Taxes and Accounting in China

Overview by Globlatrade.net:

Accounting Rules

Tax Year
The financial year begins on January 1st and finishes on December 31st of the same year.
Accounting Standards
The accountancy standards for companies promulgated by the Ministry of Finances (MOF) of 30 November 1992 and which came into effect on July 1, 1993. China promulgated its first complete standards specific to accountancy in 1997 and the MOF promulgated 13 standards more specific to accountancy since then. For more information, consult Chinaorbit.
Accounting Regulation Bodies
Ministry of Finance (in chinese)
CASC
CICPA
Accounting Reports
Audit report normally contains a paragraph of definition of the 'task' or `scope' and a paragraph of opinion. The paragraph of opinion aims at establishing if the accounts were prepared according to the appropriate rules and regulations. All the reservations in opinion must be elaborated above. Statements of financial accounts or reports should comprise a Balance Sheet, profit and loss accounts, a report of gross margin of self-financing, notes on the accounts and an account for appropriation of profits and losses. For more information consult the website of the China Accounting Standards Committee operating under the Ministry of Finance.
Publication Requirements
Annual publication.
Professional Accountancy Bodies
CICPA , Website of the Chinese institute of chartered accountants (in English)
Certification and Auditing
Companies have to seek a statutory auditor to conduct an annual audit of the financial health of their organization. You can contact the National Audit Office of China (CNAO).
Accounting News
China Accounting News (EIN)

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Tax Rates

Consumption Taxes

Nature of the Tax
Consumption tax
Tax Rate
The taxpayers of Consumption Tax include all enterprises, units, household businesses and other individuals engaged in production or importation of taxable consumer goods within the territory of the People's Republic of China. The taxable consumer goods exported by the taxpayers are exempt from Consumption Tax, unless the taxable consumer goods are restricted by the State from exportation. Taxes vary from 0 to 50% (30% on cosmetics, 20 to 45% for tobacco, 5 to 25% for alcoholic drinks, 17% for the personal care products for skin and hair, etc.).
Reduced Tax Rate
Preferential rate of 4% or 6% for small companies.
Sale of certain products (running water, books, medicines, newspapers and magazines, certain agricultural products, chemical fertilizers, liquefied gas, coal for domestic use) are taxed at the preferential rate of 13%.
Other Consumption Taxes
There are no additional taxes on consumption in addition to the official consumption tax.
 
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Corporate Taxes

Company Tax
25%
Tax Rate For Foreign Companies
Resident companies are taxed on their world incomes and the nonresident companies on the Chinese incomes.
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.

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Individual Taxes

Tax Rate

Income tax progressive rates from 5% to a maximum of 45% over CNY 100 000
Allowable Deductions and Tax Credit
- credit for donations up to 30% of the income.
- income of personnel services (deduction of CNY 800 or 20%). 
- current expenditure for rental income, up to CNY 800 for each simple expenditure.
- relief for an individual who suffered a natural disaster.
- relief for handicapped person, widows/widowed person and orphans.
Special Expatriate Tax Regime
For foreigners taxed in China, an additional amount of 3,200 RMB can be reduced from their monthly income, or a total of 4,000 RMB.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the list of the treaties of non double taxation signed by China.
Withholding Taxes
Withholding tax rates in China are 10% for dividends, 20% for interest and 20% for royalties.

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Sources of Fiscal Information

Tax Authorities
Fiscal Authority
Other Domestic Resources
Chinese government web portal

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Intellectual Property

National Organizations
National Office of intellectual property (SIPO) 
National administration of copyrights

Regional Organizations
Expert Group on intellectual property rights (IPEG)
International Membership
Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)
 

National Regulation and International Agreements

 
Type of property and law Validity International Agreements Signed
Patent
 
Patent Law 1992
non renewable protection of 20 years Patent Cooperation Treaty (PCT)
Strasbourg agreement Concerning the International Patent Classification
Trademark
 
Law on Marks
10 years. Renewable indefinitely Trademark law treaty
Nice agreement
Protocol relating to the Madrid Agreement
Design
 
Patent Law
10 years  
Copyright
 
Copyright Law
During the lifetime of the author and 50 years after his death Berne convention
Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms
Rome ConventionFor the Protection of Performers, Producers of Phonograms and Broadcasting Organizations
WIPO Copyright Treaty
WIPO Performances and Phonograms Treaty
Industrial Models
 
Patent Law
10 years  

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Legal Framework

Independence of Justice
Judiciary is not independent in China. The government controls the judiciary. The CCP directs verdicts and sentences, particularly in politically sensitive cases. China has not accepted the obligatory jurisdiction of the International Court of Justice (CIJ).
Equal Treatment of Nationals and Foreigners
The judiciary does not guarantee an impartial trial to a foreign national. A high degree of corruption exists in the country, especially corruption within the CCP is rampant.
The Language of Justice
Mandarin-Chinese.
Recourse to an Interpreter
Possible.
Sources of the Law and Legal Similarities
The legal system is based on the Confucian philosophy of the social order by moral education. After the 1911 revolution, the Republic of China mainly adopted a legal code of Western type inspired by the German law.
The establishment of the People's Republic of China in 1949 brought a Soviet system influenced by socialism. There does not exist a tradition of constructive law in China and the first civil code dates from the beginning of the year 1980 and is written in a rather incomplete way as compared to the Western laws, which till today leaves an important place for arbitrary judgments. The law is subject currently to a progressive reform encouraged by external and internal pressures.. The constitution in force currently was promulgated in December 1982.
Checking National Laws Online
China Legislative Network system
 
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Standards

National Standards Organizations
Standardisation Administration of China (SAC)
Chinese Association for Standardisation
Integration in the International Standards Network
SAC is the member of:
- The Internationale Standardisation Organisation (ISO) and of the International Electronic Commission (IEC)
- The APEC/SCSC, sub-committee of Standards and Conformity of the organisation of Asia- Pacific economic cooperation
- The ASEM/TFAP/SCA, Plan and Standards of action for facilitation of commercial exchanges and evaluation of conformity of the Asia-Europe Dialog (ASEM)
- The Congress of Standards for the Pacific Zone (PASC)
Classification of Standards
List of Chinese Codes and Standards.
Online Consultation of Standards
Publications relating to the Chinese standards of the SAC.
Certification Organizations
Chinese Obligatory Certification (CCC)
Administration of certification and accreditation of China (CNCA)
Certification organizations
AQSIQ

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Business Practices

General Information
Communicaid
Kwintessential Cross Culture solution
Opening Hours and Days
Banks: Monday to Friday, from 8.30 to 17.00, from 8.00 to 13.00 on Saturday.
 

Public Holidays

New year January 1
New lunar year during February
Women's day March 8
Qing Ming Festival April
Labour day May 1
Youth day May 4
Children's day June 1
Dragon Boat Festival June
Army day August 1
Teachers' day September 9
National Day October 1, 2
 
 

Periods When Companies Usually Close

Labour day from May 1-7.
Spring festival One week off.
 

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