China: Business Environment
Goods and services taxable at 6% include R&D and technology services; information and technology services; culture and creative services; logistics supporting services; authentication and consulting services; radio, film and television services; business-supporting services; other modern services; value-added telecommunication services; loan services; direct financial services; insurance services; financial product trading; cultural and sports services; education and medical services; tourism and entertainment services; catering and accommodation services; daily services; other lifestyle services; sales of intangible assets.
Goods and services taxable at 9% include agricultural products (including grains); tap water; heating; liquefied petroleum gas; natural gas; edible vegetable oil; air conditioning; hot water; coal gas; coal products for household use; food-grade salt; farm machinery; fodder, pesticides; agricultural film; fertilizers; methane gas; dimethyl ether; books; newspapers; magazines; audio-visual products; transportation services; postal services; basic telecommunication services; construction services; sales of immovable properties acquired or developed after 1 May 2016; leasing of immovable properties; transfer of land use rights.
Zero-rated (exempt-with-credit) goods and services include exports of goods (excluding prohibited or restricted exports) and services rendered by domestic entities or individuals to overseas entities and consumed entirely outside the country, including international transportation services, including transportation services for Hong Kong SAR, Macau SAR and Taiwan, China; space transportation services; research and development services; contractual energy performance services; design services; radio, film and television programs (works) production and distribution services; software services; circuit design and test service; information systems services; business process management services; offshore outsourcing services, including information technology outsourcing (ITO), business process outsourcing (BPO) and knowledge process outsourcing (KPO); technology transfer.
Taxpayers that supply items eligible for VAT reduction must book these sales separately. Otherwise, no reduction applies.
A tobacco tax is levied on the purchase of tobacco leaves within the country's territory, at the rate of 20% of the purchasing value.
Stamp duties may be levied on specific legal documents (rates between 0.005%-0.1%).
China levies a motor vehicle acquisition tax on the purchase and importation of cars, motorcycles, trams, trailers, carts, and certain types of trucks. The rate is equal to 10% of the taxable consideration. A vehicle and vessel tax is also levied at fixed amounts according to the weight.
A vessel tonnage tax is levied on any vessel entering a port inside the territory of China from overseas, calculated according to the tonnage multiplied by the applicable tax rate that is determined based on the net tonnage and the term of the tonnage tax license.
The sale of real estate and net development costs are subject to the land appreciation tax at four bands ranging from 30 to 60% (depending on the percentage of the gain realised).
A deduction is allowed for the amortisation of intangible assets, including patents, trademarks, copyrights, and land use rights. Intangible assets have to be amortised over a period of at least ten years. Organisational and start-up expenses are tax-deductible fully in the first year of activity. Interest on loans is also tax-deductible (subject to conditions). 200% of the salary expenses paid to handicapped staff are deductible. The tax amortisation value of certain R&D expenses is increased between 175-200%.
Tax losses can normally be carried forward for a maximum of five years starting from the year subsequent to the year in which the loss was incurred, while carryback of losses is not permitted.
Preferential tax treatments in the form of incentives are further granted to new high-technology enterprises (HNTE), companies in special economic zones (SEZ) and pilot free trade zones (FTZ), while exemptions may apply to agriculture, forestry, fishery, software, infrastructure and other specified environment and technology developments.
A deed tax, generally at rates between 3% and 5%, may be levied on the purchase, sale, gift, or exchange of ownership of land use rights or real properties and paid by the transferee/assignee.
An urban and township land-use tax is levied on taxpayers who use land within the area of city, country, township, and mining districts. The due amount depends on the area of land actually occupied multiplied by a fixed amount per square metre determined by the local authorities. The same principle applies to the arable land occupation tax, which is levied on companies and individuals who build houses or carry out non-agricultural construction on arable lands.
The sale of real estate and net development costs (or land use rights) are subject to the Land Appreciation tax at 30 to 60% (depending on the percentage of the gain realised).
Stamp duty (0.005% - 0.1%) is levied on specific legal documents.
The employer contributes around 16% of the basic payroll to the state-administered retirement scheme, as well as to medical insurance, maternity insurance, unemployment insurance, and work-related injury insurance funds (bringing the total to approx. 40% of base monthly salary, with actual rates varying across the country).
An urban construction and maintenance tax is levied on the amount of indirect tax (VAT, consumption tax), at a rate of 7% for urban areas, 5% for county areas, and 1% for other areas. The same calculation base is used for the national (3%) and local educational surcharge taxes (2%) paid on the amount of VAT and consumption tax.
A motor vehicle acquisition tax is levied at 10% of consideration on automobiles, tramcars, trailers, and motorcycles. A vehicle and vessel tax also applies (generally at fixed amounts).
Companies and individuals active in the entertainment and advertising businesses are subject to a cultural business development levy at 3% on the relevant income.
Local authorities levy a resources tax on natural resources, including crude oil, natural gas, coal, salt, raw metallic metals, non-metallic metals, mineral water, carbon dioxide gas, and water (in 10 provinces). This tax is applied on a sales turnover or tonnage/volume basis.
An environmental protection tax (EPT) is levied on enterprises that directly discharge taxable pollutants within the Chinese territory. It is calculated based on the volume of pollutants discharged multiplied by a specific EPT coefficient.
For further information, including information on other common fees, costs or compulsory donations other than taxes that are collected from companies by the Chinese tax authorities, please consult the portal of the State Taxation Administration.
| China | East Asia & Pacific | United States | Germany | |
| Number of Payments of Taxes per Year | 7.0 | 23.4 | 10.6 | 9.0 |
| Time Taken For Administrative Formalities (Hours) | 138.0 | 195.1 | 175.0 | 218.0 |
| Total Share of Taxes (% of Profit) | 59.2 | 33.8 | 36.6 | 48.8 |
Source: Doing Business, Latest available data.
| Income from wages/salaries | Progressive rates |
| Annual taxable income (after deducting the standard basic deduction, specific deductions, specific additional deductions, and other allowable deductions) | |
| CNY 0 - 36,000 | 3% |
| CNY 36,000 - 144,000 | 10% |
| CNY 144,000 - 300,000 | 20% |
| CNY 300,000 - 420,000 | 25% |
| CNY 420,000 - 660,000 | 30% |
| CNY 660,000 - 960,000 | 35% |
| CNY 960,001 and above | 45% |
| Income from Private Businesses | Progressive rates (Taxable income = Total Revenue - Costs - Expenses - Losses) |
| CNY 0 - 30,000 | 5% |
| CNY 30,000 - 90,000 | 10% |
| CNY 90,000 - 300,000 | 20% |
| CNY 300,000 - 500,000 | 30% |
| CNY 500,001 and above | 35% |
| Non-resident (employment income, remuneration for labour services, author’s remuneration,royalties - calculated by each category on a monthly or transaction basis) | Progressive rates (3-45%) |
| CNY 0 - 3,000 | 3% |
| CNY 3,000 - 12,000 | 10% |
| CNY 12,000 - 25,000 | 20% |
| CNY 25,000 - 35,000 | 25% |
| CNY 35,000 - 55,000 | 30% |
| CNY 55,000 - 80,000 | 35% |
| CNY 80,001 and above | 45% |
| Incidental income, rental income, interest income, dividends, and capital gains | Flat rate at 20% |
Personal basic contributions are deductible. These include payments to housing funds and certain medical insurance, pension and unemployment insurance payments. Taxable income from personal services, royalties and remuneration from manuscripts and the leasing of property is net of a standard deduction for expenses that is equal to 20% of total income. Reasonable business expenses incurred in earning income from a business are deductible. Rental income is also subject to deduction (according to the monthly amount received). For sales of property, the original cost of the property and reasonable expenses incurred are deductible from the sales proceeds to determine the taxable income.
Certain specific deductions also apply, including child education (CNY 1,000 per child per month); continued education (CNY 400 per month or 3,600 per year depending on the type of qualified continued education); mortgage interest (CNY 1,000 per month); rental expense (CNY 800, 1,100, or 1,500 per month depending on the location); elderly care (up to CNY 2,000 per month depending on the status of the taxpayer); major medical expense (qualified self-paid portion above CNY 15,000 and capped at CNY 80,000 per year for each eligible individual); care expense for children under the age of 3 (CNY 1,000).
Charitable contributions to qualified domestic non-profit organisations are deductible up to 30% of taxable income.
Losses from privately-owned businesses and sole proprietorship enterprises can be carried forward for five years.
Certain categories of income are considered China-sourced income regardless of whether the payments are made within China or not, including:
When calculating taxable employment income for non-residents, IIT law only allows the standard basic deduction of CNY 5,000 per month.
Foreign individuals are subject to deed tax and stamp duty upon the purchase of real property in China.
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Latest Update: April 2024
