China tax system - taxation of Chinese companies and individuals: VAT, income tax and capital gains. Tax treaties of China.

Basic taxes (briefly)

Personal tax 3-45%
Corporate tax (in detail) The standard income tax rate is 25%. There are preferential tax rates for companies from certain industries (in particular, high-tech), regions / zones and small businesses
Capital gains tax. Details
VAT. Details The standard VAT rate is 13%. For some goods and services, rates of 9% and 6% apply. The tax rate for small VAT payers is 3%
Other taxes Social contributions, Real estate taxes
Government fee Yes
Stamp duty 0,005-0,1%

International tax agreement

Albania, Algeria, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Bulgaria, Cambodia, Canada, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Ecuador, Ecuador, Egypt, Estonia, Ethiopia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hong Kong (China), Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Korea (Republic of), Kuwait, Kyrgyzstan, Lao People's Democratic Republic, Latvia, Liechtenstein, Lithuania, Luxembourg, Macao (China), Malaysia, Malta, Mauritius, Mexico, Moldova (Republic of), Mongolia, Morocco, Nepal, Netherlands, New Zealand, Nigeria, Norway, Oman, Pakistan, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Serbia, Seychelles, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syrian Arab Republic, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Venezuela, Vietnam, Zambia, Zimbabwe
   
Argentina, Bahamas, Bermuda, Cayman Islands, Guernsey, Isle of Man, Jersey, Liechtenstein, San Marino, Virgin Islands (British)


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Taxation of individuals

Chinese tax residents pay tax on their worldwide income, while non-residents pay tax on income from sources in China.

Incomes of residents are generally taxed according to a progressive tax scale:

  • income up to CNY 36,000 is taxed at 3%;
  • income from CNY 36,000 to CNY 144,000 at 10%, tax is reduced by CNY 2,520;
  • income from CNY 144,000 to CNY 300,000 at 20%, tax is reduced by CNY 16,920;
  • income from CNY 300,000 to CNY 420,000 at 25%, tax is reduced by CNY 31,920;
  • income from CNY 420,000 to CNY 660,000 at 30%, tax reduced by CNY 52,920;
  • income from CNY 660,000 to CNY 960,000 at 35%, tax reduced by CNY 85,920;
  • income over CNY 960,000 at 45%, tax reduced by CNY 181,920.

Non-resident income in the form of employment remuneration, remuneration for services and copyright remuneration are taxable at the following rates for each of these types of income:

  • income up to CNY 3,000 is taxed at 3%;
  • income from CNY 3,000 to CNY 12,000 at 10%, tax is reduced by CNY 210;
  • income from CNY 12,000 to CNY 25,000 at 20%, tax is reduced by CNY 1,410;
  • income from CNY 25,000 to CNY 35,000 at 25%, tax is reduced by CNY 2,660;
  • income from CNY 35,000 to 55,000 income at 30%, tax reduced by CNY 4,410;
  • income from CNY 55,000 to 80,000 income at 35%, tax reduced by CNY 7,160;
  • income from CNY 80,000 plus income at 45%, tax reduced by CNY 15,160.

Income from business activities is taxed at a progressive rate from 5% to 35%.

Other categories of income (rental income, interest, dividends, capital gains, other income) are generally taxed at a flat rate of 20%. Interests on deposits in Chinese banks are not taxable.

Income tax

Chinese companies pay income tax on their worldwide income, and foreign companies pay tax on income from sources in China.

Standard income tax rate is 25%. There are preferential tax rates for companies in certain industries (in particular, high-tech), regions/zones, and small enterprises.

Profits from the disposal of assets are taxed at normal tax rates.

Dividends which a Chinese company receives from another Chinese company are not taxable, except for dividends from listed companies with a holding period of less than 12 months.

CFC rules

If a Chinese company solely or jointly with other Chinese tax residents controls a foreign company from a low tax jurisdiction (tax rate is less than half of the Chinese rate, i.e. less than 12.5%), its undistributed profits can be included in the taxable profit of the Chinese company. Control arises if the company owns at least 10% of the voting shares of the foreign company and, in total, Chinese residents own, directly or indirectly, more than 50% of such shares. Control can also arise in other cases.

Profit of a CFC is not included in the taxable base of a Chinese taxpayer if the CFC is from a highly taxed country (the list of such countries is determined by the tax authorities), the CFC's profit arises mainly from active business operations, or if the CFC's profit is less than RMB5 million.

Withholding tax on income

When paying income from sources in China, including dividends, interest, royalty, withholding tax is withheld at 10%.

The tax rates are reduced according to the provisions of the double taxation treaties (DTTs).

VAT

The standard rate of VAT is 13%. For some goods and services a rate of 9% and 6% applies. The rate of tax for small-scale VAT payers is 3%.

There is also a VAT (and consumption tax - levied on sales of tobacco, alcohol and some other goods), which is levied on construction and maintenance in the city; the rates vary depending on the location of the taxpayer: 7% in urban areas, 5% in districts and 1% in other areas. An education contribution at the rate of 3% and a local education contribution of 2% are also paid on the amount of VAT (and consumption tax).

Social contributions

Social contributions are paid to the pension fund, medical fund, unemployment insurance, occupational injury insurance, etc. by the employer and the employee.

The amount of the contributions and the wage ceilings on which they are imposed vary from city to city. For example, in Shanghai the general compulsory contribution rate is 10.5%, for the employer 27.16% - 28.52%, the monthly salary ceiling for assessments is CNY 28,017 (calculated as the average salary of the previous year tripled); there are also minimum thresholds for assessments.

Property taxes

Property tax is paid at a rate of 1.2% on the value of buildings used for commercial purposes. The local authorities may reduce this tax. Alternatively, it is possible to pay tax at a rate of 12% on rental income.

In cities, tax is payable on land plots determined by the local authorities in RMB per square metre. Land tax is also payable on agricultural land that is not used for its intended purpose.

Tax on the sale of land rights or real estate is payable at progressive rates ranging from 30% to 60%.

Stamp duty, transaction tax

Stamp duty is payable on certain documents at rates ranging from 0.005% to 0.1%.

For transactions involving land rights and real estate, a special duty is payable at rates generally ranging from 3% to 5%.

Double taxation treaties

China has signed the following tax treaties:

103 DTCs: Albania, Algeria, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Bulgaria, Cambodia, Canada, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Ecuador, Ecuador, Egypt, Estonia, Ethiopia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hong Kong (China), Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Korea (Republic of), Kuwait, Kyrgyzstan, Lao People's Democratic Republic, Latvia, Liechtenstein, Lithuania, Luxembourg, Macao (China), Malaysia, Malta, Mauritius, Mexico, Moldova (Republic of), Mongolia, Morocco, Nepal, Netherlands, New Zealand, Nigeria, Norway, Oman, Pakistan, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Serbia, Seychelles, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syrian Arab Republic, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Venezuela, Vietnam, Zambia, Zimbabwe.

10 TIEAs: Argentina, Bahamas, Bermuda, Cayman Islands, Guernsey, Isle of Man, Jersey, Liechtenstein, San Marino, Virgin Islands (British).

Foreign Exchange Control

China has an effective currency control and regulatory system.

The main regulatory bodies are the People's Bank of China and the State Administration of Foreign Exchange.

They regulate exchange rates, payments to and from abroad, and other transactions.

Special rules exist for companies with foreign investment.

The rules are gradually becoming more liberal. In the Shanghai zone and a number of other economic zones, freer foreign exchange systems are being applied (tested).

    Taxes of China

    Min. rate for corporate tax 25%
    Capital gains tax Regular rate
    VAT 13%
    Withholding tax 10%/10%/10%
    Exchange control Yes
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