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  • Corporate Tax

    AT A GLANCE

    OUR JURISDICTIONS —

    Corporate Tax

    LAST UPDATED 11/01/2024

    AT A GLANCE

    Companies in China pay corporate income tax (CIT) on their income. Tax resident enterprises (TREs) pay CIT on their global income, while non-TREs pay CIT on their income from China only. The standard CIT rate is 25%.

    However, some industries or sectors can benefit from lower CIT rates:

    1. Qualified new/high-tech enterprises get a 15% CIT rate, but they must meet specific criteria.
    2. Key software and integrated circuit (IC) design enterprises get a 10% CIT rate after five years of CIT exemption.
    3. Qualified technology-advanced service enterprises get a 15% CIT rate if they meet specific criteria.
    4. Qualified small and thin-profit enterprises get a 2.5% or 5% CIT rate for specific income levels from 2021 to 2024.
    5. Qualified enterprises engaged in pollution prevention and control get a 15% CIT rate from 2019 to 2023.

    Additionally, some regions offer lower CIT rates for specific sectors:

    1. Encouraged enterprises in Western Regions get a 15% CIT rate from 2011 to 2030.
    2. Companies in the Qianhai Shenzhen-Hong Kong Modern Services Industry Cooperation Zone get a 15% CIT rate from 2014 to 2025 if they are involved in specific projects.
    3. Enterprises in the Guangdong-Macao Intensive Cooperation Zone in Hengqin get a 15% CIT rate if they are involved in specific projects.
    4. Companies in the Pingtan Comprehensive Experimental Zone get a 15% CIT rate from 2014 if they are involved in specific projects.
    5. Enterprises in the Hainan Free Trade Port get a 15% CIT rate from 2020 to 2024 if they are involved in encouraged industries.
    6. Enterprises in Nansha trial-run areas get a 15% CIT rate from 2022 to 2026 if they are involved in specific projects.
    7. Qualified enterprises in key industries in the Lingang New Area of the Shanghai Pilot Free Trade Zone get a 15% CIT rate for five years from their establishment date.

    Lastly, there is no local or provincial income tax in China.

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    Corporate Residence

    General

    Companies established in China are considered tax resident enterprises (TREs). Foreign companies with effective management in China are also considered TREs.

    Permanent establishment

    A permanent establishment (PE) refers to a place in China where a business conducts its operations, including:

    1. Management organizations, business organizations, and representative offices.
    2. Factories, farms, and places for natural resource extraction.
    3. Locations providing labor services.
    4. Sites for contractor projects like construction, installation, assembly, repair, and exploration.
    5. Other places where production and business activities occur.
    6. Business agents who regularly sign contracts or handle goods storage and delivery for the non-TRE.

    VAT for Companies

    VAT applies to the sales or importation of goods, provision of services, and sales of intangible and immovable properties. General VAT payers can credit input VAT against output VAT.

    From April 1, 2019, the VAT rates for general VAT payers are:

    • Sales or importation of goods: 13%
    • Sales or importation of necessity goods (e.g. agricultural products, water, gas): 9%
    • Provision of repairs, replacement, and processing services: 13%
    • Tangible movable property leasing services: 13%
    • Transportation services, postal services, basic telecommunications services, construction services, immovable property leasing services, sales of immovable properties, transfer of land-use right: 9%
    • Value-added telecommunications services, financial services, modern services (except for leasing services), consumer services, sales of intangible properties (except for land-use right): 6%
    • Exportation of goods, services that are completely consumed outside China, and specific services: 0%

    Small-scale VAT payers have a 3% VAT rate, but due to COVID-19, it was reduced to 1% from March 1, 2020, to March 31, 2022, and VAT exemption applies from April 1, 2022, to December 31, 2022.

    For taxpayers eligible for a zero rate, they may receive a credit or refund of the input VAT incurred.

    VAT refund rates for exported services are the same as the applicable VAT rate, while refund rates for exported goods range from 0% to 13%. A formula determines the refund amount, and full refund of input VAT is not available for many exported goods.

    Certain taxable activities, including specific types of sales of goods, services, and cross-border transactions, qualify for VAT exemption treatment. In these cases, the relevant input VAT incurred cannot be credited or refunded.

    Other types of corporate income

    Taxable income is the money earned in a tax year after subtracting non-taxable income, tax-exempt income, various deductions, and any allowable losses from previous years. Businesses should use the accrual method of accounting.

    Gross income includes money and non-monetary income from various sources such as sales, services, property transfers, dividends, interest, rent, royalties, and donations.

    Non-taxable income refers to government funding, administration charges, government funds, and other income specified by the central government.

    Inventory Valuation: Inventory must be valued according to costs, using methods like first in first out (FIFO), weighted average, or specific identification.

    Inventory Valuation

    Inventory must be valued according to costs, using methods like first in first out (FIFO), weighted average, or specific identification.

    Unrealized Gains or Losses

    Unrealized gains or losses due to changes in the fair value of financial assets, liabilities, and investment properties are not taxable/deductible for corporate income tax (CIT) purposes. They only become taxable/deductible when the asset/liability is sold or realized.

    Capital Gains

    Capital gains are treated the same as ordinary income for tax-resident enterprises (TREs).

    Dividend Income

    A TRE is exempt from CIT on dividends received from another TRE, except when the dividend is from publicly traded stocks held for less than 12 months. Non-TREs receiving dividends from China are subject to a 10% withholding tax (WHT), though some WHT deferrals may apply under specific conditions.

    Interest Income, Rental Income, and Royalty Income

    These incomes are treated as ordinary income.

    Partnership Income

    Partnerships registered in China are not subject to CIT. The partnership’s income is taxable at the partners’ level.

    Unrealized Exchange Gains

    Unrealized exchange gains (losses) from translating assets (liabilities) in foreign currency at year-end are generally taxable (deductible).

    Foreign Income

    A TRE and its branches within and outside China are taxed on their worldwide income. There are no provisions in the CIT law to defer foreign income for tax purposes. A foreign tax credit is allowed for foreign income taxes paid on foreign-source income.

    Certain enterprises in Hainan Free Trade Port and Hengqin are exempted from CIT on income generated by new overseas direct investments from 2020 to 2024.

    Customs duties

    Customs duties are fees charged on imported or exported goods based on customs regulations. Those responsible for paying customs duties include the receiver of imported goods, the sender of exported goods, and the owner of the items entering the country.

    China’s import and export tariff system has been adjusted based on the World Customs Organisation’s revisions to the International Convention for Harmonized Commodity Description and Coding System.

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    Import duty

    Import duty can be charged in various ways, such as ad valorem (based on the value of the goods), specific, compound, or sliding terms. The dutiable value of the goods is used to calculate the amount of duty payable.

    Import duties have different categories, including normal tariff rate, Most Favoured Nation (MFN) tariff rate, contractual tariff rate, preferential tariff rate, tariff-rate quota (TRQ) rate, and temporary tariff rate.

    The country of origin of imported goods affects the application of other trade policies, such as TRQ, preferential tariffs, anti-dumping duty, and anti-subsidy duty.

    Import and export goods can have reduced or exempted customs duties, import VAT, and consumption tax according to state regulations.

    For goods entering and exiting customs special supervision zones, import duties, import VAT, and consumption tax are deferred, and they are exempted for exportation and paid for sales from the special supervision zones to domestic markets.

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    Other taxes

    Various taxes are also levied in China, such as:

    • consumption tax,
    • real estate tax,
    • urban and township land-use tax,
    • arable land occupation tax,
    • land appreciation tax, stamp tax,
    • deed tax,
    • payroll taxes,
    • social security contributions,
    • urban construction and maintenance tax,
    • educational surtax,
    • local educational surtax,
    • motor vehicle acquisition tax,
    • vehicle and vessel tax,
    • vessel tonnage tax,
    • resource tax,
    • environmental protection tax (EPT),
    • tobacco tax, and
    • cultural business development levy.

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    The Curator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives.

    However, the Curator has additional responsibilities. They are tasked with the responsibility of managing and updating one of the jurisdiction pages.

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    Where a Curator fulfils their commitments then they receive a 100% discount against their monthly membership fee.

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    The Creator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives.

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    Initial admin fee £250 Free £250 Free £250 Free
    Minimum membership term 12 months 12 months 12 months
    Article contentCreator and Curators must create at least one piece of original, quality-approved content each quarter.
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    YesCreator and Curators must create at least one piece of original, quality-approved content each quarter.
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    Managing and updating your
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    No
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    The Curator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives.

    However, the Curator has additional responsibilities. They are tasked with the responsibility of managing and updating one of the jurisdiction pages.

    There is only one Curator membership available for each jurisdiction.

    Where a Curator fulfils their commitments then they receive a 100% discount against their monthly membership fee.

    Initial admin fee £250 Free
    Minimum membership term 12 months
    Article contentCreator and Curators must create at least one piece of original, quality-approved content each quarter.
    No
    Managing and updating your jurisdiction page Yes

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    Creator

    The Creator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives.

    However, the Creator has additional responsibilities. They commit to their other Natives that they will produce at least one piece of quality content each quarter – whether an article, video or other valuable content.

    There are multiple Creator memberships available for each jurisdiction. Where a Curator fulfils their commitments then they receive a 100% discount against their monthly membership fee.

    Initial admin fee £250 Free
    Minimum membership term 12 months
    Content creationCreator and Curators must create at least one piece of original, quality-approved content each quarter.
    YesCreator and Curators must create at least one piece of original, quality-approved content each quarter.
    Managing and updating your jurisdiction page No

    £65 / month

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    Adviser

    The Adviser is a fully-fledged member of the Tax Natives team.

    As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives.

    The Adviser Native is a care-free soul and has made no other commitments to his fellow Tax Natives to generate content or curate a jurisdictional page.

    That's cool.

    However, the Adviser will be eligible to pay the full monthly membership fee.

    Initial admin fee £250 Free
    Minimum membership term 12 months
    Content creationCreator and Curators must create at least one piece of original, quality-approved content each quarter.
    No
    Managing and updating your jurisdiction page No

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