Corporate Tax in China

Overview by Globlatrade.net:
Tax Base For Resident and Foreign Companies
Resident companies are taxed on their world incomes and the nonresident companies on the Chinese incomes.
 

Tax Rate

Standard rates 25%
- Companies in the SEZ or zones of economic and technological development
-Foreign investment companies in the transport or energy infrastructures
-Foreign banks capitalized with more than 10M USD and which are envisaged to function for 10 years.
15%
Foreign investment companies in certain sectors of the coastal cities 24%
 
Tax Rate For Foreign Companies
Same taxes as for chinese companies.
Capital Gains Taxation
Tax on capital gains (20% rate) for a Chinese company is added to the regular tax.
Tax on capital gains on the sale of real estate (20%) is calculated as sale price - purchase price.
When capital gain is above 50% of the purchase price, the income tax rate on capital gain ranges between 30% and 60%. (60% when the capital gain is more than 200%).
Main Allowable Deductions and Tax Credit
The following expenditure is deductible under certain conditions:
-  Deduction of losses (deductible over 5 years)
-  Consolidated financial statements
-  Bad debts up to a limit of 3% of the granted loans (Chinese foreign companies in the financial sector) . 
-  Financial expenditure for income generation (except shareholder loans as per limit legally defined in China). 
-  Transactions between the associated parties
-  The method of depreciation is linear; however, a foreign company can make a request to Chinese tax authorities for an accelerated rate of depreciation.
Other Corporate Taxes
- tax on transactions (turnover tax): Value Added Tax (17%, 13% for certain products), consumption tax (3 to 50%), commercial tax (3 to 20%).
- environmental tax on natural resources
- land taxes: urban property tax (1.2% of the original value or 12% on the rental value)
- taxes generally paid in advance on vehicles and ships
- 10% of the taxable consideration on the purchase and import of cars, motor bikes, trams, electrical buses, carriages and certain types of stamp duty on trucks
- Stamp duty: between 0.005% to 0.1%
- Contract tax, on the assignees or the assignees of the ownership of the right of use of the land or the real estate will be taxed from 3% to 5%
- Education Tax (3%)
- Urban Construction and Maintenance Tax. The rates are 1% for low populated areas, 5% in country areas and 7% in big cities.
 

Country Comparison For Corporate Taxation

  China East Asia & Pacific United States Germany
Number of Payments of Taxes per Year 7.0 24.5 11.0 16.0
Time Taken For Administrative Formalities (Hours) 398.0 218.2 187.0 215.0
Total Share of Taxes (% of Profit) 63.5 35.4 46.8 48.2

Source: Doing Business

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

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Experts Views (3)
  • Business Tax

    The Guide to Selling in China gives a comprehensive account of the regulatory requirements in retail, wholesale and foreign trade in China. This chapter is on Taxes Relating to the Sale of Products by Enterprises.

    Hong Kong Trade Development Council (HKTDC) on 21 Feb 2011 related to Corporate Tax in China

  • Value-Added Tax

    The Guide to Selling in China gives a comprehensive account of the regulatory requirements in retail, wholesale and foreign trade in China. This chapter is on Taxes Relating to the Sale of Products by Enterprises.

    Hong Kong Trade Development Council (HKTDC) on 21 Feb 2011 related to Corporate Tax in China

  • Enterprise Income Tax

    The Guide to Selling in China gives a comprehensive account of the regulatory requirements in retail, wholesale and foreign trade in China. This chapter is on Taxes Relating to the Sale of Products by Enterprises.

    Hong Kong Trade Development Council (HKTDC) on 21 Feb 2011 related to Corporate Tax in China

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  • Hong Kong Trade Development Council...

    Government Trade Promotion, Hong Kong SAR