China-WFOE

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

   


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TAXES

Personal tax

All companies registered in China are tax agents for their employees and pay personal tax for them.
Personal tax is paid by:
  • Individuals, who are tax residents in PRC, for income obtained in PRC and from abroad;
  • Individuals, who are not tax residents in PRC, for income obtained in PRC.

In China personal tax is levied at progressive rate from 5% to 45%, while income no more than 2000 RMB a month for residents and 4800 RMB for non-residents is not taxable. For Chinese employees company should also pay social contribution, the amount of which is about 40% from the official salary.

Corporate tax

All companies registered in China are taxpayers of corporate tax.
In Chinese tax law there are two kinds of taxpayers:
  • Resident companies: companies incorporated in PRC and abroad which are managed in PRC pay corporate tax on the total amount of income obtained from sources in PRC and abroad;
  • Non-resident companies: pay tax on income which refers to the activity of their representative office in PRC and income from sources in PRC such as dividends, interests, and royalty.

Corporate tax rate is 25%.
For the so-called low-profit companies tax rate is 20%, and for companies engaged in high-tech and encouraged by government tax rate is 15%.

Capital gains tax

Capital gains are not taxable in China, but there is a securities transaction tax, which is levied unilaterally in case of securities sales at a rate of 0.1%.

VAT

Companies selling products in PRC are taxpayers of VAT.
Standard rate is 17%; for taxpayers who are engaged in sales of some preferential products (grains and edible vegetable oils; tap water and heating water; coal gas, liquid gas and natural gas, marsh gas, black coal and charcoal for domestic use; books and magazines; forage, chemical fertilizers, agricultural chemicals and machines) – 13%; for taxpayers with с small scale of business – 3%. Export products are not taxable, unless otherwise provided in regulation of Chinese government.

Withholding tax

Withholding tax in China is levied as a corporate tax on non-resident companies income from dividends, interests and royalty at rate of 25%.

Other taxes

Social insurance contribution Pension insurance (company: 20% of total amount of salaries, employee: 8%); unemployment insurance (company: 2% of total amount of salaries, employee: 1%); medical insurance (c company: 6% of total amount of salaries, employee: 3%); employment injury insurance (about 1% of total amount of salaries); pregnancy and child birth insurance (not more than 1% of total amount of salaries). To be paid till 15th of each month in local tax authority.
Consumption tax paid by corporate and individuals who: 1) produce consumption (excisable) products; 2) import consumption product into PRC, or 3) sell consumption products. Tax rate differs.
Real estate tax paid by owners of the buildings and constructions located in the cities and used for business. Tax base is price of real estate reduce by 10-30% (depending on region).
Vehicle tax paid by owners of vehicles. Tax rate depends on type of vehicle.
Vehicle license plate tax paid on purchase of a new vehicle. Tax rate is 10% of price.
Land appreciation tax levied on transfer of land use right of state-owned land by organization or individual. Tax rate is 30% -60%.
Urban and township land use tax imposed on individuals who obtained rights to use land in the urban area. Tax rate is 0,6 to 30 RMB for square meter..
Resource tax paid by organizations and individuals, extracting resources in PRC (including sea territory).
Property transfer tax imposed on individuals gaining rights to use land or building ownership rights. Tax rate is 3% to 5%.
City Maintenance and Construction Tax levied upon paid in VAT and consumption tax. Tax rate depends on location of taxpayer and amounts 7% in the urban area, 5% - in district centers and 1% - in the rural area.
Tobacco tax imposed on individuals purchasing tobacco leaf. Tax rate is 20% of tobacco price.,
Agricultural land occupation tax imposed on agricultural lands used for construction. Rate depends on average land resource supply in the region and amounts 5 to 5o RMB for square meter.
Additional educational duties levied upon paid in VAT and consumption tax. National duty is 3%, local duty is 2%.

Exchange control

Like in Russia, in China exchange control system is imposed. It is prohibited in PRC to fulfill payments in foreign currency, but corporates and individuals can have foreign currency accounts, carry out operations in currency, transfer foreign currency abroad and receive payments in foreign currency from foreign partners, however, all these operations have to be validated by contract or invoice.

Annual Fee

There is no annual fee in China, but one is obliged to pay registration fee on incorporation of company. For example, registration fee for RO is 600 RMB, prolongation is 300 RMB, registration changes (including change of representatives) is 100 RMB.

Stamp Duty

Stamp duty in China is imposed on contracts, certificates and other documents. Duty rate depends on a type of document or nature of a contract.

ACCOUNTS

Annual Return

According to Chinese law every enterprise, including Representative office, in the period from March,1 to June,30 has to submit annual return, which is composed of the following documents:
  • annual return form;
  • annual audit report, issued by audit company;
  • copy of registration certificate with official seal;
  • other documents, required by State administration for industry and commerce.

The said documents should first be filed in electronic version to local administration for industry and commerce. After electronic version is checked by competent authorities, it should be printed out and sent to these authorities.
If company fails to submit the documents in time, it should apply for prolongation, which is not more than 30 days. In case company fails to submit annual return in time, registration authorities send a warning. If within 60 days after warning was issued, the company still fails to submit annual return, its registration certificate is to be withdrawn.

Audit

Companies with foreign investment are obliged to keep accounting books in Chinese, carry on its business calculations, submit required audit reports and accept examination from financial and tax authorities.
WFOE is obliged to submit audit report annually according to requirements of competent authorities. Report made in foreign currency should be accompanied by report in RMB.
To check and obtain respective report a company should hire CPA and pay for his/her services.
If a company with foreign investment refuses to keep accounting books, financial and tax authorities can impose a fine, and administration for industry and commerce can issue a warning about business activity termination or withdraw Registration certificate.

Tax Return

WFOE should file tax return to tax authorities on a regular basis:
  • VAT tax return - monthly;
  • Corporate tax return - quarterly.

    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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