The Basic Understanding of China Major Taxation for Foreign Investors

As we know different country has different business model. Foreign investors who plan to do business in China should know its investment environment as well as the process of companies’ establishment. Meanwhile, you should also know its taxation rules before you set up business in this country, which can make your business run smoothly.

Here I want to share you the taxation in China. In the current tax system, China's taxation includes taxation on turnover (including value added tax, consumption tax, business tax and customs duty), taxation on profits/income (including corporate income tax for enterprises with foreign investment and foreign enterprises, and individual income tax), taxation on property and deeds (including real estate tax, contract tax and stamp duty), and taxation on natural resources (including resources tax), which are respectively in relation to different objects of taxation.

Doing business in China, you need to understand the major involving taxation for foreign investors. Here are some basic understandings of related taxation, which would be useful for your reference.

Value Added Tax (VAT rate: 3-17%) Scope of charge includes sales or importation of goods, provision of processing, repairs and replacement

Business Tax (Tax rate: 3-20%) Scope of charge includes Servicing, Communications and transportation, Construction, Sale of immovable properties, Transfer of intangible assets, Entertainment, Culture and Sports, Post and telecommunications, Finance and insurance, etc.

Consumption Tax (Tax rate: 3-45%) Scope of charge includes production, sub-contracting for processing or importation of the goods, such as cosmetics, precious jewelry and precious jade and stones, high-grade watches, cigarettes, alcoholic drinks and alcohol, firecrackers and fireworks, product oils, motor vehicle tires, motorcycles, saloon cars, golf and equipment and yachts.

Corporate Income Tax (15-25%) , Scope of charge includes resident corporation should be taxed on their profits derived from sources within or out of China; non- resident corporation should be taxed on their profits derived from China and some profits out of China.

Real Estate Tax (Tax rate 1.2%) Since the 1st of January 2009, foreign-funded enterprises, foreign enterprises and organizations and foreign people should pay real estate tax in accordance with the Provisional Regulations of the People’s Republic of China on Real Estate Tax.

Stamp Duty (Tax rate: 0.005-0.1%) All corporations and persons who execute or receive, within the territory of the People’s Republic of China, documents in the categories specified as follows shall be taxpayers subject to stamp tax: contracts with regard to purchase and sales, the undertaking of processing, contracting for construction projects, property leasing, commodity transport, warehousing, loans, property insurance, technology; documents for transfer of property rights; business account books; certificates of title for building, business license, certificates for registration of trade-marks, certificates of patents and land use certificate; other documents that are taxable as determined by the Ministry of Finance.

Customs Duty (Tax rate according to the regulations of Customs) Tariff is chargeable on all goods permitted to be imported into or exported out of the People’s Republic of China. China applies different tariff rates for imported goods with different places of origin. Currently, it basically applies two internationally accepted origin criteria which are “Whole Origin production criterion” and “Substantial Processing Criterion”.

Individual Income Tax (Tax rate: 3-45%) Under following circumstances, foreigners should pay individual income tax: as in regards to an expatriate, if his or her stay in China has amounted to 90 days consecutively or accumulated stay over 90 days during the year of assessment; his or her stay in China has amounted to 183 days consecutively or accumulated stay over 183 days during the period required by the tax agreement.

Above is some basic understanding of China taxation for foreign investors. You may have a general idea of China taxation now, if you want to know more China Company incorporation, China brand registration, welcome to contact Conpak CPA. We will be more than glad to share you more information.

If you need more information on China Tax and China Company Formation: WFOE, FIE,CEPA,Foreign Representative Office, you can refer to CONPAK CPA Limited http://www.conpak.com.
Tags:company formation,trademark registration

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