FAQs of China Taxation
FAQs of China Taxation
FAQs of Individual Income Tax
- Q:
- How to compute Individual Income Tax of Hong Kong resident who provides services in China?
- A:
- Hong Kong resident, who works only in mainland and gets paid and need not provide any service back in Hong Kong, shall pay individual income tax on the income earned by provision of service in mainland, whether the income is paid or borne by domestic office or overseas employer (including Hong Kong employer).
- Q:
- How to compute Individual Income Tax payable by Hong Kong resident who is sent to work in mainland by Hong Kong employer for more or not more than 183 days?
- A:
- The employee, who stays in mainland consecutively or accumulatively for not more than 183 days, shall pay tax for the number of days staying in mainland in respect of the salary paid or borne by mainland company after computing the tax payable. The portion of salary paid by overseas employer (including Hong Kong employer) shall not be subject to tax. The employee, who stays in mainland consecutively or accumulatively for more than 183 days, shall pay tax for the number of days staying in mainland in respect of the total salary received from both mainland company and overseas employer (including Hong Kong employer), after computing the tax payable.
- Q:
- Need foreign national pay Individual Income Tax on director's emolument received in China?
- A:
- If directors are paid in the form of salary, they should pay the income tax according to their salary; if they are paid in the form of bonus and dividends, income tax are excluded.
- Q:
- Where shall foreign national pay tax on salary received in China?
- A:
- The Individual Income Tax will be declared and paid by the employer.
- Q:
- Does the number of days working in China include public holidays?
- A:
- The number of working days of foreign national employed in China shall include public holidays enjoyed in China.
FAQs of Land Value Added Tax
- Value-Added Tax: 5% or 11% of Sales Volume (tax-free upon sale of common house purchased by individual person and inhabited for more than 2 years; those inhabiting less than 2 years shall be taxed on the basis of entire selling price, while non-common house shall be taxed by price difference)
- Additional Tax: 12% of the Added Value Tax
- Stamp Duty: 0.05% of the Actual Transaction Price
- Income Tax: Individual Income Tax at 20%, Corporate Income Tax at 25% (Income Tax = Selling Price – Original Price – VAT - Urban Maintenance and Construction Tax – Stamp Duty – Land Appreciation Tax)
- Deed Tax: 1.5% or 3% of the difference between the Exchange Prices
- Land Appreciation Tax: from 30% to 60% (Since 1st November 2008, no Land Appreciation Tax is required for individual home sales )
FAQs of Real Estate Tax
- Q:
- How to compute Urban Real Estate Tax?
- A:
- The original value or rental of taxpayer's house property, whether for self-occupation or letting, shall be taken into account when computing Real Estate Tax.
- Q:
- What is the rate of Urban Real Estate Tax?
- A:
- There are several computing modes of Real Estate Tax (Detail: "Real Estate Tax".)
FAQs of Foreign Representative Office
- Q:
- How to calculate Income Tax for representative office established in Shenzhen?
- A:
- Computation of Income Tax:
- Income = Appropriation Expenditure of Current Period / (1 - Appraised and Specified Rate of Profit 23%)
- Corporate Income Tax Payable = Income × Appraised and Specified Rate of Profit 23% × Corporate Income Tax 15%
- Q:
- What expenses are included in the appropriation expenditure in computation of profits?
- A:
- They are: salary, bonus, allowance, welfare expenses, purchase costs of articles (including motors, office equipment and other fixed assets), communication cost, travel charge, house rent, equipment lease cost, car fare, entertainment expenses and other operation cost paid to employees in China and abroad.
- Q:
- Can interest income offset appropriation expenditure?
- A:
- Interest income shall not offset appropriation expenditure, and the actually accrued expenditure shall be taken in account in computing revenue before tax.
- Q:
- Can the fixed assets of representative office be depreciated?
- A:
- The expenditure of purchasing fixed assets and the charge of decoration due to the establishment and relocation of representative organisation expenditure included in the category of one-off expenditure for the computation of Income Tax.
- Q:
- Which expenses of representative office are not included in the appropriation expenditure?
- A:
- The following should not be included in the appropriation expenditure:
The airfare expenses for relevant personnel advanced by resident representative office for the purpose of visiting parent company by invitation- Board and lodging expenses, car fare as well as entertainment expenses, advanced by resident representative office when parent company visits China by delegation
- Related expenses advanced by resident representative office when the head office holds large-scale exhibit in China
- Late fee and fine on various taxes payable by representative office
- Donations in nature of public welfare or relief used in cash by representative office in China
- Q:
- Shall the usage of properties owned by parent company for office address free of charge be treated as appropriation expenditure taken in account in computation of revenue before Business Tax?
- A:
- Representative office which uses the properties owned by parent company for office address shall pay Business Tax on the basis of rent computed from the dealings between independent enterprises.
FAQs of Investment Enterprise Income Tax
- Q:
- Shall the financial statements submitted in the annual declaration of Investment Enterprise Income Tax be audited by the Certified Public Accountant?
- A:
- Enterprise shall report Income Tax Return and financial statements to competent tax authority during the period as regulated by Tax Law, whether making profits or losses in taxable year. Local tax authority shall decide if the financial statement need to be audited by the Certified Public Accountant.
- Q:
- What are small low-profit enterprises? What special offer can these small low-profit enterprises enjoy?
- A:
- Enterprises which can fulfill the following requirements are identified as small low-profit enterprises:
- Work for the national non-restricted and prohibited industries
- Industrial enterprises: annual taxable income does not exceed RMB1 million, employee not more than 100 people, total asset value does not exceed RMB30 million
- Other enterprises: annual taxable income does not exceed RMB1 million, employee not more than 80 people, total asset value does not exceed RMB10 million
- Q:
- Is there any time frame for reporting financial statements?
- A:
- The reporting time frame: quarterly reporting within 15 days from the end of quarter, and annual reporting within 5 months from each year end.
- Q:
- Need foreign enterprise which charges consulting fee on enterprises in China pay Income Tax?
- A:
- Yes. Foreign enterprise without establishment in China shall pay Corporate Income Tax at 25% tax rate for its income made in China.
- Q:
- Can the loss incurred by foreign investment enterprise in one year be deducted from the profits in subsequent years?
- A:
- The loss incurred by foreign investment enterprise in one year happens in the following two cases:
- Covering the loss incurred by only one company: The loss can be deducted from the profits of next taxable years consecutively up to 5 years. Loss of previous year shall be covered before quarterly Corporate Income Tax is prepaid from the remaining profits (if any) after covering the loss.
- Covering the loss incurred by more than one company:
Enterprise with combined Income Tax reporting and paying will involve different tax rates applicable to more than one company which calculate their tax payable at their own tax rate respectively, therefore, the loss incurred by some company will be covered by the profits of other company at the same tax rate (if any), or covered by the profits of other company at similar tax rate.
- Q:
- What are the requirements for foreign investment enterprise to settle the Income Tax?
- A:
- Enterprise shall report the annual statement of Corporate Income Tax to competent tax authority within 5 months after year end, and deduct the prepaid Income Tax from the yearly actual tax payable and verify the tax payable in supplement. The competent tax authority will carry out a general audit on the annual return and relevant information of the enterprise within 5 months from the year end, and profess the issues of the enterprise's annual Income Tax for refund for any overpayment or a supplemental payment for any deficiency.
- Q:
- Shall the travel allowance of employee on business trip be subject to individual income tax?
- A:
- Travel allowance and overtime meal allowance are not treated as salary, so personal income tax is not collected, but other allowance and subsidies released by the enterprises in the name of travel allowance is generally treated as salary and personal income tax is counted.
- Q:
- Can the personal casualty insurance contributed by the company for employees be deducted before tax?
- A:
- Only statutory insurance in China can be deducted before tax.
- Q:
- Can parent company of foreign investment enterprise charge its branches in China for administration cost?
- A:
- Yes. But the charge shall not be more than 2% of its gross profits, and it is necessary for the parent company to file an application to the competent tax authority by the end of October each year.
- Q:
- Does foreign investment enterprise need to pay "local education surcharge"?
- A:
- Yes.
FAQs of Consumption Tax
- Q:
- In which link shall Consumption Tax be collected?
- A:
- Consumption Tax shall be collected in one specific link, generally in the production, processing dealing and importation link of taxable consumption goods, except for gold and silver jewellery, diamonds and diamond ornaments, which shall be taxed in retail link.
- Q:
- Which commodities are subject to Consumption Tax?
- A:
- The following commodities are subject to Consumption Tax:
- Cigarettes
- Alcoholic drinks and alcohol
- High-grade cosmetics
- Golf and golf equipment, high-valued watches, yacht, wooden disposable chopsticks, hardwood flooring
- Precious jewellry, precious stones, pearl and jade
- Firecrackers and fireworks
- Product oils
- Motorcycles
- Automobiles
- lead storage batteries
- Coatings
FAQs of Export Tax Refund
- Q:
- What is the current rate of VAT rebate on exported goods?
- A:
- Tax refund rate can be differentiated into seven categories of 17%, 13%, 11%, 8%, 6%, 5% and 0% according to different goods.
- Q:
- When shall enterprises process the export tax rebate (exemption) confirmation after acquiring the import and export right?
- A:
- Export enterprise shall process export tax rebate (exemption) confirmation with competent tax authority within 30 days after completing the foreign trade operator registration formalities and signing the first export Agency Agreement .
- Q:
- What are the requirements for newly-opened productive enterprises to process "Exemption, Credit and Tax Rebate" for exported goods?
- A:
- The refundable tax accrued within 12 months from the first export transaction of newly-opened productive enterprise shall not be refunded per month but carried forward to the next transaction to continue crediting the tax payable on domestic sales. 12 months later, enterprise being small-scale export-oriented enterprise, shall perform as required on small-scale export-oriented enterprise. Enterprise other than small-scale export-oriented enterprise will calculate process "Exemption, Credit and Tax Rebate" per month, except in the two following cases:
- Enterprise registered more than one year ago which creates new export business (other than small-scale enterprise), after being verified by the municipal Tax Bureau to be competent of productive capacity and without violation of law, will process "Exemption, Credit and Tax Rebate" per month;and
- Newly-opened productive enterprise, whose domestic and export sales value amount to more than RMB5 million and export sales account for more than 50%, will apply to provincial tax bureau for calculation of "Exemption, Credit and Tax Rebate" per month.
- Q:
- How can I process "Exemption, Credit and Tax Rebate"? What is the standard of small-scale export-oriented enterprise?
- A:
- The refundable tax accrued during the year of small-scale export-oriented enterprise with a period of 12 months under review for tax refund, shall not be refunded per month but carried forward to the next period to continue crediting the tax payable on domestic sales of goods, the remaining portion of refundable tax after crediting will be refunded in a lump sum at end of year. According to the State Administration of Taxation, the standard of small-scale export-oriented enterprise shall be determined by the State Administration of Taxation of each province in reference to proper reality of each on a basis of the enterprise's domestic and export sales value in aggregate of a taxable year, ranging from RMB2 million to RMB5 million, for example, the standard of small-scale export-oriented enterprise in Guangdong province is below RMB3 million of domestic and export sales value in aggregate.
- Q:
- Can the goods exported by small-scale taxpayer on their own or by means of entrustment, process export rebates?
- A:
- The goods exported by small-scale taxpayer on their own or by means of entrustment, shall continue to perform tax-free policy, without crediting or rebating its Input Tax. The goods purchased by export-oriented enterprise from small-scale taxpayer for exportation, a tax rebate should be permitted, if the rate of export rebates is above 3%, the rate of rebates will be at 3%; if the rate of export rebates is below 3%, the rate of rebates will be the actual tax rebate rate.
FAQs of Value-added Tax
- Q:
- Can the VAT special invoice (issued by small-scale taxpayer) from Tax Bureau, be used to credit the VAT input tax?
- A:
- Yes. The tax rate of such invoice is at 3%. General taxpayer will take this special invoice as deduction certificate.
- Q:
- Can my company, being retail enterprise with annual turnover above RMB 5 million, refuse to apply for the qualification of general taxpayer?
- A:
- No, since 1 May 2018, any enterprise with annual turnover above RMB 5 million shall apply to Tax Bureau to become general taxpayer. If enterprise does not apply immediately, Tax Bureau will also treat it as general taxpayer.
- Q:
- Can plain invoice be used to deduct Input VAT?
- A:
- No. VAT special invoice, the Bill of Payment of Import, or withholding and remitting VAT recognised by the Tax Law can only be used to credit Input VAT, but the amount of plain invoice can be included in purchase cost.
- Q:
- Can the exported goods of small-scale taxpayer be entitled to tax refund?
- A:
- According to prevailing policies concerning tax rebates (exemptions) for exported goods, the goods exported by small-scale taxpayers on their own or on consignment shall be free of VAT, consumption tax but without refund.
- Q:
- How to apply for the qualification of general taxpayer which can issue VAT special invoice?
- A:
- Under general taxpayer qualification, company can apply for special invoice by following procedures:
- Assign one tax person
- VAT special invoice category application
- VAT special invoice administrative permission
- Buy golden-tax device
- Register final license to tax device
- Collect invoice book
FAQs of Tax Invoice
- Q:
- How can the authenticity of invoice be identified speedily?
- A:
- We can check via the website of the State - Administration of Taxation or the local taxation bureau, or through WeChat ‘ Wallet - Public Services’.
- Q:
- Do gratuitous donations of goods require special invoice?
- A:
- Yes. Goods donated to general VAT payer will be issued VAT special invoice on demand of the donee.
- Q:
- Can small-scale taxpayer issue VAT special invoice?
- A:
- Small-scale taxpayer can apply for VAT special invoice to competent tax authority (small-scale taxpayers of accommodation industry can issue VAT special invoice themselves).
FAQs of China Company Tax Registration
- Q:
- How to set the time frame for processing tax registration?
- A:
- Since July 2015, China has implemented "Three in One” Registration system, the enterprises, Farmers' Professional Cooperatives, Individual Industrial and Commercial Households, which register in the Departments for Industry and Commerce for the issuance of business licenses with uploaded uniform social credit code of legal persons and other organisations by the Administrative Departments for Industry and Commerce, do not need to go to the Tax Bureau to handle the tax affairs. The responsibility of paying tax comes into effect on the same date of the effective date of business license.
- Q:
- How can I process the tax registration regarding cessation of business?
- A:
- Taxpayer who pays tax regularly in fixed amount shall submit the "Cessation of Business Application" to the competent tax authority, and after approval, receive the Notice of Approval of Cessation of Business. Other taxpayers need not to process the application, they shall only make ‘zero declaration’.
- Q:
- How can a business process resumption tax registration?
- A:
- With the completion the application form to the Tax Department in charge or submit the application form online to the website of the State Administration of Taxation and returning the Notice of Approval of Cessation of Business, business will be resumed after the approval of competent tax authority.
- Q:
- Does enterprise need to process tax registration to set up branches? Can it apply for a plain invoice? Can it apply to be a general taxpayer?
- A:
- Yes. It needs to process tax registration. The branch of enterprise needs to get the Application Notes for Taxpayer at the same time when it gets the business license, the responsibility of paying tax exists accordingly. Besides, the branch can apply for the invoice to become a general taxpayer, but it cannot apply as general taxpayer if the company and the branch are in the same city. Also, it cannot receive the invoice nor apply for being general taxpayer after being confirmed the Value-Added Tax (VAT) by the State Administration of Taxation of the Added-Value Tax.
