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Tax Guide

Financial Year – 1 January – 31 December
Currency – Renminbi (CNY)

Corporate Tax Summary

Residence – Enterprises that are incorporated in China under Chinese law, or that are incorporated in a foreign country but have organisations in China that exercise substantial and comprehensive management and control over the production and operation, personnel, accounting, property, etc. of the enterprise.

Basis of Taxation – Resident companies are taxed on worldwide income. A non-resident company generally pays taxes only on income derived from Chinese sources.

Reference
Corporate Income Tax Rate (%) 25% From 2019-2021, small-scale enterprises engaged in activities that are not restricted or prohibited by the state with less than CNY 3 million annual taxable income, no more than 300 employees and total assets of not more than CNY 50 million can qualify for an incentive rate which is 5% to 10% lower.
Enterprises with key support from the state such as high-tech enterprises, qualified advanced technology service enterprises or supported industrial enterprises in the western region etc. can qualify for a tax rate of 15%
Branch Tax Rate (%) 25%
Withholding Tax Rate:
Dividends – Franked Not applicable
Dividends – Unfranked 10% If a non-resident tax payer is a tax resident of a country or jurisdictions that has entered into a double tax treaty with China that includes reduced withholding tax, the reduced withholding tax rate can apply following approval from the designated tax bureau.
Dividends – Conduit Foreign Income 10%
Interest 10%
Royalties from Intellectual Property 10% If a non-resident tax payer is a tax resident of a country or jurisdictions that has entered into a double tax treaty with China that includes reduced withholding tax, the reduced withholding tax rate can apply following approval from the designated tax bureau.
Fund Payments from Managed Investment Trusts Based on the nature of the fund
Branch Remittance Tax 0%
Net Operating Losses (Years)
Carry Back 0
Carry Forward 5

Individual Tax Summary

Residence – Resident taxpayers are individuals who have a domicile in china, or who do not have a domicile in China but have resided in China for 183 days or more cumulatively within one tax year.

Basis of Taxation – Resident taxpayers are generally taxed on worldwide income, with a tax offset for foreign tax paid on foreign income, up to the amount of Chinese tax payable on that income. Non-residents are taxable only on Chinese source income. Generally, individuals who have no domicile in China will not be subject to Chinese tax on worldwide income until they reside in China for 183 days or more in one year for more than six consecutive years.

The following types of income are subject to individual income tax:

  1. Comprehensive income, including wages and salaries, remuneration for personal services, royalties
  2. Business operations
  3. Interest, dividends
  4. Lease of property
  5. Transfer of property
  6. Contingent income

Filing Status – For resident taxpayers, comprehensive income is subject to yearly calculation (but still requires monthly calculation and filing). For non-resident taxpayers, the income under comprehensive income is calculated separately each time or each month when it occurs.

Personal Income Tax Rates

Taxable Income Tax Payable – Residents Tax Payable – Non Residents
Up to CNY 36,000 3% 3%
More than CNY 36,000, up to CNY 144,000 10% 10%
More than CNY 144,000, up to CNY 300,000 20% 20%
More than CNY 300,000, up to CNY 420,000 25% 25%
More than CNY 420,000, up to CNY 660,000 30% 30%
More than CNY 660,000, up to CNY 960,000 35% 35%
More than CNY 960,000 45% 45%

The above is the the tax rate for the annual comprehensive income for resident taxpayers. The tax rates for non-resident taxpayers are generally equal to those for resident taxpayers, but the yearly income can be converted to monthly income to calculate the tax rate.

Goods and Services Tax (GST)

Rate generally 3% to 13% for VAT; Tax rates for consumption tax vary considerably with the type of products.
Taxable Transactions VAT rules allow the offset of VAT incurred in relevant purchases with the VAT liability. If the output VAT is insufficient to offset the input VAT in the current period, the difference can be carried forward to the next period. If certain conditions are met, the difference can be returned.

Consumption tax is imposed on the manufacture and import of certain categories of products, such as:

  • Products whose over-consumption is harmful to health, social order and the environment
  • Luxury goods
  • High-energy consumption and high-end products
Registration VAT taxpayers are categorised as general taxpayers or small-scale taxpayers based on their annual taxable sales value. Small-scale taxpayers are subject to a lower uniform VAT rate of 3%, but no credit of input VAT can be claimed. And only general taxpayers are entitled to export VAT refunds.
Filing and Payment VAT and consumption tax is generally filed on monthly basis. A company processing taxable goods for others is liable to withhold and pay consumption tax based on the value of the raw materials used.

Other Taxes Payable

Tax Reference
Payroll Tax Under the Chinese tax system, payroll tax is a part of the comprehensive income for individual tax.
Stamp Tax Stamp tax is levied on a variety of contracts such as purchases and sales, processing, construction and engineering projects, asset leasing, goods transportation, storage and warehousing, loans, assets insurance, technology contracts, property rights transfers, accounting ledgers and royalty licensing. The tax rates vary from 0.005% to 0.1%.
Land Tax Individuals and enterprises who use land in cities and towns are subject to urban and township land use tax, which is levied per square metre. All organisations and individuals who transfer state-owned land use rights, buildings and other structures on that land, must pay land appreciation tax which is calculated based on the appreciation amount gained. A four-step progressive tax rate is applied.

Last updated: 11.06.2020

Contact us:

Senior Partner, CPA in Shanghai
Pingwen Hu
Senior Partner, CPA