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  • Guangzhou Company Taxation
  • Authorwww.for compass.com Date Time:2010-03-25 00:55:55

  • The Tax System in China has undergone tremendous changes in recent years. Currently, there are 24 different types of tax imposed on a wide range of incomes and transactions. Taxpayers can be individuals, entities or economic organizations. To fulfill its WTO commitments, the Chinese government is currently preparing for another round of tax reform, which is expected to take place in 2009. The goals of this reform are to unify current tax laws and to develop a level playing field for domestic enterprises and foreign investment enterprises, to promote the harmonized growth of taxation and the economy, and to improve the efficiency of tax collection and administration.

    Keeping place with compliance obligations in such a rapidly changing regulatory environment can be a major challenge. You are advised to seek professional advice regarding your particular circumstances.

    1、Tax Overview

    As far as China tax department is concerned, China has two functional taxes: national tax and local tax , the former is for national use while the later is for local use.

    Tax Return must claim Value Added Tax, Business Tax, Individual Income Tax monthly and Enterprise Income Tax quarterly for the registered sectors to the national or local taxation. Enterprise Income Tax needs to claim final settlement and payment yearly.

    The main tax Category to the national taxation is Value Added Tax; Consumption Tax by customs, Enterprise Income Tax, and to the local taxation is Business Tax, Individual Income Tax, Resource Tax, City Maintenance and Construction Tax, House Property Tax, Stamp Duty, Urban and Township Land Use Tax.

    Value Added Tax (VAT) is 0-17% for trading and manufacturing sectors; Business Tax (BT) is 3-20% for service sectors, Enterprise Income Tax (EIT) is 25%, and Individual Income Tax (IIT) is 5-45%.

    2China Tax Category

    The China tax could be classified as follows: Value Added Tax (VAT), Business Tax (BT), Enterprise Income Tax (EIT), Individual Income Tax (IIT), Consumption Tax by customs (CT), Resource Tax (RT), City Maintenance and Construction Tax (CMCT), House Property Tax (HPT), Stamp Duty (ST), Urban and Township Land Use Tax (UTLU)

    3Value Added Tax (VAT)

    VAT is levied at a general rate of 17 per cent on all units and individuals engaged in the sale of goods; the provision of processing , repairs and replacement services; and the importation of goods into China. A special rate of 13 percent applies to certain items, such as utilities, cereals and edible vegetable oils, animal feed, fertilizers and insecticides. Exported goods are generally zero-rated, but some exceptions apply.

    According to the companies of different sizes,the companies can be divided into normal taxpayers and small taxpayers.

    (1Normal taxpayers

    To compute the VAT payable, the normal taxpayers need to separately calculate the output tax and the input tax for the current period. Then the difference between the output tax and the input tax shall be the actual amount of VAT payable.

    The formula for computing the tax payable is as follows:

    Tax payable = Output tax payable for the current period - Input tax for the current period

    Output tax payable = Sales volume in the current period × Applicable tax rate

    (2Small taxpayers

    Small taxpayers are taxed on the basis of the revenue derived from sales of goods or provision of taxable services by applying proper rates 3%. The computing formula is:

    Tax payable = Sales amount × Applicable rate


    The imported goods are taxed on the basis of the composite assessable price by applying the applicable tax rate.

    (4VAT refund for exporters

    In case of 0% rate applicable to the exported goods, the exporters may apply to the tax authorities for the input tax refund on those goods exported. At present, the refund rates consist of 5%, 6%, 9%, 11%, 13% and 17%.

    (5Tax exemptions

    The exempted items include: self-produced primary agricultural products sold by agricultural producing units and individuals; imported goods being processed for exportation; the self-use equipment imported out of the total investment for the projects with foreign investment or domestic investment which are encouraged by the State; contraceptive medicines and devices; antique books purchased from the public; instruments and equipment imported for direct use in scientific research, experiment and education; imported materials and equipment granted by foreign governments or international organizations; articles imported directly by organizations for the disabled for exclusive use by the disabled.

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