the filing requirements and the same rule is applicable to individuals as well. Our lawyers in China provide complete tax management services and information on the taxation system currently applied here.
 

Corporate taxation in China

 
A company is considered a Chinese resident company if it is established in China or if its main place of management is located in China. Foreign companies are also subject to Chinese taxation if they operate through a permanent establishment, or if they derive income from China, even if they do not have an establishment here. Resident companies are taxed on their worldwide income and non-resident companies are liable to taxation only on the income produced in China and effectively related to their Chinese establishments (if applicable). A permanent establishment is considered to be any fixed place through which the company operates in China and which is set up in order to gain profits. 
 
The standard company income tax in China is 25%. Small-scale businesses benefit from a lower rate of 20% and companies that have a high-technology status benefit from a 15% rate. The corporate rate can be lowered down to 10% if certain conditions are met. At the same time, the rate imposed at a value of 15% of the profits can also be applied to companies incorporated in specific regions of the country, as a measure to promote investments in those areas.
 
A 10% withholding tax applies on dividends paid to non-resident companies, unless otherwise specified by a tax treaty. The same rate of 10% withholding tax also applies to royalties and interest paid to a non-resident.
 
It is important to know that the local authorities introduced new regulations from the beginning of May, referring to the Value Added Tax (VAT) applied to financial services and insurance. The new tax is applicable at a rate of 6%. Real estate VAT is imposed at a rate of 11%.
 
The Value Added Tax in China has a standard value of 17% and a lower rate applies to certain products. The tax year is generally the calendar year and penalties apply for late payments, as well as surcharges. Our lawyers in China can give you complete details about VAT registration for companies. 
 

Taxes on individuals in China

 
The taxable income for individuals in China includes the employment income, the production and business income, income for personal services, income from leasing property, the assignment of property or transfer of property and other types of income. There are seven progressive tax rates, between 3% and 45% that are levied on salaries in China. Overall, individuals are taxed for 11 types of income. 
 
Persons who want to receive more about the taxation on companies and on individuals in China can contact our Chinese attorneys
 

 

Comments

  • Anthony 2016-05-04

    I can see that the taxation, at least in terms of VAT, varies depending on the type of business or the region where the company is incorporated. I suppose this represents a good part of the taxation system.

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