The taxes applicable to foreign-invested enterprises, foreign enterprises and foreign individuals (including compatriots from Hong Kong, Macao and Taiwan) in China are: corporate income tax, individual income tax, turnover taxes (including value-added tax, consumption tax, and business tax), land value-added tax, stamp duty, vehicle and vessel usage license plate tax, urban real estate tax, and others of a similar nature. Import and export goods must pay tariff and import value added tax in accordance with Customs' tariff regulations and relevant provisions.
Enterprise Income Tax: Since January of 2008, foreign-invested enterprises or foreign enterprises which have set up institutions or sites in China to engage in production or business operations shall pay corporate income tax in accordance with the amount of taxable income, and the tax is levied at the average rate of 25 percent; however, foreign enterprises that have not set up institutions or sites in China but have gained profits (dividends), interest, rent, royalty, and other income from Chinese territory shall pay 20 percent income tax.
Stamp Duty: All entities and individuals engaged in processes of purchase and sale, processing, contracting, property leasing, goods transportation, warehousing, loans, property insurance, technological contract, as well as documents for transfer of property rights, business account books, and certificates of authorization within the territory of the People's Republic of China shall pay Stamp Duty in accordance with regulations. The lowest tax rate of Stamp Duty is 0.05‰, and the highest is 1‰. Each certificate of authorization and business account book (excluding account books that record capital) must show a pasted stamp for 5 yuan.
Consumption Tax: All entities and individuals engaged in production, commissioned processing or import of consumer goods like tobacco, alcohol, cosmetics, skin-care and hair-care products, precious jewelry and jade, firecrackers, fireworks, gasoline, diesel, automobile tires, motorcycles, and motor cars, within the territory of the People's Republic of China are liable for Consumption Tax. There are 15 taxable items and 15 tax rates (tax amounts) of Consumption Tax, from 1 percent to 56 percent. The computation of tax payable for Consumption Tax shall either be determined by quota or by a fixed rate determined by the price of the consumable item.
Deed Tax: All entities and individuals as the acceptors of the transfer of land or housing ownership within the territory of the People's Republic of China are liable for Deed Tax. The transferring of land and housing ownership refers to: remising of national land-use rights, excluding transfer of management rights of rural collective land contracting; transferring of land-use rights, including selling, gifting and exchanging; house buying and selling; house gifting; and house exchanging. The rate of Deed Tax ranges from 3 percent to 5 percent.
Urban Real Estate Tax: Housing property owned by foreign-invested enterprises or foreigners shall pay Urban Real Estate Tax. The computation shall follow either with the original value of house property after a one-off deduction of 10 percent to 30 percent, in which case the annual tax rate is 1.2 percent; or with the rental of housing property, where the tax rate is 12 percent. Urban Real Estate Tax is calculated annually and paid by stages.
Individual Income Tax: An individual who has a domicile within the territory of China or who has no domicile but has stayed within the territory of China for one year or more, shall pay individual income tax for his income obtained in and/or outside the territory of China according to the Law of the People's Republic of China on Individual Income Tax and its implementation regulations.
In accordance with the Regulations for the Implementation of the Individual Income Tax Law of the People's Republic of China, "an individual having domicile in China" refers to any individual habitually residing within the territory of China on account of family register, family ties or economic interests. In the case that an individual has no domicile but has resided within the territory of China for a period ranging from one year to five years and with income obtained outside the territory of China, upon approval by the tax authorities he shall pay individual income tax only on the part paid by companies, enterprises and other economic institutions or individuals established in China; and in the case of having resided in China for more than five years, he shall pay individual income tax on all of the income from overseas sources beginning from the sixth year. An individual, who has no domicile and does not stay within the territory of China or who has no domicile but has stayed within the territory of China for less than one year, shall pay individual income tax for his income obtained within the territory of China according to the provisions of this Law. An individual, who has no domicile within the territory of China but has resided in China for less than 90 days at a stretch or intermittently within a tax year, shall be exempted from individual income tax on that portion of income obtained in China but paid by an overseas employer and not borne by the institutions and other establishments in China of the overseas employer.
The income of wages and salaries obtained within the territory of China is subject to individual income tax. The progressive tax rate in excess of the specific amount is applicable to individual income tax and the rate ranges from the lowest 3 percent to the highest 45 percent. For the income of wages and salaries, the taxable income amount shall be the balance after deducting 3,500 yuan from the monthly income. For a taxpayer who has no domicile within the territory of China but has obtained wage and salary income within the territory of China, or a taxpayer who has a domicile within the territory of China but has obtained wage and salary income abroad, an additional deduction of expenses can be determined in light of his average income level, living standards and the change of exchange rates. The scope and the standard for the additional deduction for expenses shall be formulated by the State Council.
Individual income from remuneration for labor services, income from remuneration for manuscripts, income from the use of royalties, and income of interests, dividends and bonuses shall be subject to individual income tax. For the income from remuneration for manuscripts, a flat tax rate of 20 percent is applicable, and a 30 percent tax deduction shall be applied to the amount of tax payable.
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