Tax in China

1. Corporate Income Tax (CIT):

   • Rate: The standard corporate income tax rate in China is 25%. However, there are preferential tax rates available for certain industries, regions, and types of enterprises to promote economic development and investment.

   • Taxable Income: CIT is imposed on the taxable income of enterprises derived from their business activities within China. Taxable income generally includes revenue from sales of goods and services, investment income, and other operating income, after deducting allowable expenses.

   • Tax Filing: Enterprises are required to file annual CIT returns with the tax authorities within three months after the end of the fiscal year. Quarterly and monthly provisional tax payments may also be required based on estimated income.

   • Tax Incentives: China offers various tax incentives to encourage investment in certain industries and regions, such as high-tech industries, environmental protection, and western regions.

2. Value Added Tax (VAT):

   • Structure: VAT is a consumption tax levied on the value added at each stage of the production and distribution chain. There are several VAT rates applicable to different categories of goods and services, including general VAT rates (13% or 16%) and reduced rates (9%). Small & medium company (6% or 3%).

   • Taxable Transactions: VAT applies to the sale of goods, provision of processing, repair, and replacement services, as well as the importation of goods into China.

   • Tax Credits: Businesses can usually offset input VAT (VAT paid on purchases) against output VAT (VAT collected on sales) to determine their net VAT liability. Any excess input VAT can be carried forward or refunded.

   • Tax Filing: Businesses are required to file VAT returns on a monthly or quarterly basis, depending on their turnover and industry. Small-scale taxpayers may opt for a simplified tax regime.

3. Individual Income Tax (IIT):

   • Rate: Individual Income Tax (IIT) in China is progressive, with rates ranging from 3% to 45% for different income levels. The tax rates and brackets are periodically adjusted by the government.

   • Taxable Income: IIT is imposed on the worldwide income of individuals who are residents of China for tax purposes and on the China-sourced income of non-residents. Taxable income includes wages, salaries, bonuses, business income, investment income, and other sources of income.

   • Tax Deductions and Exemptions: Individuals are entitled to various deductions and exemptions, such as standard deductions, deductions for specific expenses (e.g., education, housing), and tax-free thresholds.

   • Tax Filing: Individuals are required to file annual IIT returns with the tax authorities by a specified deadline, usually before May 1st of the following year. Employers are responsible for withholding and remitting IIT on behalf of their employees.