Enterprise Income Tax

An Expert's View about Business Administration in China

Last updated: 22 Feb 2011

7.1 Enterprise Income Tax


Taxes levied on foreign-invested enterprises (FIEs) in China mainly include enterprise income tax, value-added tax (VAT), and consumption tax, while businesses involving the provision of agency services have to pay business tax.

7.1  Enterprise Income Tax

Taxpayer
According to the Enterprise Income Tax Law (effective on 1 January 2008) promulgated in March 2007, enterprises and other organisations in China receiving incomes are required to pay enterprise income tax. (This law is not applicable to sole proprietorships and partnerships). Enterprises are classified into resident enterprises and non-resident enterprises. Resident enterprises referred to in this law are those incorporated within the territory of China according to Chinese law, or those incorporated according to the laws of foreign countries (or regions) but their place of effective management is in China. Non-resident enterprises referred to in this law are those incorporated according to the laws of foreign countries (or regions) and their place of effective management is not in China but they have establishments or venues in China, or they do not have any establishments or venues in China but derive income from sources in China.

Entities subject to Enterprise Income Tax
Resident enterprises have to pay enterprise income tax on their income derived from sources in and outside China. Non-resident enterprises that have establishments or venues in China have to pay enterprise income tax on their income derived from sources in China, as well as income derived from sources outside China but is effectively connected with their establishments or venues. Non-resident enterprises that do not have any establishments or venues in China, or those that have establishments or venues in China but whose income is not effectively connected with their establishments or venues, have to pay enterprise income tax on their income derived from sources in China.

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Posted: 21 February 2011, last updated 22 February 2011

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